A Brief Recap of the 2023 Electricity and Natural Gas Commodity Markets
As we bid farewell to 2023, EnerConnex reflects on energy price volatility and 2024 industry megatrends. Chart 1 below illustrates the volatility in natural gas pricing at the Henry Hub, a key trading point for this commodity. Note the 100+% volatility from December 2022 to December 2023.
Given natural gas is a key input fuel for electricity generation, electricity prices also experienced large fluctuations in price throughout the year.
Energy markets also witnessed a continued increase in renewable energy adoption with renewable energy accounting for 20% of all U.S. electricity generation. Chart 2 below, breaks down the approximate percent of renewable energy by U.S. electricity production by type.
Simultaneously, natural gas commodity markets are experiencing what could be transformative changes with the use of green hydrogen used for blending with natural gas as a pathway toward decarbonization and growth in renewable natural gas (RNG). According to Wood Mackenzie, the North American RNG market could expand tenfold by 2050 to reach 4bcfd. RNG grew by 20% in 2022 and the number of RNG projects have doubled in the last five years with states such as Texas, California and Pennsylvania leading the way.
Looking ahead to 2024, EnerConnex foresees a continuing path toward decarbonization with two megatrends that will continue to impact the energy landscape. First, the continued advancement of energy storage technologies that will play a pivotal role in enhancing grid stability and managing the intermittent nature of renewable energy sources. Second, the rise of decentralized energy systems and microgrids that will empower consumers to take control of their energy consumption, contributing to a more distributed and flexible energy grid.
In summary, 2023 was marked with volatile electricity and natural gas commodity markets due to weather, natural gas storage, and the continued shift to a more renewable energy resource mix. Volatility will likely continue as the industry shifts towards more sustainable energy options while wrestling with grid reliability and resilience.