US POWER TRACKER: Moderate ISO-NE power prices expected this summer

The ISO New England on-peak Mass Hub forward power price summer strip for June, July and August averaged $59.54/MWh in May trading, down from the summer 2022 forward power price strip of $115.42/MWh. ISO-NE on-peak power prices are expected to average $41/MWh in 2023 according to S&P Global Commodity Insights power market analysts.

"With gas markets rebalancing and production outpacing demand, delivered natural gas prices in New England are projected to average around $3.32/MMBtu in 2023, down from over $9/MMBtu in 2022," the power market analysts said in a recent research note. "As a result, we project on-peak power prices to continue to moderate throughout the year with an average of $41/MWh in 2023," the analysts said.

The Mass Hub on-peak forward power price for June averaged $44.86/MWh in May trading, down nearly 51% from $91.04/MWh a year ago, according to Platts M2MS data. The monthly average power price for June was down about 2% on month.

The Mass Hub July on-peak forward power price averaged $76.87/MWh in May trading, down 44% on year and down 1.43% on month, and forward power for August averaged $56.89/MWh, down 52% on year and down about 5% on month.

With natural gas-fired power accounting for over 50% of the ISO-NE power generation fuel mix, gas prices heavily impact power prices.

Algonquin on-peak forward gas prices for June, July and August averaged $5.52/MMBtu in May trading, down from an average of $8.02/MMBtu for the corresponding period last year. The highest summer forward gas price is in July at $4.49/MMBtu, down about 45% from $8.23/MMBtu a year ago.

"We are seeing a fairly stable outlook heading into the summer," Dan Dolan, president of trade group New England Power Generators Association, said in a June 13 email. "There are no major retirements or additions expected this summer with the last year of Mystic [the 1,413-MW gas-fired power plant] and [the 800-MW offshore] Vineyard Wind project expected to come online in a little less than a year."

Power generation fuel mix

ISO-NE has over 30 GW of incremental power generating capacity, mostly wind power, in its interconnection queue, though many projects ultimately withdraw, according to the grid operator.

Gas-fired power accounted for 51.8% of the ISO-NE power generation fuel mix in May, down from 58.9% in April and 55.5% in May 2022, according to ISO data.

Nuclear power supplied 20% of the May generation mix, up from 13.8% in April and down slightly from 20.3% in May 2022.

Hydropower accounted for 10.7% of the May fuel mix, down from 12.4% in April, and up from 10.1% in May 2022. Wind and solar power accounted for most of the remainder of the generation mix in addition to fractional volumes of coal, oil and other renewables.

Spot power, gas price dynamics

Temperatures were slightly above the historical average in May and electric cooling demand began to kick in. The average May temperature across the ISO-NE footprint was 58.6 degrees Fahrenheit compared with the historical average of 57.4 degrees F, according to CustomWeather data.

Heating degree days averaged 6.5 in May as cooler temperatures stuck around, but with a few days nearing an average of 70 degrees F, cooling degree days averaged 0.5.

Despite the warmer temperatures compared with April, power demand was 1% lower in May. Peakload averaged 12,916 MW compared with 13,024 in April. Peakload was down 8% from May 2022.

This summer, under typical weather conditions, power demand in New England is forecast to reach 24,605 MW, and above-average summer temperatures, like an extended heat wave, could push demand up to 26,421 MW, which would tighten supply margins, the grid operator said June 1.

The Boston Zone saw the highest on-peak day-ahead power prices in May, which averaged $21.92/MWh, down about 67% on year and down almost 14% on month.