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EIA forecasts rise in natural gas prices in 2013-14


From the January 10, 2013 issue of Public Power Daily

Originally published January 10, 2013

By Robert Varela
Editorial Director

The Henry Hub natural gas spot price, which averaged $4 per million British thermal units (MMBtu) in 2011 and $2.75 per MMBtu in 2012, will average $3.74 per MMBtu in 2013 and $3.90 per MMBtu in 2014, the Energy Information Administration projected in its January Short-Term Energy Outlook. Given that price rise, coal's share of the U.S. generation market is expected to rise from last year's 37.6 to 39 percent in 2013 and 39.6 percent in 2014, EIA said. "Lower‐than‐projected natural gas prices along with the industry’s response to future environmental regulations could cause the coal share of total generation to fall below this forecast," the agency said.

Forecasts for closer‐to‐normal temperatures in 2013 and 2014 (after a hot 2012) will lead to increases in natural gas used for residential and commercial space heating, EIA said. Those increases will be offset by declines in natural gas for power generation, as summer temperatures are expected to be closer to normal, meaning cooler than they were in 2012, the agency said. "Despite projected declines in electric power consumption from 2012 levels, consumption of natural gas for electric power generation remains high by historical standards and reflects a structural shift toward using more natural gas for power generation."

Total generation of electricity is expected to remain largely unchanged in 2013 and to grow by 0.8 percent (94 gigawatt-hours per day) in 2014, EIA said. 

Based on the assumption that temperatures return closer to normal, EIA expects residential electricity sales during the winter months of 2013 will be higher than last year while summer electricity sales will be lower, leading to a projected annual decline of 0.3 percent during 2013. The agency projects retail sales to the residential sector will grow by 0.1 percent during 2014. The primary driver of residential electricity sales in 2014 will be growth in the number of customers, which will be tempered somewhat by increased efficiency in residential electricity consumption, EIA said. 

Growth in industrial electricity consumption is projected to pick up in the second half of 2013, when industrial electricity sales will show year‐over‐year growth of 0.7 percent, EIA said. During 2014, industrial electricity sales are expected to grow by 1.8 percent.

EIA expects retail residential electricity prices will grow by 1.9 percent in 2013 and by 2.6 percent in 2014.

Estimated coal consumption in the electric power sector was 829 million short tons in 2012, the lowest since 1992, EIA said. EIA forecasts that the delivered coal price will average $2.40 per MMBtu in 2012, $2.44 per MMBtu in 2013, and $2.50 in 2014.


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