Dive Brief:

• Low gas prices were the driving energy story of 2015, according to FERC's State of the Markets report, released last week, resulting in gas-fired generation exceeding coal, growth in storage levels and a spike in exports.
• Depressed commodity levels have also helped get the United States back into the business of exporting liquefied natural gas. The first shipments left Cheniere’s Sabine Pass terminal in February, possibly contributing to a new demand sector for the industry.
• The lower commodity prices impacted power markets. FERC said wholesale electricity prices were down 27% to 35% across the nation last year compared with 2014, at major trading hubs on a monthly average basis for on-peak hours.

Dive Insight:

Historically low gas prices have had a rippling effect across power markets, and it is unclear whether new demand could change the situation. 

Low gas prices, which would typically depress production, have not had that effect. "Marcellus and Utica natural gas production, the primary source of all new U.S. production, reached record levels in 2015," FERC noted in its report.

Production growth in the Marcellus and Utica has resulted in the addition of 51 billion cubic feet per day in new pipeline capacity, FERC said, and approximately 49 Bcf/d of capacity is proposed or planned to come online by 2018 to transport natural gas to markets. Natural gas storage levels reached a record high 4 trillion cubic feet in November, and that was despite starting the refull season below the five-year average.

FERC said the 2,469 Bcf net injection in 2015 was second only to 2014’s record 2,746 Bcf net injection.

"Based on demand so far this winter, it is likely that the natural gas in storage will be at near record levels come spring, putting further downward pressure on prices for the rest of 2016," the agency predicted.

LNG exports could add some demand to the mix, but it is unclear what the long-term price implications will be. "Staff estimates that exports could reach 8.5 Bcfd by 2020, once all of the six terminals where construction has begun or which have secured funding, are completed," the report found.

On the electric side, commodity levels and hydroelectric production kept prices low. Similar to 2014, monthly average wholesale electricity prices were highest in New York and New England, and often lowest at Mid-Columbia in the Pacific Northwest, "where hydroelectric dams are a plentiful and low-cost resource, even though water and snowpack levels in 2015 were low compared to historical averages."

FERC said that in both regions, the average market-clearing prices were "consistent with the downward pricing trend nationwide."

Between 2013 and 2015, FERC said average day-ahead locational marginal prices for the ISO New England’s Massachusetts Hub have fallen by 25%, while average day-ahead LMPs for the PJM Western Hub have fallen by 6%.

"These falling prices are the direct result of lower natural gas prices," FERC said. "These lower natural gas prices have driven out non natural gas fired capacity like coal-fired Salem Harbor plant and the Vermont Yankee nuclear facility in ISO New England, and have forced the Byron and Quad Cities nuclear plants to rely upon capacity market auctions for additional revenues in PJM."