Power Prices Tumbled Down with Natural Gas Last Year

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Low natural gas prices had a direct impact on electricity prices in 2016. 

That's according to a recent analysis by the U.S. Energy Information Administration (EIA), which found the price of natural gas helped drive down power prices across the United States. In the first quarter of 2016, average wholesale electricity prices at major U.S. trading hubs were significantly lower than the same period in 2015, including 24 percent lower in California and a whopping 64 percent lower in New England.

The chart below compares the 2015 and 2016 monthly average wholesale power prices at major ISO trading hubs. 

Source: U.S. Energy Information Administration

According to the EIA, consistently low natural gas prices were the main driver of lower wholesale electricity prices, which often determines the marginal generation cost in most power markets. Cheap natural gas also spurred an increase in natural gas-fired power generation in 2016.


Energy Trends to Watch in the Year Ahead 

Hear Direct Energy Business president John Schultz discuss 2017 power prices and other major trends to monitor this year: Watch Now 

Of course, cheap natural gas didn't just drive down power prices for consumers, it was also a factor in reducing harmful emissions. EIA estimates that U.S. energy-related carbon emissions totaled 2,530 million metric tons from January-June 2016, which is the lowest level of emissions for the first six months of a year since 1991. After declining by 2.6 percent in 2015, energy-related carbon dioxide (CO2) emissions are believed to have declined by 1.3 percent in 2016, but will increase by about 0.9 percent this year. 

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