This summer is bringing the heat. It has been the hottest summer since 2018 and the extreme weather isn’t expected to slow down. With 90% of the U.S. in a drought and higher temperatures across the board, we have seen devastating wildfires in the west and are preparing for peak hurricane season. The combination of warm weather with the current economic climate may raise concerns about the future of power prices. Don’t sweat it. We are here to break down the current conditions so you can better prepare for the upcoming months.
Economic Conditions
While several signs are pointing to an upcoming recession, it is likely that if this does occur it will be atypical from those that have come before. This is due to record-high inflation rates. The Federal Reserve has raised interest rates several times over the past few months with the goal of controlling inflation. On the other hand, unemployment is still low and consumer spending has not slowed as expected despite higher prices. These two factors are not consistent with what is typically seen during a recession.
Weather Conditions
Peak hurricane season is approaching. While the season runs from June 30th to November 30th, it tends to be most active from late August to the end of September. The National Oceanic and Atmospheric Administration, NOAA, is predicting that there is a 65% chance this season is above-normal. Severe weather can create more volatility in the energy market, with sudden price spikes possible. In addition, Chief Meteorologist at Constellation, Dave Ryan stated that over the past 10 years seasons have lagged, meaning that temperatures remain warm longer into the fall. This could increase consumer demand for energy into the next season.
Future Power Prices
Now that we have covered the current environmental conditions, let’s take a look at the future of power prices. Despite signs pointing to higher costs, consumers in the mid-Atlantic and midwest regions are expected to pay less next year. PJM, the largest grid operator in the U.S., hosted its annual auction for capacity at the end of June. This action is held to ensure there is enough electricity to meet the demand throughout the year. The cost for next year’s capacity fell to $2.2 billion, the lowest in over a decade.
There are two main factors that contributed to this fall in price. First, this auction is typically held three years in advance, but this auction was delayed. With the auction held only one year in advance, they had a more accurate forecast of power needs and avoided buying unnecessary capacity. Second, over five gigawatts of nuclear power were cleared in Illinois. This was the first time in several years this has cleared and may be due to Illinois’ new clean energy law. Consumers can look forward to savings in the next year.
Improving Efficiency
While prices may be lower for some next year, it is still important to protect yourself from market volatility now. There are several ways you can avoid peak demand charges. The first is to consider the times in which you are using energy and see if you can make a shift. The peak demand period is typically from 1 pm to 6 pm. There are a few different ways you can save energy during this time period. You can install controls to turn off lights when they are not needed, turn off copiers, printers, and other personal appliances, and charge battery-operated equipment at night. Any way you can reduce energy usage during that time will help lower peak demand costs.
The next step is to improve efficiency at your office or facility. This includes upgrading old equipment to more efficient models. Start with the systems that have the most impact on peak demand such as air conditioning and lighting. If you are unsure of where to start, you can work with an auditor who can conduct an energy assessment of your facility. Brilliant Source Energy performs facility audits to identify energy waste and provide energy-saving solutions. By combining these two approaches you will be able to better manage your monthly energy spend.
Ready to save on energy? Brilliant Source is here to help! Contact us today to discuss our energy and cost-saving solutions further
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