Examining the forward US power market curves

While the spot power market can be driven by events like overperforming demand, unplanned unit outages and unexpected weather events, the forward market is more of an ethereal entity. Generation and transmission outage information becomes sparse as time progresses. Where natural gas forwards are priced and recent happenings in spot power markets are really the two consistent sources of new information for these markets. As a result, there is typically some amount of risk premium built into these power curves, particularly over winter and summer months. This insight is an attempt to quantify how much risk premium the forward market has put on various power curves from across the country. We also examine how the forward curves have evolved over the past year for prompt summer and prompt winter months. Specifically, the research explores how the price of natural gas compares to forward power prices, and what types of impact the spot markets have had on the curves.