SNL (Jesse Gilbert)
Trying to assess the potential for coal-to-gas switching is somewhat of an art form. Suppose one were able to devise an economic model that replicates real-world generation dispatch for plant operators. A model is only as good as the inputs that go into it, and future natural gas prices are a critical component.
There has been no shortage of gas price forecasts lately, and at times wildly varying estimates put forth by investment banks and consulting firms have underscored the difficulty in trying to pin down reliable numbers in a market that is operating outside historical fundamentals.
To further complicate matters, the price of natural gas, as delivered to combined-cycle plants, the chief competitor of mid-merit coal plants, might differ substantially from broad spot natural gas prices.
SNL Energy examined delivered fuel costs to gas combined-cycle (CCGT) plants for regions across the country. For plants within an independent system operator (ISO), the region assigned was the ISO, while plants falling outside ISO membership were assigned a region based on legacy North American Electric Reliability Corp. (NERC) subregion.