Monthly wholesale electricity prices and demand in New England, October 2019

Natural gas prices lowest since at least 2003, third-lowest real-time electricity prices 

Average wholesale power prices in October 2019 were down 48.5% in the Real-Time Energy Market when compared to the previous year, falling to $20.37 per megawatt-hour (MWh)*. These prices mark the third-lowest average for any month since March 2003, when the region’s current markets launched, and the lowest of any October in that time. Prices were also down by 46% in the Day-Ahead Energy Market when compared to October 2018, averaging $20.75/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 2018 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 $1.66 per million British thermal units (MMBtu)**, the lowest natural gas price since March 2003. The price fell 50% from the October 2018 average Massachusetts natural gas index price of $3.32/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 declined by 5.7% to 8,897 GWh from the 9,436 GWh used in October 2018. The average temperature during October was 55˚ Fahrenheit (F) in New England, up four degrees from the previous October. The average dewpoint, a measure of humidity, was 46˚F in October, up three degrees from October 2018. There were 329 heating degree days (HDD)*** during October, while the normal number of HDD in October is 397 in New England. In October 2018, there were 430 HDD.

Consumer demand for electricity for the month peaked on October 2 during the hour from 2 to 3 p.m., when the temperature in New England was 74°F and the dewpoint was 64°. Demand reached 16,120 MW, with 21 MW met through reductions by active demand resources****. The October 2019 peak was 7.8% lower than the October 2018 peak of 17,479 MW, set during the hour from 6 to 7 p.m. on October 10, when the temperature was 77°F and the dewpoint was 66°.

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°F. 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°F. 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 81% of the 7,686 GWh of electric energy generated within New England during October, at about 49% and 32%, respectively. Renewable resources generated about 11% of the energy produced within New England, including 5.8% from wood, refuse, and landfill gas; 3.9% from wind; and 1.3% from solar resources. Coal- and oil-fired units produced less than 1% combined, of the energy generated within New England. Hydroelectric resources generated 8%. The region also received net imports of about 1,328 GWh of electricity from neighboring regions, and active demand response accounted for 1 GWh of reduced system demand.

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October 2019 and Percent Change from October 2018 and September 2019	October 2019	Change from October 2018	Change from September 2019
Average Real-Time  Electricity Price  ($/megawatt-hour*)	$20.37	-48.5%	-0.4%
Average Natural Gas Price  ($/MMBtu**)	$1.66	-50.0%	-14.9%
Peak Demand	16,120 MW	-7.8%	-15.6%
Total Electricity Use	8,897 GWh	-5.7%	-2.0%
Weather-Normalized Use*****	8,841 GWh	-4.0%	-4.6%

*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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Historical weather data provided by DTN, LLC.; Underlying natural gas data furnished by ICE