Summer arrived in earnest across the Midwest this week, with a heat wave pushing high temperatures into the 90s in cities throughout the region. Figure 1 lays out the 15-day temperature outlook, running from forecasts from the middle of the month on the far left through to yesterday's forecast on the far right. Blue shading marks days running cooler than normal, while orange highlights above-normal heat. The rightward march from blue into deep orange tells the story plainly. The cool middle of June has given way to a sustained and intensifying warm-up. Average temperatures across the Midwest have been holding above 80 degrees, well above what's normal for this point in the season. And the heat isn’t expected only in the Midwest; it’s widespread, which raises the prospect of record-breaking load and turns up the competition on the ties, sparking fireworks in the energy markets.

Figure 1 | Average Midwest Temperature Matrix

As the week continues, the heat spreads east into PJM territory. Figure 2 shows that region's average temperature matrix following a similar trajectory. The early part of the week was already running above normal, but the real intensification arrives today and builds into the holiday weekend, with average temperatures climbing into the high 80s and approaching 90 degrees by Friday. With both MISO and PJM staring down the possibility of record-breaking loads (see Energy GPS’s recent market flashes: "MISO Prepares for Record-Breaking Load" and "Record Load Breakdown"), the eastern half of the country is bracing for a genuine stress test.

Figure 2 | Average PJM Temperature Matrix

The fireworks in the day-ahead market have already started. Eastern day-ahead settles moved higher across the board for today, with the most striking gains at the PJM West hub, where heavy load settles jumped up $200 day-on-day and the peak hour cleared at $860/MWh. MISO's Indiana hub came in lower but was hardly cheap, posting a peak above $550/MWh and a heavy load average north of $200/MWh. Further east, the ISONE and NYISO hubs logged their own gains, with heavy-load settles topping $120/MWh. Figure 3 captures these eastern hub day-ahead prices side by side, illustrating just how broadly the heat is being priced into the system.

Figure 3 | Eastern Hub Day-Ahead LMP Prices

This heat is widespread, it's intense, and the markets are starting to show strain. This is the first real test of the summer. The bulk of the season still lies ahead, with plenty of opportunity for the next bout of extreme weather to push the grid even harder. To stay on top of market-moving events like this one as they unfold, subscribe to Energy GPS's power market flashes for timely analysis when it matters most. Contact us for more information.

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