Dive Brief:
- The Houston Chronicle reports electricity prices in deregulated markets will remain low next year, a welcome bit of news for residential consumers but a difficult sign for independent power producers.
- That's an extension of market force in play for more than a year: According to federal regulators, wholesale electricity prices were down 27% to 35% across the nation last year compared with 2014.
- Gas prices are widely expected to rise in 2017, however, a trend that is expected to push up power prices across all sectors.
Dive Insight:
The future of electricity prices remains an open question, but the Houston Chronicle reports that Moody’s Investor Services believes prices will remain low next year, at least in deregulated markets. For regulated utilities, rates will remain relatively stable.
Gas prices have traded at historic lows in recent years, below $3 per million British thermal units (Btus) at the liquid trading point Henry Hub. The U.S. Energy Information Administration expects prices will rise soon. This year prices are averaging $2.51/MMBtu — the lowest in a decade — but the federal agency expects to see a 2017 average around $3.07/MMBtu.
That means, according to EIA, that the country's average power price will rise from $0.1254/kWh this year to $0.1295/kWh in 2017. Those price increases will also hit the industrial and commercial sectors, though not as significantly. Commercial customers will see prices rise from 10.37 cents/kWh to 10.64 cents/kWh. The industrial sector will see rates rise from about 6.75 cents/kWh to 6.9 cents/kWh.
Moody's also said the rise of rooftop solar could lead utilities to request higher rates, in order to offset lower demand. The Natural Gas Supply Association has said it expects gas demand from the power sector to decline this year, though largely as a result of fuel switching. The group expects the power sector to consume about 3.3 Bcf/d less this winter, but also said the overall supply-demand balance is tightening. The group expects demand will rise 1.6 Bcf/d, compared with last winter. Supply, however, is expected to rise only 1.5 Bcf/d.
According to Black and Veatch, the rise in gas prices will have a longterm effect. Gulf Coast wholesale energy prices are expected to rise from $39.06/MWh in 2020, to $44.19/MWh in 2025, and just over $50/MWh in 2030.
