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Down, down, down: Power, gas and coal prices continue to fall YOY in H1'16


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Down, down, down: Power, gas and coal prices continue to fall YOY in H1'16

Power and natural gas spot prices in the first half of 2016continued the same decliningpattern year over year, compared to prices for the first half of 2015.

According to the National Oceanic and AtmosphericAdministration, El Niño conditions continued to affect the U.S. in January,causing the weather to be warmer than the 20th century average. Thiswarmer-than-average weather allowed for better management of constrainedpipelines around the population-concentrated areas of the country, minimizingspikes in natural gas and power prices. Historically these spikes were quiterampant in January and February, but due to above-average temperatures andlessons learned from past winters, the spikes were smoothed out.

Power prices: EasternUS

For every month in the first half of 2016, monthly averageISO day-ahead on peak power prices for the major hubs in the eastern U.S.decreased year on year. The greatest decrease was seen in the month ofFebruary, which saw prices decrease by 67% on average. The subsequent largestdips on average were seen in the months of March and January, with pricesdeclining on average 47% and 32%, respectively, year over year. April and Junewere the only months to see single-figure year-over-year average declines at 1%and 7%, respectively.

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The biggest decline year over year in the first half of 2016occurred in February for the major eastern hubs and was shared by theISO New England Inc.NEPOOL-Mass hub and the New YorkISO Zone J hub. The year-over-year decline at both hubs was 76%. InFebruary 2016, prices fell to $33.04/MWh at the NEPOOL-Mass hub from$136.54/MWh in February 2015. Prices at the Zone J hub fell to $32.08/MWh forthe second month of 2016 from $133.34/MWh in the same month in the previousyear. The metropolitan areas of Boston and New York City are covered by theNEPOOL-Mass and the Zone J hubs, respectively. These two hubs did seeyear-over-year increases in one month each, with NEPOOL-Mass hub gaining 3% inJune and Zone J gaining 1% in April.

PJMInterconnection LLC Western hub was the only major eastern hub toexperience a year-on-year decline in day-ahead on peak power prices for everymonth in the first half of 2016. The largest year-over-year decrease was seenonce again in February with prices falling by 66% to $30.55/MWh. The Indiana Hub also experienced a year-over-year decline forevery month except April when it gained 4%. The greatest year-over-year declinefor this hub was seen in February when the prices fell to $24.88/MWh.

Power prices: WesternUS

Following the trend of the major eastern hubs, the monthlyaverage ISO day-ahead market peak hour prices for western U.S., on averagedecreased in every month during the first half of 2016, compared to the firsthalf of 2015. The greatest year-on-year average decline for the major westernhubs was seen in March when the prices, on average, fell by 33%. May was aclose second with the average prices declining by 32% on the year. The monthwith the smallest year-on-year decline was January when prices on average fellby 14% for the major western hubs.

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The largest and the second-largest fall in prices, in thefirst half of the year, among the major western power hubs occurred at theMid-Columbia hub during May and June. Prices fell by 48% on the year to$14.66/MWh in May and by 40% to $22.33/MWh in June. North Hub's largest decrease occurred in February when its prices fell by 36%on the year. North Hub is also the only hub to have two months withsingle-digit year-over-year price decreases with prices down 8% and 1% in Apriland June, respectively.

The CaliforniaISO NP-15 region also experienced year-over-year declinesthroughout the first half of 2016 when compared with first half of 2015. Thelargest decrease for the NP-15 region was seen in March and May when theyear-on-year decline was 35% and prices fell to $21.75/MWh and $23.18/MWh,respectively.

Gas prices: Eastern US

Eastern U.S. gas prices followed a similar trend to thepower prices for the first half of 2016, driven by supply out of the Marcellusand lower heating demand.

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For all major eastern gas hubs, on average, the monthlyday-ahead prices decreased for all months during the first half of 2016, whencompared to the first half of 2015. The largest year-on-year average declineswere seen during February and March when average prices at the major easterngas hubs fell by 61% and 55% on the year. The only month to see average pricesdecrease by the single digits was June, which saw average prices fall by 3%.

The largest year-over-year decreases in monthly average gasprices also occurred during February, when the Transco Z6 NY location decreasedby 83% to $2.66/MMBtu and Algon Gates gas hub fell by 80% to $3.48/MMBtu. AlgonGates gas hub was the only hub to experience year-over-year gains in the monthsof May and June with 7% and 29%, respectively. Chicago hub also saw a decreasefor all months in the first half of 2016 when compared with the same period in2015. The largest decrease was seen in February when the prices fell 49% on theyear to $2.02/MMBtu. Henry hub followed the same trend in the first half andits biggest year-over-year decline was in March when prices fell by 40% to$1.71/MMBtu.

Gas prices: Western US

Following the warmer-than-average weather in January thatlowered heating demand, western gas prices continued to fall, creating anincrease in the year-over-year decline in gas prices at the major western gashubs.

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All the major western gas hubs experienced a year-over-yearprice decrease for all months in the first half of 2016 when compared to thefirst half of 2015. The greatest average decline happened during March whenaverage prices fell by 38% on the year. May was a close second with the year-over-yeardecline of 34%, on average.

Houston Ship Channel and SoCal border both experienced thelargest year-over-year decrease, at their respective locations, of 38% in March.PG&E saw a 38% decrease on the year during May. Henry Hub fell by 40% inMarch and 32% in May year over year.

Coal prices:

The first half was not kind on the coal industry withincreasingbankruptcies, production cuts,and decreasing prompt-month prices.

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The Central Appalachia CSX average prompt-month coal pricedeclined more than 20% year over year in three of the first six months of 2016.The largest decrease occurred in May with the price falling by 24% to$33.90/ton. A similar downward trend was followed by The Central AppalachiaNYMEX average prompt-month coal price with all the months experiencing a year-over-yeardecline. The greatest decline for the spec occurred in March with a year-over-yeardecrease of 17% landing the price at $43.47/ton.

Powder River Basin Wyoming Rail coal monthly average pricefollowed the example of the CAPP locations, declining each month year on yearwith the greatest decline occurring in January with the price falling by 17% to$9.94/ton.

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