Cheap fuel, stagnant demand drive down New England wholesale prices
- New England power customers scored a good deal last year, with prices falling to one of the lowest points in the last 15 years, according to analysis from the region's grid operator. With almost half the region's power generation fueled by natural gas, the lower prices were mirrored on the fuel side as well.
- Real-time wholesale power prices in New England averaged $33.94/MWh last year, and the total value of the market reached $4.5 billion — 9% higher than the record low, set in 2016. Overall, consumer demand for electricity was down in 2017 by 2.7%, influenced by the economy, weather and energy efficiency.
- Prices have been low due to stagnant demand and falling fuel coss. Natural gas generates 48% of the region's electricity, and prices averaged $3.72/MMBtu last year.
Wholesale power prices were low in 2017 because of low fuel costs and relatively low consumer demand, according to ISO New England President and CEO Gordon van Welie. But the last week of December helps to illustrate "the impact of constrained natural gas supplies on electricity prices," he said.
"The challenging operating conditions also highlighted a growing need for competitive markets to more transparently signal the potential costs of inadequate fuel security, which creates the potential for significant reliability risks to the region," van Welie said in a statement.
Both wholesale gas and power prices jumped between 2016 and 2017, but overall prices remained low compared to the last 15 years when New England's competitive energy markets were established. Energy prices were more than 17% higher, year-over-year, and gas prices were more than 20% higher.
Despite that, it was still the second lowest-priced year since the markets began.
The ISO says that August and June 2017 were among the 10 lowest-price electricity months since 2003, with prices at $23.77/MWh during August and $23.93/MWh during June.
Cold weather in December spiked natural gas demand for heating, leading to pipeline constraints and rising prices. According to the ISO's analysis, the total cost of wholesale electricity in the last week of December was about $396 million — almost half of the total cost ($856 million) for the entire month.
Reliability in December was maintained by turning to oil-fired power plants, the report notes, but "operations became tenuous as their oil supplies were depleted and some neared their emissions limits."
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