During the Texas winter storm in February, PJM was able to keep its cool as other power markets throughout the country suffered due to the strain of historic record-setting temperatures. Unlike in Texas, the reliability of the grid was well maintained in working conditions and prices of spot electricity remained steady. In the PJM, the market continues to trade in ranges between $26-$30/MWh in wholesale market in the area. It is going to take more than that type of severe weather to move this market.
This means good news for all energy buyers with open short-term power status. As seen in the chart below (Figure 1), the black line indicates that power for delivery in 2023 will be cheaper than 2022, the blue line.
Figure 1: Calendar Year Wholesale Electricity PJM West All Hours from 5
Its key to note that PJM is the largest Regional Transmission Operator (RTO), moving electricity from Chicago across the country to New Jersey. The size of this market was important in keeping electricity prices stable, while they were skyrocketing in other areas of the country. In Texas, winter storm Uri destroyed the ERCOT market, causing millions of customers to be left with no power, heat, or water for several days. Other RTOs, including the Louisiana to Michigan market (MISO) and the market from Oklahoma running north to the Dakotas (SPP), also suffered rotating power outages during that same storm. Entergy, one of the large facilities that operates MISO in the states of Louisiana, Arkansas, and East Texas, had to run rotating outages to 75,000 customers in residential areas. Since the neighboring grids were running on emergency mode, PJM exported excess power to MISO and SPP. In the following Figure 2, you can see the amount of electricity SPP imported from PJM during that specific week.
Figure 2: EIA SPP Total Interchange from enverus.com
PJM operators were lucky that the freezing cold front that swept the country retracted back north, instead of continuing its course across the states, not reaching the eastern half of the U.S. During the storm, Chicago and the Ohio Valley did experience frigid temperatures, but the eastern section of PJM, including Pennsylvania and Maryland, did not fall to freezing temperatures. Figure 3 below shows record of the temperatures across PJM, the dark blue being below-average temperatures. Note that many states are white or light blue, indicating that the temperatures recorded were around normal for that time of year.
Figure 3: Temperatures Across Major PJM Load Centers from amperon.co
In the western part of the PJM market, the freezing temperatures did affect spot prices, causing them to skyrocket specifically on Friday, February 12th. Over that long weekend, the Chicago Citygate gas hub was priced at $135/MMBtu, and Indiana gas hub was priced at $75/MMBtu. Normal spot natural gas prices for these regions are priced between $3-$3/MMBtu. Spot natural gas prices can directly affect spot electricity prices. During this storm, prices increased during the day-ahead and real-time electricity markets in the greater Chicago area, served by ComEd (See Figure 4 below).
Figure 4: Spot Electricity PJM ComEd Real Time from 5
Many industry observers have noted that just like Texas went through this market failure, PJM is no stranger to similar crises. In 2003, PJM customers went through a huge blackout that affected almost every state in the market and spread north into Eastern Canada. In 2014, PJM suffered an intense and prolonged cold front that introduced the world to the term “polar vortex”. Both events led to reforms, such as “capacity performance” and “transmission upgrades”, that have protected residential and commercial customers. These storms will be lessons that other markets, like ERCOT, can learn from and help investigators identify corrective actions to take to prevent equipment failures.
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