Saturday, January 28, 2017

Gas to Coal Switching Latency

Natural gas has been cheaper in January than it was in December.  But for multiple reasons utilities do not switch from gas to coal instantly.  In a region like MISO, it is proving evident that suddenly high December natural gas prices did not push gas down the dispatch curve as much as it was economically justified to do. 
The evidence is this:  gas continued to lose significant market share to coal in January, despite lower gas prices thus far in the month.  How bad is it?  Take a look.  At nearly every level of thermal power output in MISO, gas was down an additional 5% of the thermal power market.  

There are small signs that this trend has at least stopped, and maybe begun to reverse slightly, but not much.  December already represents a big loss for natural gas vs. prior periods.