ANALYSIS: PJM power demand, power and natural gas prices rise on year in April

PJM Interconnection power and natural gas prices climbed across the board year over year in April, with power prices up almost 70% at some hubs, reflecting a nearly 7% peak load increase from April 2020 when power demand was lower due to coronavirus pandemic lockdown impacts. Long-term weather forecasts indicate potentially warmer year-over-year Northeast US summer temperatures, which could support power and gas prices.

Average day-ahead on-peak power prices at the Northern Illinois Hub increased 69.73% in April from the year prior, increasing from $16.36/MWh in April 2020 to $27.77/MWh in April 2021, according to ISO and S&P Global Platts data.

NI Hub power prices were up almost 21%, or $4.77/MWh, in April from March 2021.

Similarly, AEP-Dayton Hub average on-peak day-ahead power prices increased 68.46% in April year over year, rising from $18.46/MWh to $31.10/MWh.

PJM Eastern Hub average day-ahead on-peak power prices increased 37.61% year over year in April but declined 35.25% month over month as temperatures moderated after a cooler March.

Platts Chicago city-gate average spot gas prices increased 52.75% year over year in April, rising from $1.66/MMBtu to $2.45/MMBtu, according to Platts data.

PJM average peak load was up 6.94% in April from the year prior, increasing from 78.3 GW to 84.1 GW. However, average peak load declined 8.93% month over month as temperatures warmed in April and power demand decreased from 91.6 GW in March.

Forward markets

PJM forward power prices increased on a month-over-month and year-over-year basis in April.

The PJM West forward on-peak power price package for May averaged $30.26/MWh in April, up 3.86% from the previous month, according to Platts pricing data. The July package traded at an average $36.50/MWh in April, up 1.98% from March.

Average PJM West on-peak forward power prices for May were up 44% from April 2020. And year over year, the AEP-Dayton Hub May forward package was up 45% while the Northern Illinois Hub was up 44%.

Forward gas prices at Transco Zone 6 non-New York for July were up slightly month over month and up by 26.57% year over year in April, trading at an average $2.34/MMBtu.

Power generation fuel mix

Natural gas-fired power generation increased slightly in April from March to supply a little over 37% of the PJM fuel mix. Gas-fired generation was down from almost 39% of the fuel mix in April 2020 when gas prices were lower due to demand-related pandemic impacts, which made the fuel attractive to power generators.

With gas prices up year on year, coal-fired power generation in April increased from the prior year to supply 19% of PJM's electricity, an increase from about 14% in April 2020, based on PJM data.

Coal-fired generation was down from March 2021 when it accounted for a little over 20% of PJM's fuel mix.

Long-term weather outlook

Philadelphia and Washington are predicted to experience about the same number of days above 90 degrees Fahrenheit as in 2020, which was an above normal year, according to a recent AccuWeather long-term outlook.

Philadelphia was above the 90-degree mark 36 times in 2020 with the normal being 31 days, and the city could have up to 38 days above 90 degrees F in 2021. Washington may approach 90 F on 50 days in 2021 after 46 days above that level in 2020, with the normal being 45 days, AccuWeather said.

Overall, temperatures may be around 1-3 degrees above normal this summer across the northeast, while temperatures are expected to average close to normal across the Ohio Valley and lower Midwest, weather forecasters said.