Report: May heat spiked power prices in several regions in one day
- Platts reports that last Thursday's unseasonable heat pushed electricity demand to its highest point this year, and in the process, spiked wholesale prices in the Midwest, Mid-Atlantic and Northeast.
- Prices in ISO New England were close to $300/MWh at one point, while PJM Interconnect neared $200MWh. In New York, prices in one zone briefly topped $700/MWh, according to Platts.
- But major grid operators say they are prepared for summer demand, even if last week's spike caught some by surprise. The Midcontinent ISO believes peak summer demand will reach 125 GW, and the operator has more than 148 GW of available capacity. Load last week peaked around 92 GW.
Grid operators say they are prepared for the summer season, but last week's unseasonably warm weather appears to have pushed demand beyond expectations. While May heat waves are not unheard of, Platts reports peak loads exceeded expectations last week.
For example, the New York ISO saw load peak around 25 GW—almost 2 GW higher than expected.
But grid operators just this month said they expect to have ample capacity to meet higher summer demand. MISO has a 23.5 GW reserve in this year, providing an almost-19% margin. New England ISO says that under normal weather of about 90 degrees, electricity demand is forecasted to peak at 26,482 MW, with extreme summer weather possibly pushing demand up to 28,865 MW. But the grid operator also says it has more than 29,000 MW of available capacity this summer.
In PJM, the grid operator has a required reserve margin of 16.6%, but said it "will have significantly more installed capacity available," with a reserve margin of 29%, or nearly 42,000 MW.
Both gas and power prices have moderated somewhat since the winter, as energy markets trade in the "shoulder season." But as summer weather warms up, demand will spike. And in regions where natural gas is a primary fuel, that could send prices higher as the United States is no longer in an gas over-supply situation, due in part to the decline of conventional gas production.
Natural gas took over as the dominant power generation fuel in 2016, but coal has seen a resurgence in recent months. According to the EIA, February gas prices at Henry Hub and New York City were "below the price of Central Appalachian coal on a $/MWh basis for the first time since November 2016."
In the first quarter of the year, Henry Hub gas prices averaged $3.01/MMBtu — compared with $2/MMBtu last year.
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