PJM Tracker: Power, natural gas prices in May rose sharply on year

PJM Interconnection day-ahead on-peak power prices increased by as much as 68% in May compared with a year ago and forward power prices were up over 45% in May 2020 as natural gas prices moved higher year over year.

Average power prices across major PJM hubs were up 60.75% in May from a year ago, according to ISO data. Day-ahead on-peak average prices at Northern Illinois Hub increased by 60% year over year, or a $10.53/MWh increase.

On a year-over-year basis, Dayton Hub and PJM West day-ahead on-peak prices also increased by about 60% in May, with PJM East Hub up the most at about 68% year over year.

Month over month from April 2021, real-time on peak prices increased by around 10% in Northern Illinois Hub and Dayton Hub and by about 20% in PJM East and West.

The May spot power price increases closely tracked May spot natural gas prices that were up by about 68% year over year at Texas Eastern Hub and about 65% at Platts Chicago city-gate. On a monthly basis, May gas prices at those hubs increased by 9.26% and 8.26% respectively from April. The Texas Eastern average May gas price was $2.31/MMBtu and Chicago city-gate averaged $2.45/MMBtu.

Peak load across the PJM footprint in May averaged 90,038 MW, a 7% increase from the April average peak of 84,104 MW. Year over year in May, PJM peak load was up about 10% from May 2020 when demand was down due to coronavirus pandemic-related impacts.

As the weather warmed heading toward the summer months, heating degree days decreased from about 11.2 in April to 5.3 in May, while cooling degree days started to kick in, rising from 0.5 in April to 2.6 in May.

"Our forecast for PJM RTO loads is anticipated to be lower year on year in July to August under normal weather assumptions, though the latest US Climate Prediction Center temperature outlook currently assesses the upcoming summer months at a high probability of coming in above normal," Kieran Kemmerer, power market analyst with S&P Global Platts Analytics, said June 4.

Forward markets

Forward PJM power and gas prices increased year over year in May, with June forward gas prices rising most.

June PJM West on-peak power prices averaged $32.11/MWh in May, which amounted to a 46% increase from where the June package traded in May 2020. Further out on the curve, the August package was up 36% year over year.

Platts AEP Dayton Hub for June averaged $33.16/MWh in May, a year-over-year increase of 45.5%, and Northern Illinois Hub forward prices for June averaged 47% higher than a year ago at $30.44/MWh.

Forward gas prices increased more than power in May on a percentage basis, with Platts Transco Zone 6 Non-New York June prices averaging $2.26/MMBtu, which amounted to a 59% year-over-year increase.

If the above-average weather forecast materializes, higher temperatures could further boost power prices this summer.

"Warmer weather suggests upside to our PJM summer forecast in the mid-$30/MWh range, aligning it further with market forwards which currently reflect a roughly $2/MWh premium, Kemmerer said."

Power generation fuel mix

Nuclear power plant outages in May pushed the share of nuclear in the PJM fuel mix down from May 2020 when nuclear generation supplied 38.7% of the fuel mix, compared with 34.6% in May 2021.

Natural gas supplied 36.8% of the PJM generation mix in May, down slightly from April but up a bit from May 2020.

Coal-fired power plants generated more electricity in PJM in May 2021 on a month-over-month and year-over-year basis. Coal accounted for 19.7% of the PJM generation mix in May 2021, 18.7% in April 2021 and 15.8% in May 2020.

Wind power accounted for 3.8% of the PJM fuel mix in May, down from 4.9% in April and 4.4% in May 2020. Non-wind renewables increased slightly from April, supplying 1.9% of the fuel mix in May.