Monday, July 29, 2013

Stunning Fact: Regional Wholesale Electricity Prices Vary By 133%--From 3.1 To 7.1 Cents Per Kilowatt-hour

Though the costs of producing many commodities can vary significantly, depending on location, the price of most commodities do not vary substantially.  For example, from high to low, prices for gasoline, typically vary around America by about 25%, and spot market natural gas prices differ by approximately 15%.

While the range in pricing of a commodity is typically narrow, wholesale electricity prices differed across America by about 133% in the first half of 2013--a true Grand Canyon gap between high and low.

The lowest price of 3.1 cents per kilowatt-hour was in the hydro dominated market at the border of Washington and Oregon, while the highest price of 7.1 cents was in the natural gas dominated market of Massachusetts and New England. Indeed, the Pacific Northwest wholesale market has consistently had among the lowest prices in the US, in part because it is dominated by renewable energy (hydro and wind). Both hydro and wind have zero fuel costs and the lowest production or operating costs of all generation types.  Wholesale electricity markets should clear at the production cost of the last plant needed to supply demand.

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