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Despite Closures, Electricity Generation from Nuclear Plants Increased

Front-month natural gas traded on the NYMEX closed on Thursday at $2.821/MMBtu, up 0.93% from last week’s closing price of $2.795/MMBtu. The EIA revised last week’s storage level from 1,186 bcf to 1,190 bcf so stockpiles decreased by 47 bcf the week ending 3/15/19. The market estimates fell between 42 bcf and 58 bcf. The total 1,143 bcf of natural gas currently in storage is 21.6% below last year and 32.7% below the five-year average. At the Transco Zone 6 trading point for New York City, prices also increased 13 cents from $2.62/MMBtu last Wednesday to $2.75/MMBtu this past Wednesday.

“Electricity generation from U.S. nuclear power plants totaled 807.1 million MWh in 2018, slightly more than the previous peak of 807.0 million MWh in 2010, based on preliminary annual data. Although several nuclear power plants have closed since 2010, a combination of added capacity through uprates and shorter refueling and maintenance cycles allowed the remaining nuclear power plants to produce more electricity,” stated EIA’s Despite closures, U.S. nuclear electricity generation in 2018 surpassed its previous peak article. The EIA does not expect this new peak nuclear generation to be surpassed in the coming decades.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generators as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as parts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production is expected to continue to grow, however, there is speculation that demand growth will outpace supply primarily due to LNG and Mexican exports and increased power burn, presenting upside risk to power pricing in the future.

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