Electric power generation fueled by natural gas fell 7 percent in the first four months of the year, compared with the same period last year, marking the first year-over-year decline since 2017, according to data from the Energy Information Administration (EIA).
Gas-fired generation in the 48 contiguous states averaged 3,394 gigawatt hours (GWh) per day in the first four months of 2021, according to data from the EIA’s Hourly Electric Grid Monitor.
Meanwhile, colder winter weather prompted an overall drop in electricity generation of 6.6 percent in the first four months of the year compared with the same period of 2020.
The EIA attributed the decline in gas-fired generation to higher natural gas prices and increased competition from renewable energy sources.
Lower natural gas production and higher winter heating demand compared with the previous winter heating season have pushed gas prices up since April 2020. The U.S. benchmark natural gas price at Henry Hub averaged $2.83 per million British thermal units (MMBtu) from January through April 2021, despite a cold snap and record-high prices in mid-February, the EIA noted.
Higher gas prices make gas-fired generation less competitive with coal-fired generation, prompting gas-to-coal fuel switching. Coal-fired generation increased nearly 40 percent during the first four months of 2021 compared with the same period in 2020, the EIA said. Coal fired generation now accounts for 23 percent of total generation, according to the EIA’s most recent Hourly Electric Grid Monitor data.
The EIA expects to see further declines in gas-fired generation through 2022. In May’s Short-Term Energy Outlook, the agency forecast gas-fired generation will decline 9.1 percent in 2021 and a further 0.7 percent in 2022.
Natural gas-fired power generation in the United States is also facing increased competition from renewable resources because of recent record high additions of wind and solar plants, the EIA said, noting that between May 2020 and February 2021, 22.5 gigawatts (GW) of wind and solar capacity additions came online in the United States, a 15 percent increase.
The EIA expects another 28.7 GW of wind and solar capacity to enter service by the end of the year based on the agency’s most recent Preliminary Monthly Electric Generator Inventory.
By comparison, natural gas-fired capacity grew by only 4.8 GW between May 2020 and February 2021, a 1 percent increase. The EIA expects another 3.8 GW of gas-fired capacity to come online by year end.