Market monitor: Fall energy costs rose despite lower demand

Increased emissions costs and supply limitations drove higher year-over-year wholesale electricity costs in the fall of 2024, according to the latest quarterly report from ISO New England’s Internal Market Monitor (IMM).

The Fall 2024 Quarterly Markets Report, which covers the period from Sept. 1 to Nov. 30, 2024, presents an assessment of each of the region’s wholesale electricity markets, based on market data, performance criteria, and independent studies.

Key findings include:

• The total estimated wholesale market cost of electricity for fall 2024 was $1.47 billion, up 8% compared to fall 2023.
• Real-time energy prices averaged $35.72 per megawatt hour (MWh), up 14% from fall 2023. Day-ahead energy prices were up 12% year over year, averaging $35.91/MWh.
• Energy costs climbed 8% to $1.08 billion. The increase came despite lower natural gas prices and lower demand relative to fall 2023. It was attributed to higher carbon emissions costs and reduced supply from imports and nuclear resources.
• Capacity costs totaled $359 million, up 38% from the previous fall. The increase was attributed to higher clearing prices in the 15th Forward Capacity Auction (FCA 15) compared to FCA 14.

The report includes these additional insights on operating conditions and the resource mix:

• The cost of carbon emissions allowances through the Regional Greenhouse Gas Initiative was up 53% compared to fall 2023, driving production costs higher for natural gas and other fossil fuel resources.
• Increasing emissions costs more than offset lower natural gas prices during the quarter. The average price of natural gas declined 13% year-over-year, to $1.95 per million British thermal units.
• Net imports fell to their lowest level in over a decade. Imports represented 4% of New England’s net energy for load in fall 2024, compared to 11% in fall 2023. The drop was attributed to dry conditions limiting the output of hydro resources in Québec, as well as a nuclear generator outage in New Brunswick. While New England is historically a net importer of electricity, it was a net exporter to Canada in fall 2024.
• Dry conditions also affected hydro resources within New England. Their output decreased approximately 40% relative to fall 2023.
• The fall was unusually sunny, leading to greater contributions from the region’s growing inventory of solar resources. Output from grid-connected solar resources increased 25% from the previous fall, exceeding the share of energy supply from net imports. Estimated output from behind-the-meter solar grew by 28% compared to the previous fall.
• With relatively mild weather and contributions from BTM solar, fall demand reached its lowest level in at least 24 years, with hourly loads averaging 12,000 MW.