2010 – 2019: A DECADE BY THE NUMBERS
As 2020 begins we take the opportunity to review the past ten years in energy markets. With the excep-tion of Texas and California, energy index prices in 2019 cleared below the decade’s average. In fact, PJM West and NY Zone J (New York City) saw the lowest index prices of the period in 2019. (Note that price data is not available for Houston and Indy Hub in 2010)
As shown above, annual electricity usage across the country shows no clear trend and thus offers no clear explanation of this price activity. Usage in 2010 was actually higher than usage in 2019. (Note 2019 includes estimates for November and December)
The ebb in wholesale electricity prices can primarily be explained by increased generation from cheap natural gas and increased renewable generation – renewables’ zero marginal cost pushes down index electricity prices.
Domestic natural gas production has increased by more than 50% over the past 10 years and is currently near records highs while gas costs to generators are near record lows.
While electricity prices and usage show no clear trend, various states’ policies make it more cer-tain renewable generation will increase. Additionally, our nation’s natural gas glut has seen the fuel gain generation share and low gas prices have generally reduced index power prices. How-ever the next decade will see more natural gas shipped abroad via LNG and uncertain produc-tion economics given the commodity’s historically low price. As the saying goes, the only constant is change.