Sunday, November 09, 2008

October Wholesale Electricity Prices at 7 Year Low

Anonymous Comment about this CD post: His data was [sic] irrelevant and pointless. You don't compare electric prices in the summer with those in the fall. I'll let you figure out why that is. If you put up a link saying cars go 159% faster than bicycles, I'd say, "yeah [sic], so what? who [sic] cares? of [sic] course they do" [sic]

That's the same with his data. Any inference drawn from it at all (deflation?) is irrelevant at best! This "phd" [sic] guy is worthless. This blog is worthless. I can't remember why I bookmarked it? I'm going to stay on tho' [sic] to correct his future errors... and I ain't [sic] no phd [sic].

OK, let me try again to show that wholesale electricity prices are falling - no data mining, just data. The chart above shows average wholesale electricity prices ($/MWh) for the month of October at the Ercot, Texas hub (data here), adjusted for inflation using the BLS Inflation Calculator.

The average October 2008 wholesale electricity price at the Ercot hub of $34.34 per MWh is 36% below October 2007 and 68% below the October 2005 peak.

Bottom Line: Wholesale electricity prices for October 2008, both in nominal and real terms, are the lowest in 7 years, since October of 2001.


At 11/09/2008 11:07 PM, Blogger Rui Yu said...

we seem to be making a big deal about wholesale electricity prices. Don't get me wrong, I'm happy about it, but its an interesting topic to cover multiple blog posts about.

At 11/09/2008 11:44 PM, Anonymous Anonymous said...

Hey?!! Are you trying to trick us again? Didn't you start with the Mass Hub? Why'd you just switch to the Texas hub?

I bet the Texas hub more volatile cuz (sic) they have less nukes and more coal & n.Gas capacity? Plus, they have stranded gas all over the place. Hey and didn't Enron blow up in 2001? Weren't they in Texas? What does all this really mean? Should I go long spring chickens?

At 11/10/2008 5:05 AM, Anonymous Anonymous said...

I must be dense. I don't get the bottom line point. Why is the price on a given day or month important?

If you charted the June wholesale electricity prices you would find that it was at a 7 year high. High prices in June, low prices in October.

As the end user, all I really care about is how much I paid over the year (or any other time interval),i.e. what is the average weighted price that ends up on my billing invoice.

If I was supplied by the Texas Ercot Hub, I would be pleased if my 2008 cost was less than my calender year 2007 cost of $51.96/MWh.

At 11/10/2008 11:38 AM, Anonymous Anonymous said...

Texas has a much different fuel mix than the rest of the country. As well as being electrically isolated from Eastern and Western U.S.

Just points to consider, lack of transportation between markets tends to skew ERCOT being a representation for North America.

Love the blog!

At 11/12/2008 8:14 AM, Anonymous Anonymous said...

I really enjoy reading your blog, however I did notice your post related to price in the ERCOT region of Texas. As an energy trader who trades the ERCOT market I thought I should point some facts regarding that particular market. First, natural gas power plants are on the margin the vast majority of the time. So, the statement that wholesale price are down from the October 2005 high is true but only because natural gas is off of its all-time high of which occurred in the fall of 2005. To really asses the conditions of the grid we must look at market Heat Rates (Power divided by Natural Gas).


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