Key Drivers For Natural Gas Prices:
- Natural gas storage level:14 bcf higher than one year ago & 166 bcf higher than past 5 year average
- LNG Exports: currently at 14.8 bcf/day shipped to Europe and Asia with a lot of growth potential in 2025
- U.S daily natural gas production: Producers have shown throughout 2024 the ability to reduce supply when prices drop and increase production when prices rise
- Winter weather: After back to back warms winters in the Midwest and Northeast, forecasts are for a colder winter this year that will likely reduce the natural gas storage surplus pushing up prices
- How cold will it get in Europe? Current storage levels are already below year ago levels at this time and this winter is forecasted to be much colder in Europe than last winter. This increases the demand for U.S. LNG
- Will the U.S. natural gas storage surplus get reduced, greatly reduced or eliminated by the end of winter. The final outcome is critical for prices in 2025 and beyond
Key Drivers For Electric Prices:
- Natural gas wholesale prices are a key influencer of power prices, but not to the extent it was even a year ago.
- The surge of new power demand growth with the building of AI data Centers, new Chip manufacturing and cryptocurrency is adding future demand beyond current levels of peak deliverability
- The exponential growth in future power demand brings to light the concern on the PJM Power Grid of the difficulty in meeting times of peak power demand with the current power asset mix to prevent blackouts
- Two primary incentives for the building of new power plants: higher power prices and higher PJM Capacity costs
- Beginning June 2025 PJM capacity prices increases from the current $28.92/MWD to $269.92/MWD substantially increasing current fixed and variable prices supply contracts as well as renewal and utility prices.
- With the likelihood that PJM capacity prices and power prices will could stay elevated for 5 years, procurement planning strategies need to be evaluated for ways to lower the impact of higher power prices and higher capacity prices.