In the July 2017 Market Report, we discussed the PJM report “Energy Price Formation and Valuing Flexibility”. This report discussed some of the issues around low energy prices being generated by most of the Regional Transmission Organizations (RTOs) and possible solutions. While changing the auction process could take some time, clearly the low electricity prices of the last few years are taking a toll on generators. We see this report as a harbinger of regulatory changes that could result in higher power prices in the next few years. We also continue to believe that future global natural gas demand is understated and that the globalization (Liquefied Natural Gas (LNG)) of the natural gas market will ultimately lead to higher natural gas prices. We will continue to monitor the markets for changes to the market price drivers.
Analyst – David Mousseau
Source – PJM, Federal Energy Regulatory Commission (FERC), CME, and Reuters
