Effects of Covid-19 on Wholesale Real-Time Electricity Prices in New England
The New England region has seen some historically low Real-Time electricity prices in 2020 so far this year. Prices in January, February and March benefitted from a mild Winter as a result of low natural gas prices generators paid to produce electricity. Covid-19 has had some very profound affects throughout the world, including on energy prices and energy demand in New England. As the end of March approached, demand for electricity dropped as many businesses reduced operations or were closed in response to the pandemic. ISO-NE reported that due to mild weather, low fuel prices and the drop in demand, wholesale Real-Time electricity prices in March were the lowest of any month since the launch of the current market structure in 2003. Prices were down 54% at 1.682 cents per kWh compared to March 2019. April saw similar results and was the lowest April and third lowest month overall since March 2003.
These lower prices have not been lost on Freedom Energy’s customers that have chosen to purchase electricity in the hourly wholesale market. For those companies that were able to continue normal production operations, the overall price of electricity they paid provided some much-needed optimism as the country navigates the overall effects of the pandemic on the economy.
The two main drivers of wholesale electricity prices in NE are the cost of fuel used to produce electricity and consumer demand. Since mid-March ISO-NE has observed an impact on consumer demand for electricity attributable to changes in response to the COVID-19 pandemic. Overall, consumer demand has declined by 3 to 5% compared to what ISO-NE forecasters would otherwise have expected. The Energy Information Administration (EIA) projects retail sales of electricity in the commercial and industrial sectors to fall by 6.5% in 2020.
Where are Wholesale Market Prices Headed?
Overall demand for electricity in New England is being impacted by the addition of solar power. New England hit a solar record in May when the region’s over 180,000 behind-the-meter (BTM) solar power installations produced an estimated 3,200 megawatts (MW) of power between noon and 1 p.m. on May 2, 2020. The NE grid saw the impact as a reduction in power system demand. Solar is producing during the peak hours of the day when prices are typically higher, reducing the need for conventional generation during those peak hours and resulting in lower wholesale prices. New England is expected to have nearly 8,000 MW of solar power by the end of the decade which could potentially add to a downward trend in prices.
Are Wholesale Real-Time Electricity Prices the Right Choice for Your Business?
Our recommendation is that clients consider market-based electricity prices as an option to conventional retail fixed prices. If your current supply contract is expiring this year, one of our energy consultants will help you to understand how a market-based product works and its potential benefits. We welcome the opportunity to provide a cost analysis in advance of your current contract end date and suggest that we begin the process now to allow you time to consider this option.
About Freedom Energy Logistics: FEL is an energy management firm based in Auburn, N.H., that specializes in unique methods of electricity and natural gas supply purchasing. Founded in 2006, FEL serves the region’s largest manufacturers, municipalities and businesses. Pioneering the ‘Direct-to-Grid’ movement, many of Freedom’s customers source wholesale energy direct from the ISO NE Pool. FEL is among the thought leaders for Community Choice Aggregation in New Hampshire. FEL is named twice to the Inc. 5000 list of fastest growing companies in America and to the list of Fastest-Growing Family Businesses in NH by Business New Hampshire Magazine. Stay Work Play’s Coolest Company for Young Professionals. Led by father and son duo Gus and Bart Fromuth, they were awarded Business Excellence Awards from New Hampshire Business Review in 2019 and 2016. For more information visit www.felpower.com or call 603.625.2244.