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EIA: Natural gas generation to hit record levels in summer 2016

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EIA: Natural gas generation to hit record levels in summer 2016

The U.S. Energy Information Administration is projectingthat natural gas-fired electricity production will hit record levels in 2016,underscoring a trend that in 2015 saw gas exceed coal as a generation fuel for the first time.

Gas-fueled generation is expected to provide an average of3.8 million MWh/d of electricity in 2016, which is 4% higher than in 2015. Therecord is expected to be set in July and August, when power demand is typicallyat its highest.

The actual generation mix is dependent on weatherconditions, and the National Oceanic and Atmospheric Administration hasforecasted a summer similar to 2015. As the heat climbs in the summer months,customers turn on air conditioners, putting additional strain on theelectricity grid. That extra demand is typically met by natural gas-fired powerplants.

Natural gas exceeded coal as a generation fuel in April 2015and has remained there for most months since. EIA said it expects thatsituation to continue through the rest of 2016, with gas ultimately providing34% of electricity generated in the U.S. Coal is expected to have a 30% share,with nuclear and renewables coming in at 19% and 15%, respectively.

But after 2016, EIA predicted that renewables will have anincreasingly larger role in the energy mix while natural generation's role willshrink due, at least in part, to rising fuel prices. That trend will continuethrough 2020, according to information recently released from the agency's "AnnualEnergy Outlook 2016." Natural gas will begin to pick back up that point,climbing steadily over the following two decades and regaining its position asthe dominate generation source for 2022 through 2040, EIA said.

Gas spot prices at the benchmark Henry Hub have beenincreasing from a monthly average of $1.92/MMBtu in May to a high of$2.59/MMBtu in June — the highest monthly spot price since September 2015. EIApredicted that prices will remain low enough to sustain the record-high gasgeneration forecast for 2016, but when they continue to climb in 2017, naturalgas generation will consequently decrease by about 2%.

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