Comparison of AEO 2009 Natural Gas Price Forecast to NYMEX Futures Prices

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On December 17, 2008, the reference-case projections from Annual Energy Outlook 2009 (AEO 2009) were posted on the Energy Information Administration's (EIA) web site. We at LBNL have, in the past, compared the EIA's reference-case long-term natural gas price forecasts from the AEO series to contemporaneous natural gas prices that can be locked in through the forward market, with the goal of better understanding fuel price risk and the role that renewables can play in mitigating such risk. As such, we were curious to see how the latest AEO reference-case gas price forecast compares to the NYMEX natural gas futures ... continued below

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Bolinger, Mark & Wiser, Ryan January 28, 2009.

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This report is part of the collection entitled: Office of Scientific & Technical Information Technical Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. It has been viewed 11 times . More information about this report can be viewed below.

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Description

On December 17, 2008, the reference-case projections from Annual Energy Outlook 2009 (AEO 2009) were posted on the Energy Information Administration's (EIA) web site. We at LBNL have, in the past, compared the EIA's reference-case long-term natural gas price forecasts from the AEO series to contemporaneous natural gas prices that can be locked in through the forward market, with the goal of better understanding fuel price risk and the role that renewables can play in mitigating such risk. As such, we were curious to see how the latest AEO reference-case gas price forecast compares to the NYMEX natural gas futures strip. This brief memo presents our findings. Note that this memo pertains only to natural gas fuel price risk (i.e., the risk that natural gas prices might differ over the life of a gas-fired generation asset from what was expected when the decision to build the gas-fired unit was made). We do not take into consideration any of the other distinct attributes of gas-fired and renewable generation, such as dispatchability (or lack thereof), differences in capital costs and O&M expenses, or environmental externalities. A comprehensive comparison of different resource types--which is well beyond the scope of this memo--would need to account for differences in all such attributes, including fuel price risk. Furthermore, our analysis focuses solely on natural-gas-fired generation (as opposed to coal-fired or nuclear generation, for example), for several reasons: (1) price volatility has been more of a concern for natural gas than for other fuels used to generate power; (2) for environmental and other reasons, natural gas has, in recent years, been the fuel of choice among power plant developers; and (3) natural gas-fired generators often set the market clearing price in competitive wholesale power markets throughout the United States. That said, a more-complete analysis of how renewables mitigate fuel price risk would also need to consider coal, uranium, and other fuel prices. Finally, we caution readers about drawing inferences or conclusions based solely on this memo in isolation: to place the information contained herein within its proper context, we strongly encourage readers interested in this issue to read through our previous, more-detailed studies, available at http://eetd.lbl.gov/ea/EMS/reports/53587.pdf or http://eetd.lbl.gov/ea/ems/reports/54751.pdf.

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  • Report No.: LBNL-1469E
  • Grant Number: DE-AC02-05CH11231
  • DOI: 10.2172/948129 | External Link
  • Office of Scientific & Technical Information Report Number: 948129
  • Archival Resource Key: ark:/67531/metadc894029

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Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

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  • January 28, 2009

Added to The UNT Digital Library

  • Sept. 27, 2016, 1:39 a.m.

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  • Jan. 4, 2017, 4:58 p.m.

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Bolinger, Mark & Wiser, Ryan. Comparison of AEO 2009 Natural Gas Price Forecast to NYMEX Futures Prices, report, January 28, 2009; Berkeley, California. (digital.library.unt.edu/ark:/67531/metadc894029/: accessed November 18, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.