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Pipeline flows hint at increased gas burn YOY during this past winter

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Pipeline flows hint at increased gas burn YOY during this past winter

Nominationdata from two key pipelines that span more than 19,000 miles and serve parts ofthe Gulf Coast, Southeast, Midwest, Middle Atlantic and the Northeast pointtoward gas-fired generation's continued chipping away at king coal's marketshare.

Asnatural gas prices fell over the course of the winter, power-sector natural gasdeliveries off of Transcontinental Gas Pipe Line Co. LLC and continued higher for the fifth straight winter season.

Power-sectordeliveries off of the two pipelines averaged 3.89 Bcf/d, up 21.9% versus theprior winter, as Transco provided just more than half of the average dailydeliveries to power plants served by the two pipelines.

Theincrease in flows over the prior year was greatest during the early part of thewinter heating season. Nominations at points on the two pipelines serving thepower sector averaged 3.7 Bcf/d in November 2015, up 37.5% year over year.Average daily flows peaked at 4.05 Bcf/d in January, a 19.6% year-over-yearincrease, and ended the winter heating season at 4.03 Bcf/d, up 22.4% fromMarch 2015.

Theyear-on-year growth in flows to the power sector comes in spite of mildtemperatures experienced over the course of the winter. Accordingto the U.S. National Oceanic and Atmospheric Administration, the MiddleAtlantic, East North Central, East South Central and South Atlantic regions allsaw electric home heating customer-weighted heating degree days, a proxy forspace heating demand for electricity, more than 25% below the year ago periodthis winter.

Evenso, falling spot natural gas prices drove the power sector to rely on moregas-fired generation this winter. According to SNL Energy data, at$1.620/MMBtu, spot prices at TETCO M3 averaged 68.9% below last winter, whilespot prices at Transco Zone 5 and Transco Zone 6 NY averaged $2.271/MMBtu and$2.216/MMBtu, respectively, 62.6% and 68.1% below the prior winter average.

Year-over-year increases in flows to the power sector tookplace at points across the pipelines, but the sharp drop in Northeast spotnatural gas prices concentrated the greatest increase in flows at pointslocated nearest to Northeast production.

SNL Image

According to the latest data from the U.S. EnergyInformation Administration, coal narrowly beat out natural gas in January toprovide the lion's share of the nation's 350.9 million MWh of utility scalegeneration. As total generation fell 3% versus January 2015, coal-firedgeneration declined 14.1% over the same period to 113.8 million MWh to accountfor 32.4% of the month's generation, while natural gas-fired generation climbed8% to just shy of 110 million MWh to comprise 31.3% of U.S. net generation. InJanuary 2015, coal supplied 36.6% of the nation's electricity while natural gassupplied 28.2% of generation.

Coal narrowly topped natural gas in 2015 generation market share inpart by building an early lead as natural gas-fired generation went on tosurpass that of coal during seven months of the year. The EIA expects gas-firedgeneration will top coal for the first time annually in 2016.

As natural gas prices remain low enough to favor burningnatural gas over coal, analysts expect the market will have difficulty inwinnowing stockpiles to a level that will prompt buyers to return to the coalmarket. On the other hand, government data show producers have been moreaggressive in reducing coal production year over year.

According to the EIA, the January stockpile draw totaled 8million tons versus a year-ago build of 3.1 million tons and a 3.6 million tonaverage draw for the prior 10 years for the month, as year-to-date coalproduction through Jan. 30 was down by nearly a third year over year. But thegovernment agency estimates stockpiles for bituminous and subbituminous coalrepresent 94 days of burn and 101 days of burn respectively, up 16% and 46.4%versus the year-ago month and up 18.1% and 47.2% versus the five-year averagefor the month.  

Market prices and included industry data are current asof the time of publication and are subject to change. For more detailed marketdata, including power, natural gas and coal index prices, as well as forwards and futures, visit our energy commodities pages. To view operational statistics oninterstate natural gas pipelines, go to our Pipeline Summary Page. To view natural gas operational flow datafor receipt or delivery points, go to our Operational Capacity by Point Page.