Power Bulls Are Banking on U.S. East Getting Tired of Heatby and
Another heat wave is set to bear down upon the East Coast this week, one that could roil power markets this time around.
Two high-pressure systems will combine to drive temperatures into the 90s Fahrenheit (30s Celsius) starting Wednesday, kicking off a period of intense heat that should last through the weekend in Washington and Philadelphia, according to the U.S. Weather Prediction Center. As a result, power demand is set to rise every day this week on the biggest U.S. grid.
Wholesale electricity prices on the 13-state eastern U.S. grid managed by PJM Interconnection LLC could jump about five-fold to about $150 a megawatt-hour, Gary Cunningham, manager of market research at Tradition Energy in Stamford, Connecticut, said in a telephone interview Monday. Whereas price gains may have been limited by efforts to conserve power in past heat waves, that may not be the case this time.
“When you get to this point in the summer people are tired of the heat,” Cunningham said. “We are looking for heat fatigue. When you see really big jumps in load, prices can’t stay at $30.”
Spot power at PJM’s benchmark Western hub, which includes Washington, was down 3 percent at $27 a megawatt-hour in the hour ended at 11 a.m. from a day earlier, according to grid data compiled by Bloomberg. On Monday, the average spot on-peak price gained 29 percent to $37.70 with the midday heat. During last month’s heat wave, the daily average topped out at $60.17 on July 27. Three or four summers ago, it wasn’t unusual to see daily averages reach $100.
The heat will come on sooner and last longer in the Mid-Atlantic, including Washington. The Northeast will probably get rain Wednesday that will delay the start of the highest temperatures there, according to the National Weather Service. By Thursday, the rest of the Northeast will start to feel the heat and temperatures in Boston may hit 94 and 90 in New York.
The combination of soaring temperatures with humidity will make it feel closer to 100 in New York and Boston and even warmer in New Jersey and eastern Pennsylvania, the weather service said.
PJM forecasts that peak demand on the grid will jump 16 percent to 146,108 on Aug. 12 from Monday’s high. Preliminary data from the grid operator shows the high so far this summer was about 150,825 megawatts on July 25, which would be the most in three years if it goes unrevised.
In addition to the daytime highs, readings overnight throughout the Northeast and Mid-Atlantic states will only fall into the high 70s, Patrick Burke, a senior branch forecaster at the College Park, Maryland-based Weather Prediction Center, said by phone Monday. Some areas won’t see readings drop below 80 degrees on either Friday or Saturday mornings, Nick Vita, a meteorologist with Commodity Weather Group LLC in Bethesda, Maryland, said in an e-mail.