The mix of energy sources used for producing electricity generation continues to shift in response to changes in fuel costs and the development of renewable energy technologies. Since 2015, the cost of natural gas delivered to electric generators has generally averaged $3.50 per million British thermal units (Btu) or less, and it is expected to remain near this level through 2019.
EIA expects the cost of natural gas for electricity generation to remain relatively competitive with coal-fired electricity over the next two years. The average cost of natural gas delivered to generators in 2018 is forecast to fall 2%, while the forecast delivered cost of coal rises 5%. These relative price changes should increase the share of natural gas generation in 2018. The costs of both natural gas and coal in 2019 are expected to remain relatively unchanged from this year’s forecast prices.Power plant operators are scheduled to bring 20 gigawatts (GW) of new natural-gas fired generating capacity online in 2018, which, if realized, would be the largest increase in natural gas capacity since 2004. Almost 6 GW of the capacity additions are being built in Pennsylvania, and more than 2 GW are being built in Texas. In contrast, about 13 GW of coal-fired capacity are scheduled to be retired in 2018. These changes in the generating capacity mix contribute to the continuing switch from coal to natural gas, especially in southern and midwestern states.
Compared with the rest of the country, the use of natural gas for electricity generation is not expected to increase as much in the West, where natural gas largely competes with hydropower. EIA expects the natural gas generation share in the West region to rise from 27% in 2017 to 29% in 2018, primarily as a result of a decline of the region’s hydropower generation share, which is expected to fall from 26% in 2017 to 23% in 2018. In 2017, hydropower generation in the West benefitted from atypically wet conditions.
Principal contributor: Tyler Hodge