PJM issues hot weather alert on high temperatures, pushing up electric demand

Houston — PJM Interconnection issued a hot weather alert for July 3 with temperatures forecast as much as 6 degrees above seasonal norms pushing up demand more than 20% higher than in June.

A hot weather alert is issued when temperatures are expected to exceed 90 degrees Fahrenheit with high humidity, driving up demand for electricity, according to PJM. A hot weather alert prepares transmission or generation facilities for the extreme heat or humid conditions, which may pose capacity issues for the grid.

"To reliably serve demand, transmission and generation operators determine whether maintenance or testing may be deferred or canceled," according to PJM. "PJM's reserve resources are available to cover for generation that may be unexpectedly unavailable or to help meet demand that is higher than forecasted."

Near-term outlook

PJM forecast peakload at 135.160 GW for July 2 and 131.965 GW on July 3, the highest levels since September, according to PJM data. Early July peakload levels are averaging 24% above the June peakload. For comparison, July 2019 peakload averaged 131.936 GW.

High temperatures across the PJM footprint are forecast to range from 87 F to 94 F, as much as six degrees above seasonal norms, according to CustomWeather.

S&P Global Platts Analytics called for a PJM hot weather alert in its "North American Electricity Weekly Outlook – PJM" report issued June 29.

"If the weather forecast holds, we see it likely that a hot weather alert could be declared mid-week–the absence of which could be relatively bullish for PJM prices," according to the June 29 report. "That being said, PJM's load forecasts consistently overshot realized loads."

The rising demand and temperatures had no impact on wholesale power prices.

PJM West Hub on-peak day-ahead for July 3 delivery remained little changed around $28/MWh on the Intercontinental Exchange in July 2 trading. For comparison, July 2019 on-peak day-ahead LMPs averaged $32.14/MWh.

"The limited impact to power prices from the issuance of the recent hot weather alerts in PJM comes primarily from the increased supply of reserves, which PJM is permitted to procure when issuing a hot weather alert," said Kieran Kemmerer, S&P Global Platts North American power analyst. "However, as seen throughout this week and last, actual loads have tended to materialize below PJM's load forecast, adding more downside risk to prices."

Power prices have been weak due to lower demand stemming from the coronavirus pandemic coupled with the impact of weak gas prices.

The PJM West Hub on-peak July package rolled off the curve at $27.40/MWh, nearly $4 lower than where the 2019 package ended, according to S&P Global Platts data. The 2020 package averaged about $27/MWh in its last month of trading, 18% lower than what the 2019 package averaged a year ago.

Summer peak outlook

PJM previously issued hot weather alerts for June 22 and 23.

PJM has forecast a summer peak demand of about 148 GW, which does not reflect the decrease in demand experienced as a result of the coronavirus pandemic, according to PJM. For comparison, the last year's summer peak reached more than 151 GW on July 19, 2019.

The all-time peakload record is 165.563 GW reached August 2, 2006.

The grid operator has more than 187 GW of installed generating capacity.

PJM, the nation's largest electric grid operator, serves customers in 13 states and the District of Columbia.