Energy prices in the PJM Interconnection climbed by 21.6% in the first half of 2013, compared with the same period of 2012, but this was partly offset by a decrease in the capacity cost per megawatt-hour, a new report states.
Monitoring Analytics, PJM's independent market monitor, on Thursday submitted its 2013 State of the Market Report for PJM: January through June, to the Federal Energy Regulatory Commission, PJM management, state commissions, the PJM board of directors and the PJM Members Committee.
"A combination of increased weather-related demand and higher fuel costs led to a substantial increase in energy prices compared to the first half of 2012," an accompanying statement said. "The hourly average load increased 2.3% in the first six months of 2013 compared to the first six months of 2012."
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The price of natural gas in the first half of 2013 was higher than it was in the same period of 2012, the report states.
"Natural gas prices were above coal prices in the first months of 2013, with prices above $10/MMBtu for some days," the report states. "Coal prices increase during the first six months of 2013 but remained relatively flat in comparison to 2012."
These trends contributed to an increase in coal-fired generation relative to gas-fired generation, the report states.
Coal units provided 44.3% of the power in the first half of 2013, compared with 40.3% in the first half of 2012.
Gas-fired units provided 15.7% of the power in the first half of 2013, compared with 19.4% in the first half of 2012.
Nuclear units provided 35.1% of the power in the first half of 2013, compared with 35.3% in the first half of 2012.
Wind units provided 2.2% of the power in the first half of 2013, compared with 1.9% in the first half of 2012.
Hydroelectric units provided 1.9% of the power in the first half of 2013, compared with 1.8% in the first half of 2012.
Commenting on the report, Jim Carson, CEO of Risquant Energy, an electricity market consultancy based in St. Paul, Minnesota, said in an email, "The critical variable is the level of natgas prices, especially relative to coal prices."
The capacity cost per megawatt-hour fell by about 21.3% in the first half of 2013, compared with the same period of 2012, the report states.
Congestion costs increased by about 16.3% in the first half of 2013, compared with the first half of 2012, which reflected the fact that the coal-heavy west side of PJM was displacing more generation from the gas-heavy east side of PJM, the report states.
The State of the Market Report's primary purpose is to determine the competitiveness of PJM markets. In general, the energy and capacity markets were competitive, but "the local [energy] market structure was evaluated as not competitive due to the highly concentrated ownership of supply in local markets created by transmission constraints," the report states.
"While transmission constraints create the potential for the exercise of local market power," PJM has rules that mitigate local market power and force competitive offers, the report states.
The aggregate and local capacity market structure is also not competitive, but PJM again applies rules to mitigate market power which resulted in competitive market performance, the report stated.
--Mark Watson, firstname.lastname@example.org
--Edited by Katharine Fraser, email@example.com