Reasons for projected natural gas-fired generation growth vary by region – Today in Energy – U.S. Energy Information Administration (EIA)

Reasons for projected natural gas-fired generation growth vary by region

Source: U.S. Energy Information Administration, Annual Energy Outlook 2014 Reference case

Note: Values for the Northeast Power Coordinating Committee, Midwest Reliability Organization, and Western Electricity Coordinating Council regions account only for the portions of these regions within the United States. Totals exclude electric generation in the end-use sector, which is largely onsite industrial generation. WECC is Western Electricity Coordinating Council, TRE is Texas Reliability Entity, RFC is ReliabilityFirst Corporation, and SERC is SERC Reliability Corporation.

EIA projects that natural gas-fired electric power sector generation in the contiguous United States will increase to 1,600 million megawatthours (MWh) by 2040, a 1.3% average annual increase. This growth is spread throughout the Lower 48 states, and the reasons for the growth vary by region.

For the United States, increasing natural gas supply results in unexpected future growth in natural gas-fired electric generation, particularly after 2020. Total U.S. natural gas production increases 56% from 2012 to 2040, largely because of the development of shale gas, tight gas, and offshore natural gas resources.

The three regions with the highest growth in natural gas-fired generation, SERC, RFC, and WECC, also have the highest overall amounts of coal-fired generation. Coal-fired generation still grows significantly in SERC Reliability Corporation (SERC) and ReliabilityFirst Corporation (RFC), despite significant retirements of coal-fired capacity, and the increased cost of building new coal-fired facilities. In the Western Electricity Coordinating Council (WECC), natural gas-fired power competes with renewable sources for future electric power demand, while in the Texas Reliability Entity (TRE) region, natural gas accounts for almost all the growth in new generation.

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Source: U.S. Energy Information Administration, Annual Energy Outlook 2014 Reference case

Note: Totals exclude electric generation in the end-use sector.

The SERC and RFC regions cover many of the states in the Southeast, Mid-Atlantic, and Midwest. The RFC contains the Appalachian Basin’s Marcellus Shale play, the country’s largest and fastest-growing natural gas production basin. Both SERC and RFC contain portions of the Central Appalachian (CAPP) coal production basin, and RFC contains the Illinois Basin, where coal production has expanded rapidly.

In both regions, natural gas-fired generation competes with coal-fired generation for existing power demand in the near term, but in the medium- to long-term, natural gas generation is driven by growth in overall power demand. Natural gas-fired generation in the RFC benefits from more retired coal capacity, but overall coal-fired generation still grows in the region, which has relatively more access than SERC to inexpensive coal from the Illinois Basin and western United States. Gas-fired generation in SERC benefits more from higher growth in overall electric power consumption (1.0% annual average growth in SERC, versus 0.6% in RFC). Only WECC and Florida experience more rapid growth in overall electric power consumption than SERC through 2040, but natural gas accounts for the largest share of this growth in SERC, versus renewables in WECC, and nuclear power in Florida.

2012-40. Natural gas-fired generation in the power sector in SERC rises by 109 million MWh, the largest increase in the United States, while in RFC, it rises by 103 million MWh, the third-largest increase in the United States. Coal-fired power remains the largest generation source in both regions through 2040.

Near-term growth. In both SERC and RFC, natural gas-fired generation falls through 2014 in response to higher gas prices, and then regains its market share in 2015 and 2016, in response to coal-fired plant capacity retirements. Cumulative coal plant retirements through 2016 are greater in RFC (20 gigawatts) than in SERC (12 gigawatts).

Medium- to long-term growth. Increased natural gas prices cause natural gas-fired generation in SERC to decline through 2019, with coal-fired generation increasing, while gas-fired generation increases in RFC. Natural gas-fired generation rises in response to higher production in both of these regions after 2020, surpassing nuclear generation by 2035.

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