Wholesale U.S. electricity prices were generally lower and less volatile in 2020 than 2019 RSS Feed

Wholesale U.S. electricity prices were generally lower and less volatile in 2020 than 2019

During 2020, wholesale electricity prices at major trading hubs in the United States were generally lower than in 2019, although prices in the western states trended higher in the last half of the year. Compared with 2019 prices, these wholesale hub prices in 2020 ranged from 5% lower in the California Independent System Operator (CAISO) market to 45% lower in the Electric Reliability Council of Texas (ERCOT) market. Monthly wholesale electricity prices were also generally less volatile in 2020 than in 2019.

Wholesale electricity prices in ERCOT for all hours (peak and non-peak) in day-ahead trading averaged $22 per megawatthour (MWh) in 2020 compared with an average of $38/MWh in 2019. Average Texas electricity prices were lower this year primarily because prices were less volatile (had fewer price spikes) than last year. In August 2019, the monthly average day-ahead wholesale price spiked to $127/MWh, and prices reached the $9,000/MWh maximum allowable price in some hours. Prices rose in these instances because electricity demand was nearing the available capacity limit. In contrast, summer temperatures were milder in Texas in 2020, and increased wind capacity additions expanded the state’s available generation capacity.

In the CAISO wholesale electricity market, day-ahead prices during the first six months of 2020 were 34% lower than during the same period in 2019. These low wholesale prices reflected near record-low natural gas fuel costs and reduced electricity demand resulting from pandemic-related stay-at-home orders. In mid-August 2020, CAISO implemented rolling electricity outages during certain hours because realized electricity demand was much higher than expected, and the area faced unexpected electricity supply shortages. As a result of these electricity market stresses, wholesale CAISO day-ahead prices in August 2020 averaged $77/MWh compared with an average of $23/MWh during the first half of the year.

Read full article at EIA