For the wholesale power markets, summer and winter typically grab the bulk of traders’ attention as loads can push the limits, which can result in bouncing power prices.
This past summer, temperatures in the lower 48 states came in as the fifth warmest in the 122-year period of record, tying 2006, according to the National Oceanic Atmospheric Administration.
So one might expect hot weather drives demand, which in turn, translates over to power prices.
However, that was not the case in many parts of the US over past couple of months.
Let’s first start with Texas, where everything is bigger.
Peak demand in the Electric Reliability Council of Texas not only climbed year over year this summer, but hit record levels several times during August and peaked above 71 GW August 11.
But if you were sitting on a trading desk expecting prices to follow that record load, you would have been sorely disappointed.
Peak power prices for ERCOT North Hub on August 11, during the record demand, averaged near mid-$40s/MWh, hardly a level one might expect when compared with events in the past as prices were seen moving up and sometimes in triple-digit territory for real-time markets.
But let’s give Texas the benefit of the doubt; maybe everyone covered their loads properly so there were no worries in real-time.
Let’s jump to the Midwest, where on July 21 the Midcontinent ISO experienced a generation shortage event.
In most cases, if a market is short on supply, the situation presents an opportunity or incentive — most likely an economic one — for someone to step up to fill in a gap.
In this case, the market should function to trigger the next generation resource available, and that typically involves prices moving up.
But just like Texas, MISO power prices that day peaked lower than some may have guessed, in the mid-$30s/MWh....MORE