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Future U.S. Electricity Generation Mix Will Depend Largely on Natural Gas Prices

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US Energy Information Administration

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natural gas price to electric generators and electric generation share, as explained in the article text

Source: U.S. Energy Information Administration, Annual Energy Outlook 2018

The mix of fuels used to generate electricity in the United States has changed in response to differences in the relative costs of electricity-generating technologies and, for those technologies that consume fuel, the cost of fuel. Several cases in EIA’s Annual Energy Outlook 2018 (AEO2018) show how projected generation and capacity could continue to be affected by fuel price patterns, particularly for the price of natural gas. In a sensitivity case with low natural gas prices, natural gas ultimately provides more than half of all U.S. electricity generation by the mid-2040s.

Natural gas recently surpassed coal as the main fuel used to generate electricity in the United States. In the AEO2018 Reference case, natural gas remains the leading source of electricity generation through 2050. By 2050, natural gas accounts for 35% of total electricity generation, a slight increase from its 2017 share of 31%.

In the Reference case, electricity generation from coal and nuclear gradually decline and lose market share to natural gas and renewables. Renewable generation surpasses nuclear by 2020 and surpasses coal by the mid-2030s as tax credits and lower capital costs drive solar photovoltaic and wind capacity additions.

electricity generation from selected fuels, as explained in the article text

Source: U.S. Energy Information Administration, Annual Energy Outlook 2018


The natural gas share of U.S. electricity generation largely depends on natural gas prices. The price of natural gas delivered to electric power plants averaged $3.47 per million British thermal units (Btu) in 2017 and in the AEO2018 Reference case is projected to be (in real dollar terms) $5.42 per million Btu 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 nearly $10 per million Btu.

Conversely, in the High Oil and Gas Resource and Technology case, which has the opposite assumptions for resource extraction costs and availability, natural gas prices are projected to remain well below $4.00 per million Btu through 2050. Relatively low natural gas prices lead to higher utilization of existing plants and to more natural gas power plant construction.

Natural gas-fired generation in the High Oil and Gas Resource and Technology case is considerably higher than in the Reference case, displacing both renewable and coal-fired generation. Because of lower natural gas prices, natural gas-fired plants exceed renewables as the leading source of new capacity additions, and more existing coal-fired generation capacity is retired. Nuclear-powered electricity generation is also lower in the High Oil and Gas Resource and Technology case, because about half of the current nuclear power plant fleet retires by 2050.

cumulative additions and retirements, as explained in the article text

Source: U.S. Energy Information Administration, Annual Energy Outlook 2018


Conversely, in the relatively high natural gas price environment in the Low Oil and Gas Resource and Technology case, electricity generation from both renewable and coal-fired plants gains market share as the natural gas share declines. Renewable technologies become the predominant source of electricity generation in this case, surpassing natural gas-fired and then coal-fired plants as the primary source of generation by the mid-2030s. Coal-fired generation remains relatively high because of fewer retirements and higher utilization rates for existing coal-fired generating plants.

In the Low Oil and Gas Resource and Technology case, renewable generation increases because of greater additions of solar photovoltaic and wind capacity. In this case and in the Reference case, most of the new capacity is powered by solar. In the Low Oil and Gas Resource and Technology case, solar and wind provide 20% and 11% of U.S. electricity generation by 2050, respectively.

electricity generation from selected renewables, as explained in the article text

Source: U.S. Energy Information Administration, Annual Energy Outlook 2018


Principal contributors: Jeff Jones, Laura Martin

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Joe Deely's picture
Joe Deely on Feb 13, 2018

The latest EIA Outlook pretty much follows the standard set over the years. Worthless.

As the fuel share chart above illustrates – EIA has coal generation dropping from 2,000 TWh in 2007 to 1,230TWh in 2016. But miraculously that drop stops and they have coal generating at least 1,100 TWh thru 2050. Pure stupidity.

Rex Berglund's picture
Rex Berglund on Feb 14, 2018

It’s amazing that EIA’s widely reported epic fails have continued for so long.

Bob Meinetz's picture
Bob Meinetz on Feb 14, 2018

Rex, since 1994 EIA’s Annual Energy Outlook has been providing forecasts up to 30 years in advance. On average, they have proven accurate to within a 17% margin of error (every year, they publish a statistical review of their performance).

But you must have a more accurate source for energy predictions 30 years in the future. You don’t? I didn’t think so – no one in the pro-renewables community does. Making their whining (“worthless”, “epic fails” and “pure stupidity”) nothing more than shooting the messenger.

Joe Deely's picture
Joe Deely on Feb 14, 2018

Just wondering – do you think any of the coal plants that are 40+ years old now will retire before 2050? Because the EIA doesn’t – they only count announced coal closures in their model – smart eh?

From a few years ago – sound familiar?

In the case of coal consumption, the average absolute percent difference over the years 1993-2013 was 10.8%. Some years it was more, others less. The number of high vs. low estimates is almost split down the middle. If EIA is off by that margin and they’re high, coal will still make up 31% of generation in 2040 (or 37% if they’re low).
Joe, I really don’t care how confident you feel you can be. I want to know when you say “coal will drop to below 33% in 2016”, or “[coal] should be below 25% of electricity consumption by 2030”: what’s your model?

Are you still going with coal between 31-37% in 2040?

Rex Berglund's picture
Rex Berglund on Feb 14, 2018

Well Bob, we’ve been over this before, remember this?×0/filt...()/

Then, there’s this predicted 20 year hiatus in wind installs, does that seem plausible to you?

Joe Deely's picture
Joe Deely on Feb 14, 2018

Perfect example of what I am saying in my other comment just popped up in the news today. Brunner Island coal plant in PA just announced future plans for closure.

The Brunner Island power plant, which has in the past been scorned as one of the most polluting coal-fired power plants in the United States, has agreed to end production of electricity by coal by the end of 2028.

The Sierra Club, which had announced an intent to sue the facility for air and water pollution, said it had reached a settlement with owner Talen Energy.
Under the terms of the settlement, the 57-year-old plant will stop burning coal from May through September — the peak smog season — by 2023, except for burning coal in case of power shortage emergencies.

Coal will be phased out completely by 2028.

Brunner Island has 3 units listed in EIA data – which total 1,411 MW. First unit went live in 1961, second in 1965 and third in 1969. So these units are between 49 and 57 years of age. Yet the model used to build the EIA Outlook counts these as active units in 2030, 2040 – even 2050. Why? Because their retirement had not yet been announced.

However, when they run the model next year, they will see this retirement and adjust coal generation downwards.

See how that works? Sorry, but that is just plain stupid.

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