U.S. wholesale electricity prices were lower and less volatile in 2024

Average wholesale electricity prices at major trading hubs in the Lower 48 states were lower in 2024 than in 2023. In addition, prices were much less volatile than they have been over the last few years. Lower and more stable electricity prices in 2024 were mostly driven by low natural gas prices, as well as increases in generation for some lower cost renewable energy sources and new battery storage capacity.

Prices were highest in January, as a result of lower-than-usual temperatures in most of the Lower 48 states, especially in the Northwest. Cold weather increased natural gas consumption and prices, which increased prices for natural gas-fired electricity. After January, natural gas prices traded significantly lower on average during the rest of the year. Benchmark Henry Hub spot prices averaged $2.21 per million British thermal units, the lowest average annual price in inflation-adjusted dollars ever reported, contributing to moderate wholesale electricity prices in all regions. Price changes for natural gas have an outsized influence on wholesale electricity prices because natural gas prices tend to set the marginal price of electricity during most hours in most regional markets. The wholesale price of electricity on the electric power grid reflects the real-time cost for supplying electricity, which can be driven by fluctuations in demand. Most retail consumers pay prices based on the seasonal average cost of providing electricity, so they do not experience these daily price fluctuations.

The electricity generation mix in 2024 noticeably changed from 2023, reducing prices in some regions. Generation increased by 3%, or 121.2 billion kilowatthours (kWh), in the Lower 48 states last year. One-tenth of this increase was due to the extra day for the leap year in 2024. Natural gas-fired generation increased 4% (70.1 billion kWh), solar generation increased 37% (55.5 billion kWh), and wind generation increased 8% (31.9 billion kWh), while coal-fired generation decreased 3% (19.5 billion kWh).

Coal and natural gas prices for electric generators were very close for most of 2024, with natural gas prices dropping below coal prices in some months. Coal-fired generation units are less efficient than natural gas-fired generators on average, meaning more coal per million British thermal units must be used to produce the same amount of energy as a natural gas unit. This difference made natural gas-fired generation the cheaper option in most regions throughout the year.

Natural gas-fired generation increased in most regions, except in California and the Southwest region where it was displaced by solar energy. Coal-fired generation decreased in most regions, most notably in the Northwest and Midwest (MISO). Coal-fired generation increased in the PJM Interconnection and the Southeast—two regions that experienced greater electricity demand than the rest of the country in 2024 and where reduced solar radiation limited solar generation.

U.S. solar generation increased due to growth in capacity and above-average solar radiation. We expect a record addition of utility-scale solar capacity in 2024. Some 25 gigawatts (GW) was added through November, more than the 18.4-GW increase in full-year 2023, which itself was a record for annual utility-scale solar installation in the United States. In addition, solar radiation during the summer months (when solar generates the most power) was higher than the 20-year average, which particularly boosted generation in the areas with the most solar capacity—California, Texas, and the Southwest. The exception was the Southeast, where solar radiation was below average, according to S&P Global IQ data.

Wind generation also grew due to increased capacity in 2024. Some 3.7 GW of wind capacity was added through November, and we expect a 5.5-GW increase in wind capacity for all of 2024.

Nuclear generation increased 1% (7.1 billion kWh) in 2024 compared with 2023 due mainly to the commercial startup of Georgia Power Company’s Vogtle Unit 3 in July 2023 and Vogtle Unit 4 in April 2024, which together added 2.2 GW of capacity.

U.S. hydro generation decreased slightly in 2024. We expected hydro generation to increase in 2024 compared with 2023 in every region except California. Although hydro generation increased in most regions, it decreased in California, New England, and Florida due to ongoing drought.

Generation from sources in our other category decreased by 23.5 billion kWh in 2024 compared with 2023. Other (utility-scale) sources include non-biogenic municipal solid waste, batteries, hydrogen, purchased steam, sulfur, tire-derived fuel, and other miscellaneous energy sources. Most of the decrease happened in Florida as one balancing authority reclassified much of its other generation as natural gas generation beginning in February 2024. To maintain generator confidentiality, generation may also sometimes be reported in the other category if too few generators are reported for a particular energy source category.