ISO New England Tracker: Power, gas prices up in June; expected higher in winter

Power and natural gas prices increased sharply month on month and year on year in June, as the coronavirus pandemic recovery and extreme heat pushed up demand.

Meanwhile, S&P Global Platts Analytics forecast summer power prices will reflect a discount to market forwards.

Day-ahead on-peak Connecticut Hub power prices rose by 95% from June 2020 to average $41.97/MWh compared with an average of $21.52/MWh in June 2020, according to S&P Global Platts data.

On a monthly basis, Connecticut Hub power prices increased by about 59% in June, reflecting the impacts of higher power demand that was pulled up by hot weather.

ISO-NE Internal Hub and Northeast Mass-Boston day-ahead on-peak power prices increased by about 93% year on year and about 59% on the month in June.

Real-time on-peak power prices at the three hubs increased by about 63% on average in June from May.

Algonquin spot natural gas prices increased by about 87% year on year in June to average $2.84/MMBtu, compared with an average of $1.52/MMBtu a year ago. Algonquin spot gas prices were up by an average of 23% in June from May.

Peak power demand increased by 32% on the month in June to average 17,744 MW, according to ISO data. Average peak load increased by 8% year on year from the June 2020 average of 16,388 MW, when lockdowns had depressed commercial and industrial demand.

Warmer June weather contributed heavily to the increase in prices and demand with an average high temperature of 79.7 degrees Fahrenheit compared to an average high in May of 66.9 F, according to CustomWeather data. The normal high temperature for June is 75.9 F.

The higher temperatures led to an increase in cooling degree days which averaged 6.7 in June compared with just 1 in May.

A heat wave at the end of June pushed average day-ahead on-peak power prices at the major hubs above $100/MWh, with Boston Hub reaching $129.63/MWh on June 30, which helped pull up monthly average prices.

Power generation fuel mix changes

A mixture of increased cooling demand and fewer power imports from the neighboring New York Independent System Operator market raised gas-fired power generation month on month in June.

"ISO-NE gas-fired generation in June exceeded 7 aGW, up 3 aGW from the month prior," Kieran Kemmerer, power market analyst with Platts Analytics, said.

"The increased call on gas-fired generation relative to the month prior stemmed from an uptick in electric cooling demand as well as displacement of imports, as gas-fired generation in downstate New York was called upon to serve increased loads locally," Kemmerer said.

Gas-fired generation accounted for 57% of ISO-NE's electricity output in June, up from 43.6% in May.

Hydropower accounted for 4.6% of the power generation fuel mix in June, down from 9.9% in May, which could also be related to lower import levels from New York.

Forward power, gas prices

Forward power prices increased between roughly 57% and 67% in June trading from year-ago levels, according to Platts data.

The July Mass Hub on-peak power package averaged $44.84/MWh in June, an increase of 67.46% from June 2020. Mass Hub power for September averaged $37.30/MWh in June trading, an increase of 56.70% from last year.

On a monthly basis, Mass Hub power forwards increased by about 14% to 15%.

"Our forecast for on-peak NEPOOL power prices for July–September now stands at $31/MWh -- a heavy discount ($13/MWh) to market forwards," Platts Analytics said in a recent research note.

August power burn from gas could be around 1.34 Bcf/d, according to Platts Analytics data.

Forward Algonquin gas prices strengthened considerably in June from year-ago levels with the July package up 83.82% to average $2.87/MMBtu compared with a July average of $1.56/MMBtu in June 2020.

The September package increased by almost 342% in June trading compared with where it traded in June 2020. Algonquin forward gas for September averaged $6.66/MMBtu in June trading.

"Our gas price forecast at Algonquin has been revised up roughly $0.10/MMBtu for the upcoming winter (December-February), pushing on-peak power prices at NEPOOL into the mid-$60s/MWh range," Platts Analytics said.