Earthquake!

Wholesale electricity prices are volatile. Because electricity cannot be stored in any meaningful quantity, electricity load (demand) and supply must be matched in real-time. Matching load and demand is the challenging job of grid operators. To give you an idea of how volatile prices can be, take a look at the graph below (source: pjm.com).

Unlike a few weeks ago, weather this week in the Mid-Atlantic has been mild. Mild weather generally leads to low and stable electricity prices. Prior to 2 PM yesterday, 8/23, wholesale prices in PJM were below $40 per megawatt-hour. Then came the earthquake. Very quickly, as a precautionary measure, a number of nuclear power plants were immediately taken offline. In some areas, spot prices in the wholesale market jumped to $140 per megawatt-hour. That is a 250% increase. Within approximately 20 minutes, however, spot prices were back to $40 per megawatt-hour as the grid operator was able to bring online other resources or implement demand response measures.

As volatile as these prices seem, during the summer heat wave, spot prices in the PJM wholesale market at times exceeded $600 per megawatt-hour. For short periods of time, spot prices in the ERCOT (Texas) market have reached $3,000 per megawatt-hour.

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