EVA has published its July Coal & Gas Price Sensitivity Outlook. The report provides insight into how Coal-to-Gas (C2G) competition may evolve given pending changes to fuel pricing and the fundamental structure of the electric power markets. EVA’s Scenario Analysis (SCAN) of modeled assumptions provides high-level insight into a broad range of market-driven outcomes.
Highlights from the July Outlook include:
- 2017 Coal burn is expected to actualize only slightly above the 2016 levels despite being up 7% YoY through April. Structural changes in gas, increasing renewables as well as lower gas prices will put downward pressure on coal for the balance of the year.
- Our analysis shows a 3.8 TCF EOS storage assuming 10-year normal weather. The storage facilitator included in the report indicates that gas prices will need to be slightly higher than $3.35/MMBtu for Q-V to achieve a 4.0 TCF EOS storage.
- Lower renewable output during the summer will help elevate gas burn, even if electricity demand stays bearish. This is evident from the higher gas burn during the first week of July despite consisting a holiday weekend.
KEY REGIONAL TAKE-AWAYS
- PJM actual coal and gas generation came down 1% and 13% respectively as a result of a reduction in power demand YoY through April.
- MISO gas burn in 2017 is set to actualize below 2015 levels, despite the current drop in gas prices. A lack of structural changes limits upside for gas.
- SPP renewable generation increased 28% YoY through April displacing gas generation, which reduced 26% YoY.
- ERCOT coal generation in the first half of 2017 continues to impress with a 65% increase YoY through April.
- SERC 2017 coal burn is projected to actualize lower than 2016 levels, despite being flat YoY through April.
- FRCC nuclear generation was down 13% YoY through April due to outages, allowing coal to gain some market share at higher gas prices.
EVA’s July Coal & Gas Price Sensitivity Outlook includes gas burn and coal burn sensitivity analysis based on a range of NYMEX gas price forwards, monthly gas and coal burn forecast for the lower-48, and storage facilitator for natural gas. The storage facilitator helps determine the natural gas price levels needed over the storage injection season to achieve a 4.0 TCF in the ground by EOS given a set of supply and demand assumptions. Additionally, the report includes a detailed analysis of U.S. power markets to provide valuable insights into factors affecting coal and gas dispatch.
For any questions about EVA’s July Coal & Gas Price Sensitivity Outlook, please contact Rob DiDona at [email protected]. To subscribe to the report or to get your free sample please visit: https://www.evainc.com/publication/gas-coal-price-sensitivity-outlook/