Energy market movements point to a diminished year-over-year advantage held by gas-fired generators over coal-fired generators in key U.S. power markets in March, as wholesale power markets failed to keep pace with a doubling in natural gas prices in spite of higher demand for electricity.
Government data shows a significant shift away from gas-fired generation in December 2016 and January, with the price of natural gas playing a significant role.
During March, U.S. average day-ahead market on-peak power prices were 41.5% higher year over year across the country but failed to crack $30/MWh as they were held down by western U.S. markets. The Midwest and Northeast markets saw both the highest power prices and largest year-over-year increases as natural gas prices more than doubled at some markets.
Across the U.S., spot natural gas prices at hubs serving generators climbed 83.5% year over year to $3.074/MMBtu during the month. PJM saw prices nearly double to $3.065/MMBtu, while NYISO and ISO New England saw prices more than double to $3.502/MMBtu and $3.910/MMBtu, respectively.
Spark spreads fell across the board. PJM and ERCOT, both regions with a significant installed coal-fired capacity, saw implied heat rates, or the efficiency rate at which the market cost of power equals the cost of burning natural gas to generate power, decline 37.1% and 20.8%, respectively, against a U.S. average of 22.9%.
At the same time, coal-fired implied heat rates improved nearly across the board as they climbed on a nationwide basis between 15.9% and 36.8% depending upon the type of coal burned.
The narrowing of the advantage held by gas-fired generators comes as year-over-year electricity demand increased in all parts of the country except for California. PJM saw average load climb 7.5% year over year, while ERCOT saw average demand climb 6.8% over the same period, with peak demand growth exceeding average demand growth in both regions.
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