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Weekly Energy Market Update: March 14, 2016

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What are some key factors that can impact long-term natural gas and electricity prices?

In the Weekly Energy Market Update for March 14, 2016, Tim Bigler — Direct Energy Business Energy Advisor — overviews how demand, production, renewables and other factors might influence natural gas and electricity prices in the coming years.

Natural Gas Demand and Production

Natural gas demand is projected to grow over the next four years, which is likely already priced in the marketplace. Production appears to be slightly slowing. As natural gas demand has been widely understood and projected, production may be the main price determinant moving forward. 

Coal, Natural Gas, Oil and Renewables Impact Electricity Prices

As coal makes up the largest source of PJM's generation and natural gas is the largest source of ERCOT's generation, price increases for coal and natural gas can directly impact electricity prices in each market. Similarly, if oil prices increase, the price of electricity could increase in certain markets. 

The recent tax credit extensions for renewable energy sources are expected to drive an increase in installed generation capacity in the early 2020s. If renewables begin to cut into the share of natural gas generation, capacity costs could increase in certain markets to keep those units available. 

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Tim Bigler, Senior Market Strategist at Direct Energy Business, is a 30+ year veteran of the U.S. natural gas, electric, and oil market.

Posted: March 14, 2016