PJM average power prices hit 15-year low in March
Cheap fuel and mild weather caused wholesale power prices to plunge to a 15-year record low in the PJM Interconnection in March, stakeholders learned Monday.
The PJM’s load-weighted average locational marginal price was $22.97/MWh in March, compared with $25.95/MWh in February and $42.02/MWh in March 2015, Paul Sotkiewicz, PJM senior economic policy advisor, reported Monday during the PJM Members Committee webinar.
Sotkiewicz said that through the first quarter, average LMPs have been less than $30/MWh, and in no calendar year has PJM had sub-$30/MWh average LMPs since PJM started LMPs in April 1999.
“It’s quite something to observe,” Sotkiewicz said.
Joseph Bowring, president of Monitoring Analytics, PJM’s independent market monitor, noted that March’s prices were the lowest they’ve been for any March since 2002, and the first quarter of 2016’s prices have similarly been the lowest for any Q1 since 2002.
Sotkiewicz said both fuel costs and the sum of heating and cooling degree days “were below their historic averages,” Sotkiewicz said.
At the Texas Eastern M-3 natural gas hub, the price averaged $1.125/MMBtu in March, compared with $2.072/MMBtu in February and $2.861/MMBtu in March 2015, according to Platts data.
According to Sotkiewicz’s presentation, HDD and CDDs totaled less than 400 this March, compared with about 700 in February and an average total of about 550.
Stakeholders also learned that if natural gas prices stay relatively low, PJM states’ collective carbon dioxide emissions would remain below targets set by the US Environmental Protection Agency’s Clean Power Plan through the target year of 2030.
Muhsin Abdur-Rahman, PJM senior market strategist, presented the results of staff’s research on a “reference model” for how PJM’s existing resources would change, by 2030, without implementation of the CPP, but in relation to the CPP goal, which is to cut CO2 emissions from existing generators by 32% by the year 2030.
The US Supreme Court on February stayed the CPP’s implementation, pending legal challenges alleging that the rule represents a legal overreach by the EPA, but PJM states have asked PJM to study the CPP’s reliability and economic impacts as a prudent step, in case the plan survives legal challenge.
The model’s results showed that if natural gas prices followed a “low” price curve between 2016 and 2037, averaging $3.43/MMBtu over the 20-year period, CO2 emissions would rise from about 340 million tons in 2018 to about 360 million tons by 2019 before dropping to about 290 million tons in 2020, according to materials presented by Abdur-Rahman. From 2020 to 2030, the model shows emissions would remain between about 285 million tons and about 300 million tons.
These numbers do not take into account the various states’ renewable portfolio standards. If those were taken into account, CO2 emissions would be about 3 million to 10 million tons lower in the “low” price scenario.
CPP’s target CO2 emissions level for PJM total about 425 million tons in 2022 and falls to about 340 million tons by 2030, the presentation shows.
The sharp decrease between 2019 and 2020 would be due to coal retirements brought about by low natural gas prices, Abdur-Rahman said.
If natural gas prices follow a more historic pattern, with a curve over 2016-2037 averaging $5.14/MMBtu, fewer coal retirements could be expected, and PJM’s CO2 emissions would start to exceed CPP target of around 410 million tons around 2023-2024, Abdur-Rahman said. That estimate excludes the RPS effect. If natural gas prices follow this more historic pattern, CO2 emissions would be about 2 million to 5 million tons less over the period.
The model starts in the year 2018, and the non-RPS model would show emissions starting around 395 million tons, rising to about 410 million tons in 2019 and remaining between about 405 million tons and 412 million tons through 2030.
“The RPSs are not driving retirements [in the model],” Abdur-Rahman said. “It’s really low natural gas that is putting pressure on coal resources.”
Stakeholders also learned that PJM leadership wants stakeholder input to address issues regarding external resources’ ability to meet capacity performance market requirements.