2015 has proven to be a very interesting and dynamic year in energy. Events large and small have had an economic impact both globally and locally across the country. A few notable highlights include this year being the hottest year on record, oil prices trading below $35 a barrel, and renewable energy possibly reaching a global tipping point.
I have spoken to many clients over the past couple of months inquiring about what 2016 has in store. The most frequent inquires I get pertain to what will happen with the markets, legislation, and regulations affecting how they will do business in the upcoming year.
I spent the better part of the fourth quarter researching and interviewing fellow industry experts to ascertain where the industry will go in 2016. Below are my energy industry predictions for 2016.
- Nationally, the supply of natural gas is up compared to this time last year. The regional transmission grid (PJM) serving Ohio has announced it has adequate capacity to meet energy demands this winter. This winter is projected to be warmer than average. Taken collectively, this means businesses should expect energy prices in our region to trend lower and costs to be down this winter compared to last year.
- After two consecutive summers of dramatically increasing electric rates, consumers in northeast Ohio can expect much better pricing during the summer of 2016. Many consumers wisely locked into longer two and three year fixed rate contracts over the past two years. For a large number of consumers, those contracts are expiring during the first half of 2016. Now is the time to explore new contract terms with your energy advisor.
- LED lighting technology, efficiency, and pricing improved dramatically over the past year. Though there will continue to be improvements to the technology, it is unlikely the industry will achieve improved pricing at quite the same rate. Businesses that have been waiting to install LEDs until the market reaches a plateau on pricing, may want to consider 2016 as the year to make their move.
- Contrary to popular belief, there are still incentives available for energy efficiency retrofits; you just need to know where to look. There is a very good likelihood that SB 310, which froze the energy portfolio standards in Ohio, will expire by the end of the year. That means businesses could expect a return of the rebates First Energy once offered. But large electric consumers still have incentives they can capitalize on in the form of an exemption to costly riders attached to their electric use. Businesses should consult their energy advisors to learn more.
- Columbia Gas of Ohio customers will continue to have access to favorable rebates. Columbia provides service to a majority of counties throughout Ohio. Their rebate program is very comprehensive extending from residential to commercial and new construction.
- President Obama’s Clean Power Plan will continue to foster dialogue and potential turmoil within the energy market. State lawmakers and utilities have cited that the plans objectives will prove prohibitively costly to plant operations. A number of states, including Ohio, have already filed suit against the EPA in court. Either way, the end result will affect energy markets.
- The Federal Government passed, and signed into law, a $1.1 trillion budget and tax extenders bill at the end of 2015. Included was an extension of Section 179D in the tax code that allows for qualifying businesses to receive up to $1.80 per square foot in deductions for eligible energy efficiency projects.
The energy markets are historically too volatile to perfectly predict. One certainty though is those businesses that are prepared with a plan are better insulated against unexpected weather anomalies, global crises, and unforeseen regulations. Be sure to consult with your energy advisor about implementing a contingency to properly manage your energy portfolio in 2016!