Natural gas market prices increased faster than power prices year over year in January, compressing margins for natural gas-fired power plants during a month when electricity demand declined in most markets.
Average hourly load fell year over year in every market but the California ISO. PJM saw the largest year-over-year decline in demand, as the market's average load and peak load slid 4.4% and 1.6%, respectively.
In spite of falling load, average day-ahead market on-peak power prices climbed versus the year-ago period by an average of 15.8% across the U.S., with only PJM and ISO New England seeing power prices decline over the same period.
Meanwhile, spot natural gas prices at hubs serving power generators outpaced the power market's gains, as U.S. average natural gas prices increased 32.2% year over year. Spot prices in the South and the Midwest saw the largest gains on a percentage basis, while the highest prices were posted in the Northeast and Mid-Atlantic.
Gas-fired implied heat rates, the efficiency rate where the market cost of power equals the cost of burning natural gas to generate electricity, declined on average 12.4% year over year across the U.S. PJM and ISO New England, the only markets where average power prices declined year over year, saw implied heat rates decline by 22% and 18.6%, respectively.
At the same time, it was a mixed bag for coal-fired implied heat rates. PJM saw coal-fired generators come under pressure, but to a lesser extent than natural gas-fired plants did. Underlying movements in power prices, natural gas prices and coal prices gave PJM's coal-fired generators a slight advantage over its gas-fired generators during the month.
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