Wholesale electricity prices flat in 2017, some spikes in California, Texas

by Talk Business & Politics staff ([email protected]) 464 views 

Wholesale electricity prices at trading hubs in the eastern United States were flat in 2017, from 2016, as average monthly wholesale prices in California and Texas rose 18% and 27%, respectively, according to the U.S. Energy Information Administration. Natural gas prices were less volatile, allowing electricity prices to remain flat in most areas of the United States.

“Average peak day-ahead wholesale electricity prices in regions controlled by the PJM Independent System Operator (ISO), which covers many parts of the Mid-Atlantic and Midwestern states, averaged about $34 per megawatt hour during 2017, 1% lower than in 2016,” according to the EIA. Average annual wholesale prices in ISO New England rose 7% to $38 per megawatt hour in 2017, from 2016.

In California, hotter temperatures led to periods of high electricity demand, nearly reaching record levels in late summer, according to the EIA. Wholesale prices during peak hours rose 42% to $55 per megawatt hour in August, from the same month in 2016. On Sept. 1, day-ahead wholesale prices in the California ISO were more than $200 per megawatt hour for four hours and hit $770 per megawatt hour in one hour.

“Electricity markets throughout the United States benefitted from relatively low natural gas fuel costs,” according to the EIA. “The monthly average price of natural gas delivered to U.S. electric generators peaked at $4.14 per million British thermal units in January 2017, but during the second half of the year the average price stayed within a narrow range of $3.10 (per million British thermal units) to $3.30 (per million British thermal units).”

The low cost contributed to natural gas being the dominate fuel for U.S. electricity generation for the second consecutive year. In 2017, natural gas-fired plants supplied about 32% of U.S. electricity, while coal-fired plants provided 30%, according to EIA estimates. The natural gas share of electricity generation declined from 34% in 2016 as renewable energy generation continued to rise.