Monday, September 10, 2012

Stunning Fact: Shale Gas Shoves PJM's Wholesale Electricity Price Down 33% In First Half Of 2012

During the first half of 2012, an already low PJM wholesale energy price fell through the proverbial floor, as gas prices delivered to power plants crashed to below $3 per thousand cubic feet.  From January to June, PJM's wholesale energy price fell 35%, down from the equivalent of 4.8 cents per kilowatt-hour to 3.1. at Table 1.7 on page 15.

The wholesale energy price accounts for approximately 70% of the total PJM wholesale electricity price, and the total PJM wholesale electricity price (energy, capacity, operating reserves etc) fell 33% in 2012 from the equivalent of 6.8 cents per kwh to 4.5 cents.

These low prices have delivered electricity bargains to consumers especially in Pennsylvania where competitive power prices are delivered quickly to the retail electricity market.  For producers, the low energy prices are cutting profits to the bone and making older, less efficient plants uneconomic.

The 2012 drop is even bigger when measured against PJM's energy price in 2008--the last year before major shale gas production in the Marcellus and around America smashed gas prices.  In the pre-shale gas era of 2008, PJM's load weighted energy price was the equivalent of 7.1 cents per kilowatthour, according to the 2008 State of the Market Report.  The difference between 2008 and 2012 prices is now a full 4 cents per kilowatt-hour.

A typical residential customer in Pennsylvania uses about 10,000 kilowatt-hours per year and is saving approximately $400 per year, as a result of the much lower PJM energy price produced by shale gas.
That's real savings for consumers and increased disposable income for the economy.

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