PJM Tracker: August power, gas prices rise, uncertainty around Illinois nuclear

PJM Interconnection power prices across major hubs averaged 83.4% higher in August on year and nearly 17% higher on month as spot August natural gas prices jumped by over 160% on year, and peak power demand was higher than July and year-ago levels.

PJM West Hub on-peak day-ahead locational marginal power prices averaged $50.92/MWh in August, the highest average price among the major hubs analyzed. On-peak day-ahead prices at the hub were 87% higher than the August 2020 average of $27.20/MWh and 20% higher than the July 2021 average.

AEP-Dayton Hub on-peak day-ahead power prices averaged $49.33/MWh in August, an 80% increase on year and 15% higher than the July 2021 average of $43.05/MWh.

PJM East Hub day-ahead on-peak power prices exhibited the largest year-over-year gain of 98.86% in August to average $49.21/MWh compared with $24.75/MWh in August 2020. PJM East on-peak day-ahead power prices increased by nearly 15% on month.

Spot natural gas prices continued to rise from year-ago levels, when coronavirus pandemic lockdowns lowered commercial and industrial demand for gas and power.

Platts Texas Eastern M-3 spot gas prices were 163% higher in August on year to average $3.72/MMBtu, compared with $1.41/MMBtu in August 2020.

Platts Chicago city-gate spot gas prices increased by 90.5% from year-ago levels in August to average $3.91/MMBtu, compared with $2.05/MMBtu in August 2020.

"With both coal and gas prices rising throughout the month, on-peak power prices across PJM averaged over $50/MWh at all major hubs -- the highest levels seen in any month since the first half of 2018," S&P Global Platts Analytics said in a research note.

PJM peak load averaged 128,183 MW in August, which was a 3% increase from July's average peak of 124,446 and a 5% increase from August 2020, according to ISO data.

Power demand was pulled up by higher temperatures across the PJM footprint, which averaged 77.4 degrees Fahrenheit in August compared with a July average temperature of 76.3 degrees F, according to CustomWeather data.

Electric cooling demand was also higher in August, with cooling degrees days averaging 9.5% higher than in July.

"Our pandemic demand analysis for the month of August suggests continued weather-adjusted load growth on average, with metered loads materializing above prepandemic modeled load through much of the month," Platts Analytics said.

Power generation fuel mix

Coal-fired power generation lost market share to natural gas in August with coal supplying 25.76% of the August generation mix compared with 26.83% in July. In August 2020, coal-fired power accounted for 22.1% of PJM's electricity output, compared with 42.29% from gas-fired units, which ran more often amid lower gas prices.

Natural gas-fired power accounted for 39.24% of the PJM generation fuel mix in August, up slightly from 37.89% in July.

Nuclear power output was largely unchanged month over month and hydropower was down slightly to supply 1.8% of the August fuel mix compared with 1.95% in July.

Wind power was also down slightly in August, supplying 1.38% of the generation mix compared with 1.43% in July.

Forward markets

On-peak forward power prices increased during August trading, with the Northern Illinois Hub for September averaging 64.84% higher than August 2020. Forward prices at the hub during August trading for September were 9.38% on month.

PJM West Hub on-peak forward power prices for September averaged $45.56/MWh during August trading and fell slightly further along the curve, with the November package averaging $42.83/MWh.

Forward gas prices increased from year-ago levels and strengthened heading into the winter months. Platts Transco Zone 6 non-New York for September increased 114% in August trading compared with its 2020 counterpart.

Prices at the hub averaged $3.04/MMBtu for September and $3.69/MMBtu for November during August trading.

"We continue to maintain that state policy in support of Exelon nuclear will be enacted though note that there is likely still more deliberation required by the Illinois House, Senate and governor to reach a formal conclusion," Platts Analytics said.