Marginal Fuel Switching and Price Volatility in PJM
36 Pages Posted: 10 Feb 2019
Date Written: January 28, 2019
We use emergency outages of coal and gas generators in PJM as an exogenous source of variation in the power generation stack to study how changes in the marginal fuel source affect real-time wholesale electricity prices. Our results cast significant doubt on anecdotal evidence that natural gas generation leads to higher electricity price volatility. We find that wholesale prices are less volatile when natural gas is on the margin more often.
Keywords: Price Volatility, Natural Gas, Coal, Emergency Outages
JEL Classification: G1, G13, Q02, Q41
Suggested Citation: Suggested Citation