Average wholesale electricity prices at major trading hubs across the U.S. in 2016 were significantly lower than in 2015. The primary driver of the low wholesale electricity prices was the sustained low cost of natural gas, the fuel that often determines the marginal generation cost in most power markets. The low cost of natural gas also encouraged an increased use of the fuel for U.S. power generation in 2016.
The cost of natural gas delivered to power generators averaged $2.78 per million Btu in 2016, 17-percent lower than the average price in 2015. In addition to keeping wholesale power prices relatively stable in 2016, the low cost of natural gas contributed to a shift toward increased natural gas-fired electricity generation (6-percent higher), largely at the expense of coal-fired generation (12-percent lower).
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