Early November cold weather prompts fuel switching in PJM and MISO

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A historic November cold snap sent temperatures below freezing in 75% of the Lower 48 states. Because of this cold snap, the price of natural gas increased from an average of less than $2.00 per million British thermal units (MMBtu) in October to a mid-November high of $5.11/MMBtu at the Tetco M3 hub, located in northeast Pennsylvania in the PJM Interconnection (PJM). Prices rose about $1.00/MMBtu and reached nearly $3.00/MMBtu at the Chicago Citygate hub in the Midcontinent Independent System Operator (MISO). These price increases resulted in coal-fired power generation replacing natural gas-fired generation starting in late October in both of these regional transmission organization markets. In both PJM and MISO, where strong competition exists between natural gas- and coal-fired generation, relative shifts in fuel prices can influence which type of power plant operates.

Throughout all of 2019, natural gas-fired generation has accounted for an increasing share of power generation in PJM and MISO, averaging 35% in PJM and 27% in MISO. This summer, the natural gas market in the Lower 48 states experienced record-high natural gas consumption, relatively low natural gas prices, retirements of coal-fired generation, and increasing natural gas-fired capacity. In October, when regional natural gas prices were particularly low because of moderate autumn temperatures, natural gas-fired generation in MISO reached its highest level for 2019 at 36%. However, as natural gas spot prices in the PJM and MISO regions approached nearly $2.70/MMBtu in late October, the coal-fired generation share increased from its earlier lows.

PJM. The PJM Interconnection spans states in the U.S. Middle Atlantic. Cold weather in that region caused the natural gas spot price at the Tetco M3 trading hub to rise from less than $2.00/MMBtu at the end of October to a high of $5.11/MMBtu on November 13, the peak of the cold temperatures. On November 9, the share of natural gas-fired generation in PJM decreased to 34%, its lowest level since May. Conversely, the share of coal-fired generation increased to 31% on November 14, which was the highest coal share since March.

MISO. MISO covers much of the U.S. Midwest and part of the Gulf Coast. For several days in October, the share of natural gas-fired generation was higher than the share of coal-fired generation in the region for the first time in 2019. With low natural gas spot prices, natural gas-fired generation peaked at a 36% generation share on October 14. In contrast, coal’s generation share fell to 25% on October 12 because natural gas prices were lower than $2.00/MMBtu and wind generation was strong. However, by November, lower wind power and higher natural gas prices made coal-fired generation more economically attractive. The Chicago Citygate natural gas spot price rose to nearly $3.00/MMBtu on November 7, or $1.00/MMBtu higher than the average October price. Higher natural gas prices contributed to the natural gas generation share falling to 22% on November 10, its lowest share in eight months. Meanwhile, coal’s generation share increased from its October average of about 32% to a November average of 38% through November 13.

EIA collects the data for the Hourly Electric Grid Monitor from Form EIA-930, Hourly and Daily Balancing Authority Operations Report, which includes hourly electricity demand, forecast demand, net generation, and interchange data. The data are provided by the 65 electricity balancing authorities that operate the electric grid in the Lower 48 states and maintain real-time balance between electricity demand and supply on the grid.

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