Boston, MA -- (SBWIRE) -- 04/23/2014 -- The fact that the US spent most of January 2014 in the grip of a polar vortex, which sent temperatures plummeting to record lows, served to underscore some of our long-held views on US coal-gas dynamics. We have long believed that although a glut of cheap shale gas has driven a significant short-term switch from coal to gas in electricity generation, the composition of the country's energy mix will ultimately hinge on fluctuations in gas prices. To this end, we had already seen coal generation rebound as gas prices climbed higher in the first half of 2013, and this rebound appears to have further to go after sub-zero temperatures in early 2014 contributed to record withdrawals of natural gas from storage. This in turn led to a surge in Henry Hub spot prices, which caused some utilities to switch back to coal as gas became more expensive. It is in this context that we reiterate that although gas prices will likely fall back as the cold weather abates, the recent surge in gas prices as a result of increased demand can be viewed as a short-term proxy - representative of what might happen to pricing dynamics in the US power market when Henry Hub prices inevitably rise towards the end of the current decade.
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