Determining the Most Liquid North American Power Markets with ZEMA

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An Overview of North America’s Electricity Market

The North American power markets are not only large, but also multi-faceted, varying by location, season, and state. The area it covers ranges from the small population of Delaware, who consume about 8.6 million MWh in a year, mostly during the long winters, to the people of Texas, who consume a massive amount of about 365 million MWh annually.[1] Additionally, every region has a different ratio of residential to industrial power users. Location, distribution of end use, and even the fact that air conditioning requires far more power than heating are all crucial factors that shape the power market.

As the power market is characterized by rapid change and volatility, it is essential for traders and analysts to have access to timely, relevant market data to know where they stand. By examining different methods of comparing deregulated electricity markets in North America, the next few sections will attempt to demonstrate why access to a wide variety of market data is necessary for making judgments on the volatility and liquidity of the market. Access to such information is invaluable to anyone making trading decisions or performing analysis in this highly complex industry.

A Discussion on Size

Since the 1990s, the deregulated energy markets in North America have continued to grow. Nine ISO/RTOs now serve the continent, together delivering 2.2 million GWh each year to over two thirds of U.S. and nearly half of Canada.[2]

Of these nine ISOs and RTOs, MISO covers the largest geographical area, as its grid extends over most or all of 9 U.S. states, smaller parts of 6 other states, and Manitoba, Canada.[3] PJM, which covers 13 states and the District of Columbia, is somewhat smaller, although it covers considerably more ground than ISOs in charge of single states, such as ERCOT, CAISO, and NYISO.[4] Nevertheless, geographical coverage is not a reliable way to measure the size of an ISO since it is people, not empty space, who create demand.

Keeping the importance of demand in mind, we should note that while PJM is not the largest system operator geographically, it serves over 61 million customers.[5] Meanwhile, MISO serves 42 million customers,[6] and ERCOT, NYISO, and CAISO serve 30 million,[7] 24 million,[8] and 19 million[9] customers respectively. These numbers are more revealing, but still, we should note that on average, the industrial sector consumes over three times as much energy as the residential sector[10]; the existence of a large industrial sector in a state will greatly influence demand, prices, and how much electricity is being traded.

Perhaps, then, it would be better to examine how many parties are involved in the market. If we apply this measure of size, ERCOT becomes the largest ISO, facilitating over 1100 market participants,[11] compared to PJM’s 900,[12] MISO’s 394,[13] and NYISO’s 400.[14] This says nothing, however, about how often these participants actually participate and how much they buy or sell, leaving us to wonder how much trading really happens in these markets.

Given territory size, population served, and number of market participants, we can draw a decent picture of the five largest ISO/RTOs, in terms of the demand and populations they serve. However, in order to navigate the electricity market, let alone the entire power market, we need more than just a picture; we need something much closer to an x-ray image.

Trading Trends across the Continent

Depending on how we look at the ISOs/RTOs of North America – MISO, PJM, ERCOT, NYISO, and CAISO, for instance – we may gain different perspectives on market size and dynamics; however, descriptions of appearance are vague (at best) indicators of how the energy market functions within the territories of these ISOs/RTOs. More telling of the state of the market are descriptions of how much is traded, how many trades take place, and how many distinct market participants trade at a single location.

Electricity hub prices from each of the ISOs/RTOs mentioned above are included in the graph below. The net volume traded each month from January to June 2014 at each hub is represented as a line graph, and net trades per month as the corresponding bar graph.

Figure 1: Volume Traded vs. Number of Trades (Jan. 2014-Jun. 2014) (Source: ICE)

Figure 1: Volume Traded vs. Number of Trades (Jan. 2014-Jun. 2014) (Source: ICE)

It is easy to see that the net volume over each month traded at PJM West (represented in green) significantly dwarfs that of the other hubs; however, the net volume traded in ERCOT North (represented in blue) sits quite distinctly in between the volume traded by PJM West and by the other three hubs displayed (SP15, NYISO A, and Indiana Hub, represented in purple, pink/red, and dark/light cyan, respectively), which cluster near the bottom of the graph. The case is similar when we look at the number of trades per month for each hub – although, notice that the number of trades at SP15 hovers around half the number of ERCOT North’s.

Figure 2 depicts the number of trades as the line graph against the number of companies trading, which is represented as a bar graph (the color coding remains the same).

Figure 2: Number of Trades vs. Trading Companies (Jan. 2014-Jun. 2014) (Source: ICE)

Figure 2: Number of Trades vs. Trading Companies (Jan. 2014-Jun. 2014) (Source: ICE)

The number of companies trading follows the same trend as volume traded and number of trades – PJM West leads by a significant number, with ERCOT North following; however, SP15 follows ERCOT North more closely here.

A clear trend is evident in these two graphs; PJM West surpasses the other hubs by a sizeable margin on all accounts, with ERCOT North consistently following. In both graphs, SP15 remains a more active hub than NYISO A and the Indiana hub, which produce fairly similar numbers. Moreover, all hubs seem to follow the same trends over time. Data on volume traded and number of trades is clearly more consistent than statistics on size, customers served, or even the total number of market participants; however, both knowing what a market looks like and understanding the snapshots we can collect of its interior are necessary in order to navigate such a complex industry.

The Data Collection Challenge

Those who wish to keep up with the state of the North American power market need a wide range of data in order to acquire a complete picture of their market(s) of interest, as making wise trading decisions requires concrete notions of market volatility and liquidity. This information is available, but not all in one place. ICE provided the information displayed in the above graphs, but if I had wanted to discuss weather or electricity consumption forecasts, both of which are relevant to understanding wholesale electricity markets, I would have to look elsewhere. More often than not, this can prove a time consuming challenge.

ZEMA can provide fast, easy access to data from multiple sources while providing the latest in analytical and visualization tools. Additionally, ZEMA allows users to create their own analyses and store them conveniently for future access, as in the example below:

Figure 3: Difference between Volume Traded/Month PJM West and the Moving Average Monthly Volume over the Preceding Year (Source: ZEMA)

Figure 3: Difference between Volume Traded/Month PJM West and the Moving Average Monthly Volume over the Preceding Year (Source: ZEMA)

Figure 3 is an Excel table exported from ZEMA, displaying the difference between each month’s net volume traded and the value of the moving average over the preceding year. This formula-based curve will be updated regularly with the ICE data displayed in Figures 1 and 2, both in the ZEMA profile I created and on the spreadsheet that pulls this data from it.

For more information on ZEMA, visit our website or book a complimentary demo.

[1] “State Electricity Profiles,” EIA, May 1, 2014, accessed July 22, 2014,

[2] “Company Information and Facts,” CAISO, accessed July 11, 2014, .

[4]“Who We Are,” PJM, accessed July 11, 2014,

[5] Ibid.

[6] “Corporate Information,” MISO.

[7] “ERCOT Quick Facts,” ERCOT, accessed July 11, 2014,

[9] “Company Information and Facts,” CAISO.

[10] “Energy Consumption by Sector,” EIA.

[11] “ERCOT Quick Facts,” ERCOT.

[12] “Who We Are,” PJM.

[13] “Corporate Information,” MISO.

[14] “Fact Sheet,” NYISO.

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