Monthly wholesale electricity prices and demand in New England, February 2020
Real-time electricity lowest of any February, third-lowest month overall
Average wholesale power prices in February 2020 were down 45% in the Real-Time Energy Market when compared to the previous year, falling to $20.32 per megawatt-hour (MWh)*, the lowest February price since the launch of the current market structure in March 2003 and the third-lowest month overall in that time frame. Prices were down by 35.3% in the Day-Ahead Energy Market when compared to February 2019, averaging $23.06/MWh.
Drivers of wholesale electricity prices
In general, the two main drivers of wholesale electricity prices in New England are the cost of fuel used to produce electricity and consumer demand.
Power plant fuel: Fuel is typically one of the major input costs in producing electricity. Natural gas is the predominant fuel in New England, used to generate 49% of the power produced in 2019 by New England’s power plants, and natural gas-fired power plants usually set the price of wholesale electricity in the region. As a result, average wholesale electricity prices are closely linked to natural gas prices.
The average natural gas price during February was $2.27 per million British thermal units (MMBtu)**. The price fell 45.7% from the February 2019 average Massachusetts natural gas index price of $4.18/MMBtu. The Mass. index price is a volume-weighted average of trades at four natural gas delivery points in Massachusetts, including two Algonquin points, the Tennessee Gas Pipeline, and the Dracut Interconnect.
Electricity demand: Demand is driven primarily by weather, as well as economic factors. Energy usage during February declined 2% to 9,468 GWh from the 9,659 GWh used in February 2019. The average temperature during February was 34˚ Fahrenheit (F) in New England, up four degrees the previous February. The average dewpoint, a measure of humidity, was 21˚F in February, up four degrees from February 2019. There were 907 heating degree days (HDD)*** during February, while the normal number of HDD in February is 1,017 in New England. In February 2019, there were 986 HDD.
Consumer demand for electricity for the month peaked on February 14 during the hour from 6 to 7 p.m., when the temperature in New England was 18°F and the dewpoint was -6°. Demand reached 16,961 MW, with 8 MW met through reductions by active demand resources****. The February 2020 peak was 8.7% lower than the February 2019 peak of 18,585 MW, set during the hour from 6 to 7 p.m. on February 1, when the temperature was 16°F and the dewpoint was -3°.
Peak demand is driven by weather, which drives the use of heating and air conditioning equipment. The all-time high winter peak was 22,818 MW, recorded during a cold snap in January 2004 when the temperature was -1°F and the dewpoint was -20°. The all-time peak demand in New England was 28,130 MW, recorded during an August 2006 heat wave, when the temperature was 94°F and the dewpoint was 74°. Air conditioning use is far more widespread than electric heating in New England, so weather tends to have a relatively greater impact on the summer peak than the winter peak.
Fuel mix: The mix of resources used in any given time period depends on price and availability, as well as supplemental resource commitments needed to ensure system stability. Natural gas-fired and nuclear generation produced about 79% of the 7,716 GWh of electric energy generated within New England during February, at about 49% and 30%, respectively. Renewable resources generated about 11% of the energy produced within New England, including 6.0% from wood, refuse, and landfill gas; 3.8% from wind; and 1.5% from solar resources. Coal- and oil-fired units produced approximately 0.5% combined of the energy generated within New England. Hydroelectric resources generated 9%. The region also received net imports of about 1,856 GWh of electricity from neighboring regions.
|February 2020 and Percent Change from February 2019 and January 2020
||February 2020||Change from February 2019||Change from January 2020
|Average Natural Gas Price
|Peak Demand||16,961 MW||-8.7%||-6.2%|
|Total Electricity Use||9,468 GWh||-2%||-8.9%|
|Weather-Normalized Use*****||9,373 GWh||-3.6%||-13.2%|
*One megawatt (MW) of electricity can serve about 750 to 1,000 average homes in New England. A megawatt-hour (MWh) of electricity can serve about 750 to 1,000 homes for one hour. One gigawatt-hour (GWh) can serve about 750,000 to 1 million homes for one hour. **A British thermal unit (Btu) is used to describe the heat value of fuels, providing a uniform standard for comparing different fuels. One million British thermal units are shown as MMBtu. ***A degree day is a measure of heating or cooling. A zero degree day occurs when no heating or cooling is required; as temperatures drop, more heating days are recorded; when temperatures rise, more cooling days are recorded. The base point for measuring degree days is 65 degrees. Each degree of a day’s mean temperature that is above 65 degrees is counted as one cooling degree day, while each degree of a day’s mean temperature that is below 65 degrees is counted as one heating degree day. A day’s mean temperature of 90 degrees equals 25 cooling degree days, while a day’s mean temperature of 45 degrees equals 20 heating degree days. ****Since June 1, 2018, active demand-response resources have been able to participate on an hourly basis in the wholesale electricity markets. These resources reduce demand in real time.*****Weather-normalized demand indicates how much electricity would have been consumed if the weather had been the same as the average weather over the last 20 years.
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