As the new year approaches, we take a look at energy prices in 2015 and what new trends to expect in 2016.
Energy Prices in 2015
In 2015, market fundamentals led to low energy prices. Until April, coal had always generated more electricity than natural gas. By September 2015, however, natural gas based electricity generation was 4% more than coal. As utilities started to use more natural gas to generate electricity in comparison to other sources, the price of electricity began to more accurately reflect the price of natural gas.
Since winter last year was mild, by mid-summer, there was an oversupply of natural gas which led to high natural gas storage costs. Since electricity providers wanted to use up the natural gas, electricity produced from cheap natural gas helped push electricity rates down. As we entered autumn and winter, El Nino caused temperatures to remain higher than usual, extending energy prices fall even further.
The New Year: Energy in 2016
For a glimpse in to 2016 and beyond, you must look no further than December 2015 and the legislation that extended the Investment Tax Credit (ITC) for rooftop, commercial, and utility scale projects. Originally scheduled to phase out at the end of 2016, the ITC was extended through 2021 for rooftop solar and even further for larger scale initiatives. So what does this mean for the market place?
Where many thought the installation of solar capacity would face a net decline, we now look at a landscape in the US that will continue to drive innovation and technology forward, while driving down the price of solar projects across the board. If you're investing in solar for your home or business, make sure to have an in depth knowledge of your current rate structure, as it will drive the ROI associated with your project.
In 2015, power prices approached all-time lows, and many businesses saved money by locking in forward contracts. In 2016 and beyond, it will be increasingly difficult for businesses to save money, year over year, just with energy procurement and locking in low energy rates.
In 2016, there’ll be an increase in distributive generation projects, demand response (in Texas only), and storage capabilities that can drive value in the long run. You’ll want to look into new and innovative energy efficiency initiatives, as well as opportunities to start programs that create additional revenue streams like demand response.
Short-term Energy Outlook, EIA.gov, https://www.eia.gov/forecasts/steo/report/electricity.cfm