Dive Brief:
- PJM Interconnection’s load-weighted locational marginal prices (LMPs) averaged $69.92 per megawatt-hour in the first six months of 2014, up 84% from $37.96 per megawatt-hour for the first half of 2013.
- Though 2Q 2014 LMPs were elevated from the previous year, the remarkable average 1H LMP increase was caused primarily by extremely higher prices during the frigid winter’s increased demand which produced higher fuel costs.
- Summer 2014 has had “below- and well-below-normal” temperatures throughout the entire Eastern Interconnection, including PJM, suggesting LMPs are already moving toward moderation for the year.
Dive Insight:
The prices are the highest since 2008 but, according to State of the Market Report for January through June from PJM independent market monitor Monitoring Analytics, it is not a trend. The 2008 LMP of $74.77 per megawatt-hour was the only one higher than the 2014 LMP since 1998.
Other findings from the report include a rise in congestion costs, particularly in PJM's AP South Interface near Maryland, Virginia and West Virginia. Congestion costs in PJM increased from some $306 million in 1H 2013 to about $1.1 billion in 1H 2014, while the AP South Interface added $455.4 million in 1H 2014, the biggest single cost increase factor.
PJM's energy, capacity, regulation, and financial transmission rights markets were, the report found, “generally competitive” in 1H 2014.
