Dive Brief:
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Electricity prices rose in the Midcontinent ISO (MISO) from June to July as a result of higher natural gas prices, the wholesale market operator reported.
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Real-time locational marginal prices in MISO averaged $29.73/MWh in July, up from $27.42/MWh in June and $28.87/MWh in July 2015, according to the grid operator.
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Average spot natural gas prices at Henry Hub were $2.79 per million BTU in July, up from $2.43 per million BTU in June.
Dive Insight:
Low natural gas prices as a result of new supplies from hydraulic fracturing have been a key factor in driving down power prices not just in MISO, but across the nation in recent years.
But markets like an equilibrium, and the persistently sub-$3 prices they have also pushed many drillers to reduce production, constraining supply somewhat. In some markets that has resulted in slightly higher power prices.
Low gas prices have also taken a toll on coal-fired generation which becomes relatively more expensive in the dispatch stack compared with gas-fired generation.
With rising gas prices, that balance begins to shift. In MISO coal-fired generation was on the margin 85.5% of the time, turbines fired by natural gas were on the margin 61.8% of the time, and combined-cycle natural gas plants were on the margin 51.1% of the time, according to Platts. Wind was on margin 12.7% of the time, and hydroelectric power 3.9%.
In the neighboring PJM Interconnection market, energy market prices decreased from the first six months of 2015 as a combined result of lower fuel prices and lower demand. The load-weighted average real-time locational marginal price was 36% lower in the first six months of 2016 than in the first six months of 2015 — $27.09/MWh versus $42.30/MWh, PJM reported.
PJM did not break out the times when different generation sources were on the margin, but it does report on net revenue for different types of generators.
In the January to June period, average energy market net revenues decreased, according to the State of the Market report from PJM’s market monitor. For new combustion turbines net revenue fell by 50%. For new combined-cycle units net revenue fell by 41%, and for a new coal plant they fell by 75%. Net revenues for new wind and solar plants fell by 31% and 44%, respectively, PJM reported.