The bomb cyclone weather event in early January led to record levels of U.S. natural gas demand and increased wholesale and natural gas and power prices throughout the United States, according to the U.S. Energy Information Administration. A constrained natural gas pipeline network resulted in oil-fired and dual-fuel generation to rise in New England and New York and to a lesser extent in the Mid-Atlantic.
Day-ahead daily average peak-period power prices for Jan. 5, one of the coldest days of the weather event, rose to $247 per megawatt-hour in New England and New York and $262 per megawatt-hour in the Mid-Atlantic, from an average of $30 to $50 per megawatt-hour in the preceding six weeks.
“Power markets in the Northeast and Mid-Atlantic have become more reliant on natural gas over the past several years following the retirement of electricity generators that use fuels other than natural gas,” according to the EIA. “However, the relative moderation in power price spikes during this year’s cold snap — despite higher natural gas prices — reflects a host of market rule changes and winter preparedness actions taken by the region’s grid operators to improve winter reliability.”
More than one-third of New England’s natural gas capacity has dual-fuel capability with oil as a secondary source. About 40% of oil capacity can switch to natural gas, and nearly 50% of coal capacity can switch primarily to oil. Between Dec. 28 and Jan. 8, dual-fuel generators that burn oil and natural gas comprised of about 30% of New York ISO’s generation mix, while coal and oil-only generators accounted for about 5%. Nuclear generators account for 30% of total generation, and natural gas and renewable energy comprised of the remaining 35%. In New York, about 70% of natural gas capacity can switch to oil. About 20% of oil capacity can switch to natural gas, and 13% of coal capacity can switch to oil or natural gas.
In the Mid-Atlantic, 40% of the market’s natural gas generators can switch primarily to oil, while 15% of coal capacity can switch to natural gas or oil and 4% of coal capacity can switch primarily to natural gas. Oil generation reached a peak of 9% of the generation mix on Jan. 7, and was an average of 4% between Dec. 28 and Jan. 8. Coal generation was an average of 40% over the same period, up from 30% the week before.