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ANALYSIS: US Midwest gas-fired power demand down this summer despite warmer temps

Highlights

Prices prompting gas-to-coal switching

Wind generation capacity up year over year

Despite warmer temperatures and the absence of coronavirus-related demand destruction, Midwest gas-fired power generation is down 300 MMcf/d summer over summer likely due in part to substantially higher regional cash prices coupled with additional wind capacity.

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New wind capacity and higher gas prices appear to be slashing Midwest power burn summer over summer, with Illinois showing the largest drop in deliveries to power plants this year versus last, according to S&P Global Platts Analytics.

Midwest power burn, on a per degree basis, is down year over year so far this summer on a per degree and has averaged 2.1 Bcfd/d since the start of the summer. This is down from 2.4 Bcf/d this time last summer despite temperatures 2 degrees Fahrenheit warmer so far this summer over 2020.

Chicago cash prices have averaged $2.68/MMBtu so far this summer, more than a dollar above the $1.66/MMBtu this time last summer, which has incentivized gas-to-coal switching. Wind capacity in the region has also risen 5.3 GW since this time last summer, displacing other forms of generation, according to Platts Analytics data.

However, a review of pipeline deliveries to power plants across the Midwest on a state-by-state basis shows deliveries have not declined in all states. Illinois, the most populous state in the Midwest, has had the largest summer-over-summer declines in deliveries to power plants. Last summer at this time, roughly 381 MMcf/d was delivered in Illinois. So far this summer it has fallen 144 MMcf/d to 238 MMcf/d.

In Indiana, the state with the largest deliveries to power plants in Platts Analytics data, deliveries have fallen 72 MMcf/d. Last summer at this time it averaged 453 MMcf/d compared to 381 MMcf/d this summer.

States like Michigan, North Dakota, South Dakota and Nebraska have all marginally increased deliveries to power plants this summer from last.

This variation across every state does not appear tied to prices, as Chicago, Ventura and MichCon all hover near each other and roughly $1.00/MMBtu above last year. Nor does it follow temperatures as the temperatures in the most populous cities in each state rose from 0.3 degree in Omaha, Nebraska, to 4.2 degrees in Milwaukee, Wisconsin, summer over summer.

Wind capacity in the states and wind speed this year also plays a roll in the differences between the states. Iowa, for example, which has fallen 51 MMcf/d summer over summer, has roughly three times as much installed wind generation, at 11 GW, than Michigan, who marginally increased deliveries and has only 3.3 GW of installed wind capacity, according to Market Intelligence.