Power produced from gas sees decline in U.S.

06 May 2021

Daily change in natural gas generation.

Natural gas-fired electricity generation in America’s lower 48 states averaged 3394 GWh per day in the first four months of the year, according to new data from the U.S. Energy Information Administration.

That average daily production represented a 7% decline from the previous year as power producers were driven to alternatives by stronger natural gas prices and more competitive renewables. The decline is the first year-over-year decline in natural gas power generation during this period since 2017.

Even as natural gas-fired power generation fell, total electricity generation during the same period rose 6.6% from the same period a year ago, primarily because of colder weather, the EIA reported.

Prices surged earlier this year in response to a decline in production and a surge in winter heating demand, compared with the prior winter heating season. Even excluding a weather-driven spike in prices from Feb. 16 – 19, gas prices at Henry Hub averaged $2.83 per MMBtu in the first four months of the year, up $0.88/MMBTU from the same period a year ago. That increase is caused, in part by weak prices in the 2019 2020 winter.

The EIA reported that the stronger prices in the first four months of the year have made natural gas-fired generation less competitive compared with coal, leading some producers to switch fuels. Coal-fired power generation rose nearly 40% in the first four months of 2021, compared with the same period in 2020, accounting for 23% of total electricity generation.

Natural gas has also faced additional competition from renewable generation, as recent record-breaking capacity additions of wind and solar plants have come online. Between May 2020 and February 2021, the U.S. electric grid has seen an additional 22.5 GW of combined wind and solar electric power, a 15% increase. An additional 4.8 GW of natural gas-fired capacity came online in the same period.

Looking forward for the rest of the year, the EIA expects an additional 28.7 GW of renewable solar and wind generation to come online. Meanwhile, natural gas will see an additional 3.8 GW of additional capacity for the rest of the year, the EIA reports.

Looking forward, the EIA predicted that natural gas-fired generation to continue to slide through 2022. For the rest of the year, that will fall 6.8% and an additional 2.3% in 2022.

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