Monthly wholesale electricity prices and demand in New England, May 2020
Day-ahead electricity prices lowest in market history, real-time third-lowest
Wholesale power prices averaged $16.48 per megawatt-hour (MWh)* in the Day-Ahead Energy Market in May 2020, down 32% compared to the previous year and marking the lowest since the current market structure launched in 2003. Real-Time Energy Market averages fell to $17.97/MWh, the lowest May price and the third-lowest month overall since 2003.
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 May was $1.38 per million British thermal units (MMBtu)**. The price fell 41% from the May 2019 average Massachusetts natural gas index price of $2.33/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 May declined 6.1% to 8,212 GWh from the 8,479 GWh used in May 2019. The average temperature during May was 57˚ Fahrenheit (F) in New England, the same as the previous May. The average dewpoint, a measure of humidity, was 41˚F in May, down four degrees from May 2019. There were 271 heating degree days (HDD)*** during May, while the normal number of HDD in May is 238 in New England. In May 2019, there were 272 HDD. ISO New England is publishing weekly reports on the estimated impact on electricity demand of societal changes in response to the COVID-19 pandemic.
Consumer demand for electricity for the month peaked on May 29 during the hour from 5 to 6 p.m., when the temperature in New England was 77°F and the dewpoint was 67°. Demand reached 16,555 MW. The May 2020 peak was 5.1% higher than the May 2019 peak of 15,748 MW, set during the hour from 5 to 6 p.m. on May 20, when the temperature was 78°F and the dewpoint was 63°.
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 69% of the 6,201 GWh of electric energy generated within New England during May, at about 42% and 27%, respectively. Renewable resources generated about 17% of the energy produced within New England, including 7.1% from wood, refuse, and landfill gas; 5.4% from wind; and 3.7% from solar resources. Coal- and oil-fired units did not produce a statistically-significant amount of energy. Hydroelectric resources generated 14%. The region also received net imports of about 1,833 GWh of electricity from neighboring regions.
|May 2020 and Percent Change from May 2019 and April 2020
||May 2020||Change from May 2019||Change from April 2020
|Average Natural Gas Price
|Peak Demand||16,555 MW||+5.1%||+16.3%|
|Total Electricity Use||8,212 GWh||-6.1%||-0.4%|
|Weather-Normalized Use*****||8,151 GWh||-7.1%||+1.2%|
*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.