While wholesale electricity prices at major trading hubs in the eastern U.S. during 2017 were relatively unchanged from 2016, the average monthly wholesale prices in California and Texas increased by 18% and 27%, respectively.
Less volatility in natural gas fuel prices through the year contributed to stable wholesale electricity prices in most areas of the country, although late summer heat waves resulted in short-term price spikes in some western electricity markets, the Energy Information Administration reports.
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 roughly $34 per megawatt-hour (MWh) last year, 1% lower than in 2016.
Although prices in ISO New England spiked to $75/MWh in December, the average annual wholesale price of $38/MWh last year was 7% higher than the year-ago average, EIA reported.
Hot summer temperatures in California led to periods of high electricity demand, which neared record hourly levels in late summer. Wholesale power prices during peak hours averaged $55/MWh in August — 42% higher than in the same month in 2016.
On Sept. 1, day-ahead electricity market prices in the California ISO were higher than $200/MWh for four hours and reached $770/MWh in one hour, Kallanish Energy learns.
Electricity markets throughout the U.S. benefited from relatively low natural gas fuel costs. The monthly average price of natural gas delivered to U.S. electric generators peaked at $4.14 per million British thermal units (MMBtu) in January 2017, but during the second half of the year the average price stayed within a narrow range of $3.10/MMBtu to $3.30/MMBtu.
The continued low cost of natural gas also permitted the fossil fuel to remain the dominant source of U.S. power generation for the second year in a row, EIA found.
EIA estimates natural gas-fired power plants supplied an average of 32% of total U.S. electricity in 2017, compared with 30% supplied by coal-fired plants. The natural gas share of generation was down slightly from an average of 34% in 2016, as generation from renewable energy continued to grow, according to EIA.