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2009 State of the Market Report

Prices and Revenues

ASM. Although the methodology does not capture several likely impacts on generation dispatch due to changing fuel prices, the figure clearly demonstrates that fuel price changes account for a significant share of the year-over-year change in electricity prices.

Next, we analyze the frequency with which different types of units are on the margin in the Midwest ISO. When a constraint is binding, more than one type of unit may be setting prices (one in the constrained area and one in the unconstrained area). Therefore, the total for all the fuel types exceeds 100 percent.

Figure 5 shows the average prices that prevail when each type of unit is on the margin (in the top panel) and how often each type of unit sets the real-time clearing price (in the bottom panel).

Average LMP

$160 $140 $120 $100 $80 $60 $40 $20 $0

Figure 5: Price Setting by Unit Type 2007 – 2009

Oil Oil/Gas Gas Water Other Coal Nuclear

070809 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

2007

2008

2009

160% 140% 120% 100% 80% 60% 40% 20% 0%

Share of Intervals Setting Price

Coal units set prices in 96 percent of all intervals, including virtually all off-peak intervals, up from 87 percent in 2008. This increase in coal-fired units setting prices is due to the substantial decrease in average load and the 600 MW increase in average wind generation that generally displaces generation from higher-cost units.

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