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Hans Rottmann on Natural Gas’ Impact on Pennsylvania Electricity Prices

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I read an article “Natural gas now serves two masters: electricity and heat” in yesterday’s Pittsburgh Post-Gazette. The article is a good read on some significant changes in the natural gas and electricity markets that are being caused by the increase in gas-fired power plants due to economics, environmental benefits and prolific shale gas production. A key message is that energy infrastructure is being stressed by reliance on natural gas for both heating and cooling demand. And this stress can lead to impacts on both grid reliability and the price that consumers pay for their energy.

The article’s focus is on Pennsylvania, but refers to risks and price volatility in New England as a “canary in the coalmine” that we should all be aware of. However, I would point out several key differences between the energy infrastructure in Pennsylvania and New England.

  1. Pennsylvania is less reliant on natural gas-fired power generation.
  2. Pennsylvania has more diverse gas supply alternatives including less constrained pipelines from traditional Southwestern U.S. and Canadian supply routes and in addition, the prolific local supplies that are mostly shale gas.
  3. Local gas infrastructure includes natural gas storage reservoirs that offer additional flexibility for delivery that is not available in New England and is available to meet peak demand.

The article has many other good points and is a worthwhile read and is yet another reminder that natural gas is influencing prices not just in PA, but throughout U.S. energy markets.

Posted: July 19, 2013

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