February 11, 2014

Electricity Price Ticker Tracks Volatile Prices

The graphic above illustrates the astonishing volatility of the wholesale price of electricity over the course of just a few days in early 2014. While the price normally hovers around $20 per megawatt hour (Mwh), at one point in early January it hit $1520 per Mwh. That price peak reflects the extraordinary levels of demand for electricity that accompanied several very cold days in January.

The volatility has led to the demise of at least one energy supplier, Clean Currents Benefit, LLC. In an open letter posted on it’s website on January 31, the renewable energy supplier wrote: “the recent extreme weather, which sent the wholesale electricity market into unchartered territories, has fatally compromised our ability to continue to serve customers.”

This volatility stems from new shortage pricing rules implemented in October 2013 by PJM Interconnection, the regional electricity transmission organization that maintains the high voltage electricity transmission system for Pennsylvania and twelve other states as well as the District of Columbia (local distributors, such as PECO in Philadelphia, get that electricity to consumers). The new rules were put into place in response to Federal Energy Regulatory Commission policy that, when energy reserves fall short, the wholesale price should respond to that lack of supply. Because PJM must hold in reserve sufficient energy resources to ensure the electricity system’s reliability even under extraordinary circumstances (such as when a large-scale generator breaks down or when the system experiences very high levels of demand), the extremely high demand for electricity in January caused the wholesale price to spike as the energy reserves diminished.

You can track the real-time wholesale price of energy by viewing the Electricity Price Ticker that Penn IUR developed for PJM. Visit our website to see the price on the Ticker in the upper right. If you would like your own Electricity Price Ticker, you can download and install a free app developed by Penn IUR at http://www.powerisknowledge.com.

 

 


Media Contact:

Deborah Lang
Communications Director
dlang@upenn.edu
215-573-8386

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