According to the Energy Information Administration’s (EIA) recently released Electric Power Monthly, natural gas net generation rose by 21 percent from 2011 to 2012 (the biggest increase since an 11 percent rise in 1994) as low natural gas prices encouraged more natural gas consumption in the electric power sector. Natural gas generation displaced some coal generation, which fell about 12 percent from 2011 to 2012.
During 2012, an extremely hot summer combined with low natural gas prices relative to coal led to record high gas-fired power generation. BENTEK Energy Services LLC (BENTEK), which provides daily natural gas consumption, reported that 17 of the 25 highest days of power burn since 2005 occurred between June 28 and August 9, 2012.
In the past decade, most electric generating capacity additions have been natural-gas fired, and many of these were combined-cycle units. In the first half of 2012, natural gas and renewable sources continued to dominate capacity additions. Particularly, combined-cycle units have been added to states that traditionally burn coal.
Natural gas prices were up at most market locations, but decreased significantly in the Northeast. The Henry Hub price increased from $3.34 per MMBtu last Wednesday to $3.49 per MMBtu yesterday, an increase of 15 cents per MMBtu, or 4.5 percent. This marked the second consecutive report week of higher spot prices for the Henry Hub and most other U.S. trading points. Most trading points increased by about 10 cents per MMBtu week-on-week. However, prices in the Pacific Northwest rose by 25 cents per MMBtu, likely in response to increased natural gas use for power generation due to low rainfall levels in a region that relies heavily on hydroelectric power.
Prices declined significantly at Algonquin Citygate, serving Boston markets, and at Transcontinental Pipeline’s Zone 6 New York delivery point (Transco Zone 6 NY), serving New York City, likely due to warmer temperatures in the Northeast. The Algonquin Citygate price fell by more than half (53.1 percent), from $16.55 per MMBtu last Wednesday to $7.76 per MMBtu yesterday, a decrease of $8.79 per MMBtu. This marked the third consecutive report week that the Algonquin Citygate price fell, following a decline of $1.30 per MMBtu last week, and $4.78 per MMBtu two weeks ago. These three weeks of decline brought the Algonquin Citygate price near the $7.42 per MMBtu level that it traded at on Wednesday, January 30, before it spiked to $22.63 per MMBtu on Wednesday, February 6. The Transco Zone 6 NY price also declined this report week, decreasing by $13.36 per MMBtu to $3.85 per MMBtu at the close of trading yesterday, less than one-quarter of its $17.21 per MMBtu spot price last Wednesday.