VIDEO: Gas power generation could catch up with coal power

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The Energy Information Administration (EIA) released its Short-Term Energy Outlook on May 12 and it suggests that the amount of domestic electricity generated from natural gas could essentially catch up with coal‘s share this spring.

“Low natural gas prices in recent months have significantly increased the use of natural gas rather than coal for electricity generation,” EIA reported in its update.

“EIA expects natural gas generation in April and May will almost reach the level of coal generation, resulting in the closest convergence in generation shares between the two fuels since April 2012,” EIA said.

For the year, EIA forecasts coal’s share of U.S. total power generation will be 35.8 percent in 2015, down from 38.7 percent in 2014. In contrast, the natural gas fuel share averages 30.7 percent this year, up from 27.4 percent in 2014.

Henry Hub natural gas prices below $3/mmBtu have led to a shift away from the use of coal and toward natural gas for fueling power generation.

During the first two months of 2015, coal fueled 37.4 percent of total U.S. electricity generation, down from 43.0 percent during the same period in 2014. In contrast, natural gas generation accounted for 27.6 percent of total generation, up from 23.7 percent during the first two months of 2014, EIA said.

The January-February natural gas fuel share of total electricity generation has been higher only once, in 2012, when it averaged 27.9 percent, EIA said.

As far as overall demand for electricity, warmer weather this summer could demand more use of air conditioning than last summer, EIA said.

The National Oceanic and Atmospheric Administration (NOAA) projects warmer temperatures this summer than last year’s mild summer. U.S. cooling degree days during the summer months (April-September) of 2015 are projected to total about 6 percent more than the same period last year, EIA said.

EIA forecasts U.S. retail sales of electricity to the residential sector will be 3,920 gigawatthours per day (GWh/d) during the summer of 2015, which is 2.9 percent higher than last summer.

Higher residential consumption of electricity this summer is offset somewhat by a year-over-year decline in sales during the first quarter, leading to forecast 2015 annual growth in U.S. residential electricity sales of 0.5 percent. EIA expects U.S. retail sales of electricity to the commercial and industrial sectors to grow by 1.5 percent and 0.6 percent, respectively, during 2015.

EIA expects continued growth in average U.S. residential electricity prices over the forecast period, but at a slower pace than last year. The forecast U.S. retail residential price increases by 1.6 percent in 2015 and by 1.8 percent in 2016. Industrial electricity prices, which are more responsive to changes in fuel costs, are expected to fall by 2.4 percent in 2015 and then rise by 1.2 percent in 2016.

Natural gas working inventories were 1,786 billion cubic feet (Bcf) on May 1, which was 71 percent higher than a year earlier, but 4 percent lower than the previous five-year (2010-14) average. The winter withdrawal season typically ends in March, and April is typically the beginning of the injection season, which runs through October.

EIA projects natural gas inventories will end October 2015 at 3,890 Bcf, a net injection of 2,420 Bcf. This would be the second-highest injection season on record.

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Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 22 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants.

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