Natural gas leads pack for US power generation

Natural gas leads pack for US power generation

Natural gas-fired generation will remain the dominant source of power generation capacity for years to

come amid low gas prices, tougher emissions standards and an aging fleet of coal-fired plants.

Wind, solar and other renewables are capturing a greater share of the power generation capacity mix.

But the immediate outlook for capacity shows continued reliance on gas and other traditional forms of

generation, according to the American Public Power Association (APPA).

More than 168,000MW of generation capacity was added in the US between 2008-2015 — 42pc of

which was gas, 33pc was wind, 11pc was coal and 8pc was solar.

Gas was the only fuel type for which there were more capacity additions than cancellations during that

period, APPA said.

In addition, gas is expected to fuel the largest share of electricity generation in 2016 at 33pc, topping

coal which historically has been the leading fuel source, according to the US Energy Information

Administration (EIA).

A glut of gas from US shale fields have pushed prices lower, creating more demand for the fuel. Spot gas

prices at the US bench mark Henry Hub averaged at $1.67/mmBtu in March, 40pc lower than a year

earlier. The EIA projects Henry Hub prices in 2016 should average $2.25/mmBtu, down from

$2.61/mmBtu in 2015.

Gas consumption for power generation reached 26.5 Bcf/d (751mn m³/d) in 2015, a year-over-year

increase of 19pc, as electric utilities substituted low-cost gas for coal. The EIA projects power sector gas

consumption this year to reach 27.3 Bcf/d.

US marketed production which peaked last August at 79.8 Bcf/d should average 79.68 Bcf/d this year,

up by about 1pc from 2015. Production should increase by 2.1pc next year, according to the EIA.

Gas-fired generation currently accounts for 42.7pc of the 1.17mn MW US electricity generation capacity

and about 50pc of the 42,205MW generation capacity that is under construction, according to the APPA.

Operators of US coal plants are faced with growing challenges in regulatory pressure from the US

Environmental Protection Agency (EPA)’s mercury and air toxics rule and the Clean Power Plan for

reducing CO2 emissions in the power sector.

Some power plant owners had to implement costly upgrades for emissions controls on coal-fired units

but some plants were retired as the owners analyzed the upgrades would be too costly given increased

competition from gas.

In the past year wind took the top spot in new capacity addition followed by gas.

About 6,152MW of wind generation and 4,972MW of gas-fired generation was added in 2015, while

more than 18,000MW of generation capacity was retired, of which coal accounted for almost 80pc,

according to the APPA.

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