Natural Gas Projected to Fuel Largest Share of U.S. Summer Power Generation

The U.S. Energy Information Administration (EIA) expects natural gas–fueled electricity generation will exceed all other fuel sources once again this summer, marking the third year in a row that gas has been the leader.

However, the EIA anticipates electricity generation from both gas and coal will be less this summer than in 2016.

The reason is two-fold. First, the National Oceanic and Atmospheric Administration is predicting milder temperatures in 2017. That means total generation could be cut 2.4% this year, according to the EIA. The other reason is that output from hydroelectric and other renewable generators is expected to increase this year, eliminating some demand for fossil-fueled generation.

Natural gas usage is sensitive to gas price, and the price has risen from last year. During the first three months of 2017, the Henry Hub natural gas price averaged $3.01/MMBtu, according to the EIA. (The Henry Hub is a distribution hub located in Erath, La., that interconnects with nine interstate and four intrastate pipelines, making it an important pricing point for futures contracts traded on the New York Mercantile Exchange.)

The first quarter 2017 price was roughly 50% higher than the $2.00/MMBtu that natural gas averaged during the same period in 2016. The increase caused the share of U.S. generation from gas-fired sources to slip to 29% while coal’s share increased to 31% during the three-month period. Current expectations are for Henry Hub spot prices to remain less than $3.09/MMBtu throughout the summer (June, July, and August).

Other notable items in the EIA’s April-released Short-Term Energy Outlook included a projection that wind power capacity would increase 17% during the next two years. The EIA estimated that wind capacity was 81 GW at the end of 2016 and would grow to 95 GW by the end of 2018. It also said utility-scale solar capacity would increase 47% from 21 GW to 31 GW over the same period.

The EIA expects coal prices to remain fairly stable during the next two years. It said the delivered coal price averaged $2.11/MMBtu in 2016. With gas prices higher, it expects coal usage to increase and average prices to climb slightly to $2.17/MMBtu in 2017 and $2.22/MMBtu in 2018, roughly the price it was in 2015.

Aaron Larson, executive editor (@AaronL_Power, @POWERmagazine)

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