EIA sees natural gas, renewables taking electricity market share from coal
Originally published January 25, 2012
Use of renewable fuels and natural gas for electric power generation will rise over the next 25 years, largely at the expense of coal, the Energy Information Administration projects in an early release of a portion of its Annual Energy Outlook 2012. EIA projects that total electricity consumption, including both purchases from electric power producers and on-site generation, will grow from 3,879 billion kilowatt-hours in 2010 to 4,775 billion kWh in 2035, increasing at an average annual rate of 0.8%.
The natural gas share of electric power generation will increase from 24% in 2010 to 27% in 2035, and the renewables share will grow from 10% to 16% over the same period, the agency said. At the same time, the projected coal share of overall electricity generation falls to 39%, well below the 49% share seen as recently as 2007, "because of slow growth in electricity demand, continued competition from natural gas and renewable plants, and the need to comply with new environmental regulations," EIA said. In its 2011 annual outlook, EIA projected coal’s share would fall only to 43% by 2035.
Electricity generation from nuclear power plants is expected to grow by 11%, from 807 billion kilowatt-hours in 2010 to 894 billion kWh in 2035, EIA said. Nuclear generating capacity will increase from 101 gigawatts in 2010 to a high of 115 gigawatts in 2025, after which a few retirements result in a decline to 112 gigawatts in 2035. Nuclear’s share of electric power generation is expected to remain largely flat over the 2010-2035 period, declining slightly from 20% in 2010 to 18% in 2035, according to the 2012 outlook.
U.S. production of natural gas is expected to exceed consumption early in the next decade, EIA said. The United States is projected to become a net exporter of liquefied natural gas (LNG) in 2016, a net pipeline exporter in 2025, and an overall net exporter of natural gas in 2021. "The outlook reflects increased use of LNG in markets outside of North America, strong domestic natural gas production, reduced pipeline imports and increased pipeline exports, and relatively low natural gas prices in the United States compared to other global markets," the report said.
Natural gas production will increase throughout the next 25 years, EIA said. Shale gas production is projected to increase from 5.0 trillion cubic feet in 2010 (23% of total U.S. dry gas production) to 13.6 trillion cubic feet in 2035 (49% of total U.S. dry gas production).
Demand for natural gas in electricity generation will grow from 7.4 trillion cubic feet in 2010 to 8.9 trillion cubic feet in 2035, EIA said. "A portion of the growth is attributable to the retirement of 33 gigawatts of coal-fired capacity over the projection period."
With increased production, average annual wellhead prices for natural gas are expected to remain below $5 per thousand cubic feet (2010 dollars) through 2023, EIA said. After 2023, natural gas prices will rise as production gradually shifts to resources that are less productive and more expensive, the 2012 outlook said. Natural gas wellhead prices (in 2010 dollars) are projected to reach $6.52 per thousand cubic feet in 2035 (compared with $6.48 per thousand cubic feet (2010 dollars) in EIA’s 2011 outlook).
The average minemouth price of coal is expected to increase by 1.4% per year, from $1.76 per million Btu in 2010 to $2.51 per million Btu in 2035 (2010 dollars), according to the 2012 outlook. That contrasts with EIA’s 2011 outlook, which projected essentially flat prices. Coal consumption, mostly for electric power generation, will fall off through 2015 as retirements of coal-fired capacity more than offset an increase of about 9 gigawatts in capacity due to come online in 2011 and 2012, the 2012 outlook said. After 2015, coal-fired generation is expected to increase slowly as the remaining plants are used more intensively.
Excluding hydroelectricity, renewable energy consumption in the electric power sector is projected to grow from 1.4 quadrillion Btu in 2010 to 3.4 quadrillion Btu in 2035, with biomass accounting for 30% of the growth and wind 44%. Consumption of solar energy grows the fastest, but starting from a small base it will account for only a small share of the total in 2035, EIA said.
Following the recent rapid decline of natural gas prices, real average delivered electricity prices are expected fall from 9.8 cents per kilowatt-hour in 2010 to as low as 9.2 cents/kWh in 2019, as natural gas prices remain relatively low, before ending at 9.5 cents/kWh in 2035, EIA said in the 2012 outlook.
Energy use per capita will continue to decline—at an annual average rate of 0.5% per year from 2010 to 2035—due to the impact of an extended economic recovery and improving energy efficiency, EIA said. Total U.S. population will increase by 25% from 2010 to 2035, but energy use will grow by only 10%, according to the 2012 outlook.
The early release of the 2012 outlook is available on EIA's website. The agency plans to issue the full Annual Energy Outlook 2012 on April 26.
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