Record low prices in summer 2015 New England wholesale electricity market
The summer of 2015 brought New England the lowest wholesale electricity prices since 2003, thanks to record low prices for natural gas. According to regional grid operator ISO New England Inc., this illustrates what happens “when New England power plants can access the vast supply of lower-priced, domestic natural gas being produced in the Marcellus shale deposit.”
In a post on its ISO Newswire site, the grid operator noted that the average real-time wholesale electricity price for June, July, and August 2015 was $26.86 per megawatt-hour (MWh). By comparison, the average real-time price of wholesale electric energy in 2014 was $63.32 per megawatt-hour. While summer energy prices have typically averaged lower than winter prices in New England, 2015’s summer prices were low even in comparison to other recent summers: $34.31 in 2014, or $43.94 in 2013.
What explains New England’s low wholesale electricity prices this summer? According to ISO New England, it’s because existing natural gas-fired power plants could get fuel at a low price:
In essence, the reason was the low price of natural gas that could be delivered to the power plants that burn natural gas to make electricity. For most of the year, the price of natural gas is low in New England, and as a consequence, the demand for natural gas for both heating and power generation just continues to grow. In fact, in 2014, New England power generators using natural gas produced 44% of the region’s electricity.
The ISO-NE post describes how low-priced natural gas plus adequate interstate pipeline transportation capacity yields New England low electricity prices. Indeed, the average price of natural gas in New England during June, July, and August averaged a record low $2/MMBtu. This is nearly 40% below last year’s summer average ($3.27/MMBtu), itself the next-lowest summer record.
New England’s average summer electricity price was even below that of other regions, like the Midwest. According to ISO-NE, “This summer’s prices indicate that the region’s electricity prices can be competitive, in the more commonly understood sense, with other regions of the US when low-cost fuel is available.” Indeed, at times the price of natural gas in New England was below that of the benchmark Henry Hub.