Supply Update
- Electricity Generation Growth: We expect a significant increase in electricity generation over the next few years. In 2025, an additional 62 GWh of electricity generation will come online. After accounting for the retirement of about 10 GWh this year, this represents a net increase of approximately 4%. This growth is why long-term future pricing is now lower than short-term pricing.
- Natural Gas Challenges: Our natural gas reserves are depleted, 23.4% below last year’s levels and 11.5% below the five-year average. Production is expected to average about 104.6 Bcf this year and nearly 107 Bcf in 2026. Even if demand remains stable (which is unlikely), we won’t see a surplus for a couple of years.
Weather Outlook
Demand Trends
- LNG Exports at Record Highs: LNG exports are operating near full capacity, reaching all-time highs of over 16 Bcf/d. We are only 1.3 Bcf/d away from maximum capacity, with more facilities set to come online soon.
- Winter Withdrawals and Spring Outlook: This winter’s withdrawals have been exceptionally high, with half falling below the five-year range. Injection season is scheduled to begin on April 1st, but a cool spring could delay this. However, spring weather appears to be on the horizon.
NATURAL GAS STORAGE REPORT
LNG EXPORTS
NYMEX 12-MONTH STRIP
Strategic Recommendations
Consider longer-term agreements for better rates if you’re not using a managed product, such as with smaller accounts. However, pass-through capacity should be used whenever possible to reduce premiums. For managed index products, focus on reducing or eliminating premiums by passing through energy and capacity. Consult with a qualified energy expert to recommend hedges during market dips. Don’t hesitate to lock in part of next winter’s supply (25-50%) or secure on-peak hours during the summer when demand peaks.
Future Outlook
Due to the PJM auction results, your facility will experience an electricity cost increase of approximately 15-20% in June 2025. The growth of AI manufacturing, electrification, and EV adoption puts additional strain on the electric grid, forecasting significant demand increases over the next seven years and supply closures.
To mitigate these impacts, we’re ensuring our clients are aware of these changes and taking proactive steps:
- Energy Hedging Strategies: These can reduce costs by about 15% compared to fixed rates.
- Expert Energy Audits: Engage with our energy experts for complimentary onsite audits to:
- Identify Energy Conservation Measures to improve efficiency.
- Enhance Electrical Service Reliability and Backup Solutions.
- Explore Alternative Energy Solutions for Onsite Generation.
- Determine Operational Improvements to offset Peak Building Usage.
NYMEX ROLLING PROMPT MONTH
