November 24, 2020

Monthly wholesale electricity prices and demand in New England, October 2020

Prices up in both real-time, day-ahead markets in October

Wholesale power prices averaged $26.87 per megawatt-hour (MWh)* in the Real-Time Energy Market in October 2020, up 31.9% compared to the previous year. Day-Ahead Energy Market averages rose to $24.78/MWh, a 19.4% increase from October 2019.

By the numbers

October 2020 and Percent Change from October 2019 and September 2020	October 2020	Change from October 2019	Change from September 2020
Average Real-Time Electricity Price *($/megawatt-hour)**	$26.87	+31.9%	+35.2%
Average Natural Gas Price ($/MMBtu)**	$1.96	+18.1%	+36.1%
Peak Demand	15,584 MW	-3.4%	-19.0%
Total Electricity Use	8,888 GWh	-0.4%	-3.5%
Weather-Normalized Use*****	8,924 GWh	+0.7%	-2.6%

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 October was $1.96 per million British thermal units (MMBtu)**. The price rose 18.1% from the October 2019 average Massachusetts natural gas index price of $1.66/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 October decreased by 0.4% to 8,888 GWh from the 8,920 GWh used in October 2019. The average temperature during October was 53˚ Fahrenheit (F) in New England, down two degrees from the previous October. The average dewpoint, a measure of humidity, was 45˚F in October, down one degree from October 2019. There were 369 heating degree days (HDD)*** during October, while the normal number of HDD in October is 397 in New England. In October 2019, there were 329 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 October 30 during the hour from 6 to 7 p.m., when the temperature in New England was 33°F and the dewpoint was 27°. Demand reached 15,584 MW. The October 2020 peak was 3.4% lower than the October 2019 peak of 16,138 MW, set during the hour from 2 to 3 p.m. on October 2, when the temperature was 74°F and the dewpoint was 64°.

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 80% of the 7,046 GWh of electric energy generated within New England during October, at about 57% and 23%, respectively. Renewable resources generated about 13% of the energy produced within New England, including 6.9% from wood, refuse, and landfill gas; 4.1% from wind; and 2% from solar resources. Coal- and oil-fired units did not produce a statistically-significant amount of energy. Hydroelectric resources generated 7%. The region also received net imports of about 1,992 GWh of electricity from neighboring regions.

_{*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 1,000 homes for one hour. One gigawatt-hour (GWh) can serve about 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.}