Why do grocers mark down the price of asparagus in the spring, or strawberries in the summer? Because they’re in season and stores have excess supply, and they need to increase demand by cutting prices. The lower prices are a sign, or “price signal,” of excess supply, and the grocers are following the economic law of supply and demand.
Electricity markets follow the law of supply and demand, too. Falling electricity prices are a price signal that we have more power plants than we need. The Federal Energy Regulatory Commission (FERC), which oversees our nation’s electric grid, reports on wholesale electricity prices, and their latest State of the Markets report is an eye-opener.
The report shows that we’re retiring old coal plants at a fast clip, but we’re adding new natural gas plants at an even faster clip – causing power prices to plummet. In PJM, the largest regional electricity market in the country, 1.9 GW of coal plants closed in 2017 as 2.8 GW of new natural gas plants were added. Read More