Natural Gas In the News: Natural gas-fired generation returns to pre-October levels in PJM and MISO

Natural Gas In the News:  Natural gas-fired generation returns to pre-October levels in PJM and MISO

A November cold snap resulted in prices for natural gas rebounding from an average of less than $2.00 per million British thermal units (MMBtu) in October to mid-November highs of $5.11/MMBtu at the Tetco M3 hub, located in northeast Pennsylvania in the PJM Interconnection (PJM), and nearly $3.00/MMBtu at the Chicago Citygate hub in the Midcontinent Independent System Operator (MISO). These price increases caused coal-fired power generation to replace natural gas-fired generation starting in late October in both of these regional transmission organization markets. In both PJM and MISO, where there is strong competition between natural gas- and coal-fired generation, relative shifts in fuel prices can influence which type of power plant operates.

Throughout all of 2019, natural gas-fired generation has accounted for an increasing share of power generation in PJM and MISO, averaging 35% in PJM and 27% in MISO. This summer saw record natural gas consumed for generation across the Lower 48 states, supported by relatively low natural gas prices, retirement of coal-fired generation, and increasing natural gas-fired capacity. In October, when regional natural gas prices were particularly low, natural-gas fired generation in MISO reached its highest level for 2019 at 36%. However, as natural gas spot prices in the PJM and MISO regions approached about $2.70/MMBtu in late October, the coal-fired generation share rebounded from its earlier lows.

The PJM Interconnection spans states located in the Middle Atlantic. Cold weather in that region resulted in the natural gas spot price at the Tetco M3 trading hub to rise from less than $2.00/MMBtu at the end of October to as high as $5.11/MMBtu on November 13. On November 9, the share of natural gas-fired generation in PJM decreased to 34%, its lowest level since May 2019. Conversely, coal's generation share increased to 31% on November 14, which is the highest coal share since March 2019.

MISO's region covers much of the Midwest and part of the Gulf Coast. For several days in October, the share of natural gas-fired generation was higher than the share of coal-fired generation in MISO, the first time in 2019. With low natural gas spot prices, natural gas-fired generation peaked at a 36% generation share on October 14. In contrast, coal's generation share fell to 25% on October 12 because of low natural gas prices and strong wind generation. However, by November, lower wind power and higher natural gas prices made coal-fired generation more economically attractive. The Chicago Citygate natural gas spot price rose to nearly $3.00/MMBtu on November 7 after spending most of October lower than $2.00/MMBtu. The higher natural gas prices contributed to the natural gas generation share falling to 22% on November 10, its lowest share in eight months. Meanwhile, coal's generation share increased from its October average of about 32% to a November average of 38% through November 13.