Average 2024 U.S. Wholesale Electricity Prices Projected to Be Similar to 2023 Levels: EIA

The average wholesale electricity price during 2024 across majority of the U.S. regions is projected to be similar or marginally lower than in 2023, according to the U.S. Energy Information Administration. The price forecast hinges on the assumption of relatively constant generation fuel costs. The agency acknowledges that temporary price hikes may occur in the market during instances of high demand or supply constraints. However, despite this volatility electricity prices on average throughout 2024 are expected to be largely rangebound.

U.S. electricity prices are impacted by a number of factors, which include weather, the price of fossil fuels and the production from renewable assets. The single most important determinant of U.S. electricity prices is natural gas price. Natural gas generation is the largest and most often the highest cost source of U.S. electricity and is a key price setter, since a large number of electricity markets across the U.S. set prices at marginal cost.

The agency forecast U.S. natural gas prices to be $2.91 per million British thermal units (MMBtu) during 2024, lower than the price averaged $3.29 per MMBtu in 2023. The expected price decline in U.S. natural gas prices during 2024 can be attributed to a comfortable supply outlook, due to high storage levels coming in 2024 and robust gas production. The lower U.S. natural gas price is projected to ensure average wholesale electricity prices during 2024 across most regions remain at levels similar to 2023.

During 2023 natural gas prices were highest in the Pacific states of California, Washington and Oregon. As a result, the Pacific Northwest had the highest U.S. wholesale electricity prices averaging $82 per megawatt hour (MWh). The agency projects fuel costs to be higher in these states during 2024 compared to other states and accordingly the price of electricity in these states to be higher and average $67/MWh in 2024.

The agency projects U.S. electricity prices to be relatively similar to 2023 in markets operating in the Eastern Interconnection. The projected wholesale U.S. electricity price during 2024 outside of the Northeast is between $30/MWh and $40/MWh.

The design of U.S. electricity prices reflect market fundamentals at a specific time. During extreme weather conditions or supply restriction, prices can be extremely volatile. For instance, wholesale prices in the market operated by the Electric Reliability Council of Texas surpassed $2,500/MWh during a few hours in August 2023, resulting in the region’s monthly price averaging $355/MWh.