A key economic variable in the financing of wind farms and other power plants is the wholesale price of electricity. Wholesale prices skyrocketed to 10 cents per kilowatt-hour in 2008 and then plummeted to 4 cents or less by 2012.
But 2013 was a different story. Wholesale prices are up across the country but especially so in the New York and New England markets.
Indeed, the regional variation in wholesale prices during 2013 were truly super-sized. Power prices were lowest in the South and highest in New England and New York. Prices ranged from 3.4 to 6.5 cents per kilowatt-hour, creating winners and losers as well as possibly future opportunity.
Importantly, the wholesale power prices in New England and New York are just about high enough for wind farms to be financed on a merchant basis, if they were to continue. But will they?
Time will tell whether the region has shifted to wholesale power prices above 6 cents or will revert to prices in the 4 to 5 cents range. If they have shifted to 6 cents and higher, look for a rush of wind farms into New York and New England.