Bloomberg News

Energy Demand May Rise on Heat, Humidity Across U.S. East

July 16, 2012

Energy demand may rise 10 percent to 60 percent from New York to Chicago this week as another heat wave take holds over the eastern U.S. and Canada.

A heat advisory has been issued in New York, where temperatures are expected to reach 92 Fahrenheit (33 Celsius) today and feel hotter, according to the National Weather Service. The city has opened cooling centers today and tomorrow.

“This week’s strong heat in the Midwest and East is not expected to rival the previous heat wave in terms of absolute temperatures, but it could match the demand levels in the East due to higher humidity levels,” said Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland.

Humidity, along with heat, plays an important part in how much energy is used. While temperatures may fall well short of 100 degrees, people will use air conditioners to fight muggy, sticky conditions and send electricity use soaring.

The immediate result can be high prices on spot electricity markets, while prolonged periods of heat, especially in large cities, may cause natural gas futures to climb on bets that more will be needed to produce electricity. Gas accounts for about 32 percent of the fuel used to make power in the U.S.

Earlier this month, temperatures rose to 100 degrees or higher across much of the eastern U.S. Temperatures this week are expected to peak in the high 90s.

Eastern Demand

The East Coast may use from 10 percent to 30 percent more energy from July 17 to July 23 to fight the heat, said David Salmon, owner of Weather Derivatives in Belton, Missouri. Thirty percent to 60 percent more energy may be consumed in the Midwest, including Chicago, Salmon said.

The U.S. cooling-degree days value for this week is expected to be 91, or 17 higher than normal, according to the U.S. Climate Prediction Center in Camp Springs, Maryland. New York state’s may be 79, or 24 more than normal, the center said.

The value, calculated by subtracting a base of 65 degrees from the daily average temperature, is used by energy and weather derivatives traders to gauge market demand for power- plant needs. Higher values mean warmer weather and more energy used for cooling.

Chicago is expected to reach 97 today and tomorrow before dropping into the mid-80s later this week, according to the Weather Service. Yesterday’s high in Chicago was 95 and the temperature has been above 90 there since July 12.

A heat wave is defined as at least three consecutive days of temperatures of 90 or more.

Mid-Atlantic Heat

Washington may reach 97 today and 99 tomorrow, according to Weather Service. The high in Philadelphia, where an excessive heat warning has been issued, may peak at 98 tomorrow.

Toronto is forecast to be near 99 degrees tomorrow, according to Environment Canada.

While average temperatures will cool slightly in the eastern U.S. and Canada next week, the Midwest will probably remain about 8 to 14 degrees above normal from July 21 to July 25, according to MDA EarthSat Weather in Gaithersburg, Maryland.

Prolonged high temperatures and a lack of rain across the Midwest have caused the U.S. Agriculture Department to cut its prediction for corn production to 12.97 billion bushels, 12 percent less than the record 14.79 billion the agency had predicted a month earlier. The department has said the drought is the worst in 24 years.

To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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