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Power

What's Happening To Wholesale Electricity Prices? (construction-physics.com) 102

Posted by msmash from the closer-look dept.
US wholesale electricity prices have nearly doubled since 2020, rising faster than consumer rates across most regional grid operators. Analysis of location marginal pricing data from 17 trading hubs shows average wholesale costs increased from baseline 2020 levels to peaks 2-4 times higher by 2022, before partially recovering. Consumer electricity prices rose 35% during the same period.

Transmission congestion spreads are widening in most Independent System Operators and Regional Transmission Organizations, particularly in PJM, SPP, and NYISO, where bottlenecks increasingly prevent access to cheaper generation. California's CAISO stands alone among major grid operators as wholesale prices remain flat or decline in 2025 despite natural gas volatility. The cheapest wholesale electricity continues to trade in SPP's Oklahoma-Kansas region at $16-17 per megawatt-hour.

What's Happening To Wholesale Electricity Prices? More | Reply

What's Happening To Wholesale Electricity Prices?

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  • Two letters: (Score:5, Insightful)

    by Locke2005 ( 849178 ) on Friday September 19, 2025 @12:09PM (#65670642)
    AI

    • Re:Two letters: (Score:4, Insightful)

      by TheMiddleRoad ( 1153113 ) on Friday September 19, 2025 @12:19PM (#65670670)

      Obvious post is obvious.

      • Obvious post was karma-whoring for a "Score:5, Insightful". Obviously!

        • Re: (Score:2)

          by skam240 ( 789197 )

          When you see conservatives blaming renewables and the like for it the obvious needs to be pointed out.

          • When you see Georgia maga minions accusing a Hyundai battery plant of using up all the Georgia farmers' water, but welcoming data centers, you question if they are on the correct medications.
            • Here in GA there is a proposed data center in the site of a logging operation and they have asked for a much power a the local utilities can provide. But I'm pretty sure charging my EV overnight at home once a week is the problem.
    • As middleroad also said, this is the answer to the rhetorical question. There is a new big dog at the bowl, and it is ravenous. And the owner is letting the big dog have all it wants.
    • You are subsidizing billionaires.
    • The energy companies seem to be raking in the profits, such as Constellation, which is up by more than 300% since 2023, and over 750% in a 5-year time span (https://finance.yahoo.com/quote/CEG/). I don't know all what they do (energy generation and delivery are listed, but I suspect they do other things too, such as trade and speculate on energy like Enron did), but as an essential service that everyone needs it seems outrageous they are socking the public (particularly a public that doesn't get to choose w

    • For every complex problem there is an answer that is clear, simple, and wrong.

      The problem is that distribution networks are highly regulated monopolies, many of them operating in the red because of fire-related lawsuits or government-mandated rate limits that don't respect the costs. They have no real incentive, and in some cases no funding, to expand to meet the ever-increasing demand.

      There's a long backlog of electricity producers waiting to be connected to the distribution network, but that network is ex

    • Re: (Score:2)

      by Torodung ( 31985 )

      Good point, but I don't think that's even hit its stride yet. We're talking about 2020-present, and it's not a hockey stick.

      I suspect unintended consequences more than AI. That and regulatory capture of some kind. That's the usual suspects.

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      But also failure to deploy renewables faster enough. This week we have had two periods of free electricity due to the abundance of renewables. The things keeping retail prices high are mostly gas and a bit of nuclear. Our system works on the basis that everyone gets paid the price of the most expensive source, which is always gas or nuclear (we don't have any coal).

      Another example of NIMBYism making things worse for everyone. Every objection to renewables is forcing prices to remain high.

    • It's not just AI, mining is also doing its bit.

  • Foreign investors (Score:5, Interesting)

    by ArchieBunker ( 132337 ) on Friday September 19, 2025 @12:14PM (#65670660)

    My electric company is owned by a foreign consortium based in Vietnam and Australia. Maybe allowing that wasn’t such a hot idea for consumers.

    • What are you, a Communist?/s

    • The company may have foreign owners, but the company operating in your state is still under the jurisdiction of the state regulator.

      If your state is "deregulated," then the power company provides transmission, but not generation, to its customers. In that case they bill you the supply cost based on what the market is offering.

      If your state is not "deregulated," then the power company is providing both transmission and generation to its customers. In that case the state regulator will define the allowed mark

      • Hopefully your state allows both NG and ELECTRIC to be sold to you by someone other than the utility. They should be working to offer you the solar mid day power for you to squirl away for them at .09USD/kWH. Mine only allows me to buy NG with a fixed price contract, making hot water and winter heating costs are not my issue. The cost of what shows as 65% solar power from a producer local that exactly matches about 70% of my load (cooling) as it appears on my bill is the problem.

        The easy fix is fo

  • "Just buy bonds" (Score:1)

    by Anonymous Coward

    Who here thinks buying bonds is a better use of money than taking ownership of your own power generation by using solar+battery?

    • Those bonds will help keep the air conditioning and refrigerator on when a hurricane wipes out electricity for weeks in half your state.

      Substitute snowmageddon or heat dome as regionally appropriate.

  • Market forces (Score:5, Insightful)

    by Turkinolith ( 7180598 ) on Friday September 19, 2025 @12:23PM (#65670688)
    And guess what's going to happen with the federal government not allowing any new solar or wind energy generation projects. It's going to take longer than a year for coal or gas plants to come online too so in the meantime just bend over and get ready.

  • Wrong Model (Score:5, Interesting)

    by mspohr ( 589790 ) on Friday September 19, 2025 @12:24PM (#65670694)

    The US electric grid is based on large generating plants connected by long distance transmission lines. This was the only feasible way to set up the grid when all you had were large generators.
    However, with the rise of solar (home and commercial) and battery storage, it is possible to organize the grid as a network of small distributed generators. This reduces the need for long distance transmission and makes the grid more resilient since there are many more sources of energy and the failure of one is insignificant.
    California is a good example where a network of home batteries has prevented four major outages this year and was called into use about 15 times to supplement large generators.
    A problem is that power companies don't make profits from small scale generation and storage. It actually costs them. Power companies would rather invest in large generating plants and long distance transmission where they get a guaranteed return on investment and well as controlling the market so they can charge high prices.

    • If it's the same as here, then there is simply no market incentive for localized storage even though there is a massive need. For market to drive distributed storage, you need extremely local pricing.

      • PS. except for homeowners of course.

        • For "homeowners" substitute "property owners". Where I live, lots of commercial buildings have solar panels on their roofs or over their parking lots.

      • Re: (Score:2)

        by dgatwood ( 11270 )

        If it's the same as here, then there is simply no market incentive for localized storage even though there is a massive need. For market to drive distributed storage, you need extremely local pricing.

        In California, they have messed with the cost structure enough that solar without storage is usually not worth doing beyond your peak usage, because your excess power production won't net you nearly as much as you pay to buy that power back later in the afternoon.

        • It's not worth it even if you're on NEM 2.0. I get between 3-5 cents per kW that I send to the grid and pay about 39 cents per kW that I draw any other time. Thank goodness for my batteries...

        • Re: (Score:3)

          by mspohr ( 589790 )

          That's why most solar installations in California now have batteries so they can store solar PV energy and avoid buying or selling from the grid.

          • All the new installations, sure. All the old ones, highly unlikely. If you are on NEM 1.0 or 2.0, you are grandfathered into that for a certain period of time, I think 25 years. If you add a battery to your system, it counts as changing your system that you will be put on the new NEM 3.0 rules. That's very likely not going to be worth it for a property owner and will likely even discourage some from getting a battery knowing they'll lose out on the better sell back rates of 1.0 or 2.0.

            • Until you can contract you own hourly model for purchasing power, the utilities are allowed to rob you for 98.5% of the time so they can take the hit 1.5% when every gas peaker is running near 100%. Yet another place where you are actualy paying for insurance and not the service. The easiest solution is just to offset you cooling needs with solar, do not bother with the grid tie, and use a commodity portable power bank as emergency power for internet, a TV, computers. When you get an EV, that commo

        • In California, they have messed with the cost structure enough that solar without storage is usually not worth doing beyond your peak usage, because your excess power production won't net you nearly as much as you pay to buy that power back later in the afternoon.

          Why should home solar owner get a guaranteed return greater than the wholesale market cost?

          All that does is raise the price of electricity for everyone who can't install solar.

          • Because the power the residential customer produces is being consumed before the substation in anyplace but certain neighborhoods in phoenix AZ. The unreasonable charge is the grid/delivery/connect charge for net power producers, if the label was storage company, or peak power provider, the utility would write a check.
        • Solar in excess of you HVAC and pool demands are not worth it. If you lower your overall demand off the grid by 65%, you have offset the problem since 2018. Its an accounting perception problem, people will happily pay to remove that hot humid feeling. Turning off you HVAC has a ROI of 0 years, until the divorce lawyer.
    • If you turn a 50A consumer to a 50A producer, the load past the first substation towards the big producer drops. The home player is powering his neighbors AC unit. The consumption of power is for cooling for residential, the hard neighborhoods in the sun with no tree cover just became easy. Why are we upgrading the grid in the direction of big producers for the residential customers. The utility rate boards are not asking the right questions: Are we building a grid for a demand curve that no longe

  • huh... AI bulls*t becomes ubiquitous and electricity prices skyrocket. no correlation though, right? what a coinkydink.

  • No, prices aren't rising. Owners are **choosing** to raise prices because they can.
    If the gov't (yeah, i know) mandated a sliding cost scale, with highest prices for the biggest users, things would change rather quickly

    • Re: (Score:2)

      by dgatwood ( 11270 )

      If the gov't (yeah, i know) mandated a sliding cost scale, with highest prices for the biggest users, things would change rather quickly

      I've said this before. That won't work. Business, unlike homeowners, have the ability to create shell companies. The effort required to avoid rules like that is negligible for businesses. All that does is massively increase the billing hassle for the power companies.

      • Re: (Score:2)

        by skam240 ( 789197 )

        I don't follow your reasoning at all. If a data center is using massive amounts of power why does it matter who owns it? Power companies just need to charge at the meter a scaling rate based on use. Some one has to pay that bill or the servers go off.

        • Re: (Score:2)

          by dgatwood ( 11270 )

          I don't follow your reasoning at all. If a data center is using massive amounts of power why does it matter who owns it? Power companies just need to charge at the meter a scaling rate based on use. Some one has to pay that bill or the servers go off.

          Ten tiny companies, ten meters.

          • Re: (Score:2)

            by skam240 ( 789197 )

            Ten tiny companies, ten meters.

            So instead of paying higher prices for power they'll spend tons of money maintaining an incredibly inefficient system?

            • Re: (Score:2)

              by dgatwood ( 11270 )

              Ten tiny companies, ten meters.

              So instead of paying higher prices for power they'll spend tons of money maintaining an incredibly inefficient system?

              Surprisingly little money. As soon as the extra cost exceeds the cost of hiring one person to maintain workarounds, it is cheaper to do the workarounds. Tricks like that might ostensibly work for individuals, but they fail badly every time when you're talking about big corporations.

    • Re:Misleading headline (Score:5, Informative)

      by ScienceBard ( 4995157 ) on Friday September 19, 2025 @01:46PM (#65670840)

      No, prices aren't rising. Owners are **choosing** to raise prices because they can.
      If the gov't (yeah, i know) mandated a sliding cost scale, with highest prices for the biggest users, things would change rather quickly

      That's not how electricity prices work.

      In non-wholesale market areas the cost of electricity is set by the government. The net return to the utility is fixed and pretty low, low to mid single digits percent. Monthly or yearly price variation in those regions are virtually always related to pass-through costs like fuel or storm damage which the utility "passes through" without markup to the customer. New large loads, like a datacenter, basically get explicitly approved by the state via regulatory mechanisms to ensure they don't raise prices for consumers in excess of the benefits they provide the region.

      In wholesale markets prices are set by the market itself (which an independent regional nonprofit runs), with generators bidding into the market with cost curves. That works a little differently market-to-market, but basically the utility calculates their breakeven cost for each generator and submits that. The market stack-ranks all the generators bid in, in real time (say every 5 minutes). The controllers for the grid then send orders to the generators whether they should be online, and at what generation level. There's all kind of complexities with that I won't get into. The key observation there however should be "wait, if they're bidding in at cost how do they make money?" And the answer is the unit "on the margin", i.e. the unit that is the most expensive that is required not to have blackouts, sets the market price in any given 5 minute period. That "most expensive" unit nets basically no money. Everybody else makes a profit of whatever the difference is between the most expensive unit's generating cost and their generating cost. There are independent market monitors that make sure no generator/utility are exerting market influence to game the system (which is illegal).

      The author of the blog post is picking up on something real, which is that transmission constraints are increasingly impacting wholesale prices. There's quite a bit more going on than that though, and more transmission won't solve all of it.

      One issue is that the price in a given hour is increasingly set by a marginal generator that is totally divorced in price from renewables. In a perfect world those higher cost marginal generators would eventually be replaced by the lower cost technology, but in practice the lower cost technology (solar, wind) is incapable of reliably serving electricity. So the more expensive generators stick around because they have to, and the renewables operators just increasingly pocket the difference. Most grid operators use a separate market that clears once a year and compensates reliability to ensure the grid doesn't collapse because stable generators retire. That has its own insufficiencies, but the end result is that the wholesale price of electricity is increasingly meaningless for sending price signals to generators as to whether they should stay operational. It really only works for telling a generator if they should be outputting in any given minute, not if a plant should continue to operate.

      Another issue is that because of the way intermittent generation (wind, solar) warp the market the wholesale cost of electricity increasingly means nothing to consumer bills either. Take California, with the ironically stable (if high) wholesale prices but the soaring retail costs. Why is that? It's because incentives are warping the generation market, and those incentives are funded outside of wholesale electricity cost. Home solar rebate programs. Transmission infrastructure cost (solar/wind are typically far from power consumers and require a lot more/bigger power lines). Insurance cost (more transmission infrastructure for solar/wind increases the likelihood of things like wildfire, which increases insurance cost). Cost to build batt

      • Re: (Score:1)

        by skam240 ( 789197 )

        That's not how electricity prices work.

        No, it is. Government just needs to tell power companies to charge on a sliding scale based on usage at the meter. It's incredibly simple.

        You even say in your post that government sets the prices but somehow that cant be changed?

  • lets ask one of the culprits (Score:3)

    by Growlley ( 6732614 ) on Friday September 19, 2025 @02:06PM (#65670872)
    Ai to answer that one

  • ......with the Big Bad Bill allowing natural gas to be exported overseas, the largest portion of electricity energy supply will rise with greater demand.
    I'd plan on electricity being significantly more expensive upcoming.

  • Our state government pressured our utility (who mostly uses hydro and some NG) to dump their one small coal plant. Since then, they are paying spot prices far more often. Since they can't raise consumer rates much, they are laying folks off like crazy internally to try to stay afloat, so it takes forever to get work done.

    Thank you WA state!

  • What happens to residential electricity pricing is very specific to region. In California, the cost of PG&E's electricity has skyrocketed due to wildfires. You just need to spark a couple wildfires during a mega-drought and high winds then suddenly WHAMO! -- $30 billion dollar settlement, bankruptcy proceedings, (https://en.wikipedia.org/wiki/Pacific_Gas_and_Electric_Company#Wildfires), and a mandate to put 10,000 miles of above-ground power lines underground.

    All of that is extremely expensive. They nee

    • All the results of a wildfire are not on the generators, the producers, it is on the grid operator who is passing the bill to consumers. The grid costs in California should be larger than the production costs (good amount of peaking can be done by hydro). Knocking down 65% of your demand with a solar farm works if your portion of payments for wildfires of the past also goes down by 65%.
  • And wasn't surprised in the least. I've worked with electric utilities all over the English speaking world and the ignorance is universal. Here the communist John Oliver does an amazing job clearly explaining how electric utilities work. https://www.youtube.com/watch?... [youtube.com]

    Just ignore his batshit crazy solution at the end. It's almost as if he had someone incredibly intelligent write the first 20 minutes and then someone else who never watched it do the last part.

  • Utility company gets X% of the money charged to share holders.
    Rates can go up to cover the cost of building new generation plants.
    So - build the most expensive generation plant you can get away with.
    Rates get moved up.
    Utility company gets same X% just of a bigger pie.
    Profit!

  • ....I built my house off-grid years ago.

    I could run my house on 100% incandescent bulbs if I wanted (though honestly I prefer the LEDs).

    If you can put any kind of solar on your home, I urge you to do so.

    Ferret

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