by Paul Ciampoli
APPA News Director
Posted January 8, 2019
Wholesale electricity prices during 2018 at major trading hubs in the U.S. were generally higher than in 2017, the Energy Information Administration reported on Jan. 8.
In its “Today in Energy” report, EIA said that wholesale prices in 2018 ranged from 14% higher than in 2017 in the area served by the Midcontinent Independent System Operator to 60% higher in the Electric Reliability Council of Texas electricity market, which serves most of Texas.
Monthly wholesale electricity prices were also more volatile in 2018 than in 2017, seeing spikes during the winter and summer months.
EIA reported that day-ahead wholesale electricity prices during peak hours in the market managed by ISO New England averaged $116 per megawatt hour in January 2018 but averaged only $44/MWh in February and March. January 2017 prices in New England were about $40. Higher January electricity prices were a result of constrained natural gas supplies during the first weeks of the month caused by a period of colder-than-normal weather, which required the use of higher-priced oil-fueled generation.
Wholesale electricity prices in the middle Atlantic and eastern Midwest markets served by the PJM Interconnection were also higher in January 2018, averaging $73/MWh, compared to prices below $40 for January 2017.
Peak period wholesale electricity prices during the summer months of 2018 were higher in most areas of the U.S. than those during the summer of 2017. For example, in the ERCOT market, monthly prices during July 2018 averaged $112/MWh compared with $36/MWh in July 2017. These higher prices were the result of record levels of electricity demand in a region where available generating capacity was limited, EIA said.
Summer prices were also high in much of the western U.S. Record high electricity demand in the California ISO area in late July, “combined with a sharp increase in natural gas fuel costs, led to monthly CAISO wholesale prices averaging $101/MWh, which was the highest monthly average price since 2009,” the report noted. July prices in the CAISO were about $40 in 2017.
EIA went on to say that although the MISO wholesale electricity market experienced higher prices last year, prices in their Midwestern markets were not as volatile as in other areas. Peak period prices in MISO averaged $36/MWh in 2018 compared with $31/MWh in 2017.
Natural gas continues to fuel growing share of power generated in U.S.
EIA noted that natural gas continues to fuel a growing share of the electricity generated in the U.S. Although natural gas prices increased last year, the cost of generating electricity with natural gas remains relatively low, EIA said. “The sustained low natural gas prices encouraged the addition of significant new natural gas-fired capacity in 2018. In some areas of the country, ongoing coal plant retirements also contributed to a structural shift toward natural gas.”
For all of 2018, natural gas fueled an estimated 35% of total U.S. electricity generation, up from 32% in 2017. In contrast, the share of total generation from coal declined from 30% to 27% last year. Generation from wind and solar power plants grew from a combined share of 8% in 2017 to 9% in 2018.
The share of U.S. hydroelectric generation last year was relatively similar to the 2017 level, contributing about 7% of total electricity generation.