PJM Tracker: Pandemic-weakened power demand, cheap gas sap power prices

Houston — Pandemic-induced sharp decreases in power demand combined with cheap natural gas to cause the PJM Interconnection's on-peak power prices to plunge in April, year on year, and July-August on-peak packages followed a similar pattern.

Day-ahead on-peak locational marginal prices averaged around $17.50/MWh across a geographically dispersed set of PJM hubs this April, down between 33.3% and 39.6% from April 2019 levels and down from about 6% to about 9.8% from March averages.

Of the 12 states plus the District Columbia that are included in the PJM footprint, all except Pennsylvania had stay-at-home policies in force by the end of March, and all except Kentucky had them in effect at least through the end of April. Six states plus DC still had those policies in effect as of this writing.

PJM's daily peakloads averaged about 78.3 GW in April, down almost 11% from March and down 7.8% from April 2019.

The year-on-year peakload decreases cannot be attributed to the weather, as total population-weighted average heating- and cooling-degree days this April were up 49.7% from April 2019, but they were down 14.4% from March totals.

Natural gas prices also cannot be blamed for all of the power price decreases. At the Texas Eastern M3 pipeline, spot gas averaged $1.506/MMBtu this April, up 2.9% from this March's $1.463/MMBtu but down from April 2019's average of $2.339/MMBtu.

Gas prices – indeed, the whole energy complex – have been cut by the initial rejection of an oil production cut agreement among OPEC and Russia, which was sought to accommodate the sharp decrease in fuel spending as travel spending crashed as a result of the novel coronavirus pandemic.

GENERATION MIX

At such low prices, gas-fired generation easily maintained its leading share of PJM's much diminished power demand, providing 38.7% of the system's average daily power this April, down from March's 40.8%, but up from April 2019's 32.7%, when gas plants had a second-place share.

Nuclear came in second this April, at 37.6%, up from this March's 35% and last April's 36.2%.

Coal-fired generation continued its decreasing share but retained the No. 3 position with 14.4% of PJM generation this April, down from this March's 15.8% and last April's 22.1%.

Wind generation continued to add to its share, averaging 4.8% this April, up from March's 4.2% and last April's 4.6%.

FORWARD MARKETS

Looking forward, PJM West Hub July 2020 on-peak packages had an average of $28.30/MWh this April, down 0.9% from its March average and down 25.7% from the July 2019 package last April.

PJM West Hub August 2020 on-peak had an average of about $27.50/MWh this April, up 3.1% from its March average but down 25.8% from the August 2019 package last April.

Tetco M3 July and August gas contracts were up on the month but down on the year.

Tetco M3 July averaged $1.801/MMBtu this April, up 6.4% from March but down 25.7% from the July 2019 contract last April.

Tetco M3 August averaged $1.813/MMBtu this April, up 6.5% from March but down 25.1% from the August 2019 contract last April.

The National Weather Service's forecast for June, July and August, issued April 16, indicates enhanced chances for above-normal temperatures – from 33% to 60% -- for virtually all of the PJM footprint, with even chances for near-normal temperatures for western segments in Illinois, Indiana and Kentucky.