This winter’s weather demonstrated the continuing importance of weather as a near-term driver of natural gas prices, according to Consulting firm ICF International, which has released its ICForecast Energy Outlook for the second quarter of 2014.
The study finds the impacts of winter 2014 are likely to persist through the remainder of the year. The report projects gas prices based on the assumption of “normal” (20-year average) weather.
Natural gas-fired units will fill the gap caused by the coal-fired generation retirements as well as meeting incremental demand growth going forward. Over the next 25 years, natural gas-fired units will increasingly move into the base load across most markets in the US.
Going forward, as gas increasingly sets the margin over all hours, even in historically coal-dominant regions such as the Midwest and Southeast, energy prices will firm, and implied heat rate spreads across the nation will tighten. A continued rise in gas use for electric generation, will place significant upward pressure on gas prices and increase the potential for price volatility through the end of the decade.
Energy Manager Today is hosting an energy procurement webinar, Wednesday, March 26, which will discuss the impacts of weather on energy purchasing.