Projected U.S. power generation and capacity currently is significantly influenced by natural gas prices, the Energy Information Administration states.
In EIA’s recent Annual Energy Outlook 2019’s (AEO2019)high oil and gas resource and technology scenario, which includes projected low natural gas prices, natural gas provides 54% of all U.S. electricity generation by the end of 2050.
In the low gas resource and technology scenario, which includes high natural gas prices, the natural gas generation share falls to 21%, Kallanish Energy reports.
Natural gas share continues climbing
On an annual basis, natural gas surpassed coal in 2016 as the fuel most used to generate electricity in the U.S. In the outlook’s reference (most likely) case, natural gas remains the leading source of electricity generation through 2050.
In 2018, natural gas accounted for 34% of total electricity generation, and EIA projects its share to grow to 40% by 2032 and then remain between 39% and 40% through 2050.
Electricity generation shares from coal and nuclear gradually decline as coal and nuclear become less cost competitive compared with natural gas and renewables. Renewables generation surpasses nuclear by 2020 and surpasses coal by the mid-2020s as tax credits and lower capital costs drive solar photovoltaic and wind capacity additions.
Low prices equal higher utilization
Relatively low natural gas prices lead to higher utilization of existing plants and to more natural gas power plant construction. The price of natural gas delivered to electric power plants averaged $3.42 per million British thermal units (Mmbtu) in 2018, and in the AEO2019 reference case, EIA projects it will average (in real dollar terms) $5.36/Mmbtu in 2050.
In the low oil and gas resource and technology case, higher extraction costs and lower resource availability result in less natural gas production, and the natural gas price for power plants increases to $8.62/Mmbtu in 2050.
In the high oil and gas resource and technology case, which has the opposite assumptions for resource extraction costs and availability, EIA projects natural gas prices will remain well below $4.00/Mmbtu through 2050.
Natural gas can displace renewables
Because of lower natural gas prices, the share of natural gas-fired generation in the high oil and gas resource and technology case displaces renewables, coal-fired, and nuclear-powered generation.
Natural gas-fired plants exceed renewables as the leading source of new capacity additions, and more existing coal-fired and nuclear-powered generation capacity is retired.
Nuclear-powered electricity generation is lower in the high oil and gas resource and technology case because almost half of the current nuclear power plant fleet retires by 2050.
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