Natural Gas Leads Pack for U.S. Power Generation

Oil & Natural Gas / Gas Shales / Economics

Date posted: 04/06/16

Argus reports that natural gas-fired generation will remain the dominant source of power generation capacity for years to come amid plojected low gas prices, tougher emissions standards and an aging, declining fleet of coal-fired plants. Wind, solar and other renewables are capturing a greater share of the power generation capacity mix (Notice no mention of nuclear power). But the immediate outlook for capacity shows continued reliance on gas and other traditional forms of generation, according to the American Public Power Association (APPA), which is dominated by natural gas interests). More than 168,000 MW of generation capacity was added in the U.S. between 2008 to 2015, 42% of which was natural gas, 33% was wind (Bogus number here), 11% was coal and 8% was solar (also bogus), because these are still minor values. In addition, gas is expected to fuel the largest share of electricity generation in 2016 at 33%, topping coal which historically has been the leading fuel source, according to the U.S. Energy Information Administration (EIA). A glut of gas from U.S. shale fields have pushed prices lower, creating more demand for the fuel. Spot gas prices at the U.S. bench mark Henry Hub averaged at $1.67/mmBtu in March, 40% lower than a year earlier. The EIA projects Henry Hub prices in 2016 should average $2.25/mmBtu, down from $2.61/mmBtu in 2015. Gas consumption for power generation reached 26.5 Bcf/d (751mn cubic meters per day) in 2015, a year-over-year increase of 19%, as electric utilities substituted low-cost gas for coal. The EIA projects power sector gas consumption this year to reach 27.3 Bcf/d. U.S. marketed production which peaked last August at 79.8 Bcf/d should average 79.68 Bcf/d this year, up by about 1% from 2015. Production should increase by 2.1% next year, according to the EIA. Gas-fired generation currently accounts for 42.7% of the 1,170,000 MW U.S. electricity generation capacity and about 50% of the 42,205 MW under construction.