Renewable Energy to Reduce Electricity Generation from Natural Gas

In the EIA’s January Short-Term Energy Outlook (STEO), it is forecasted that rising electricity generation from renewable energy resources such as solar and wind will reduce generation from fossil fuel-fired power plants over the next two years. The forecast share of generation for US non-hydropower renewable sources, including solar and wind, grows from 13% in 2021 to 17% in 2023. It is forecasted that the share of generation from natural gas will fall from 37% in 2021 to 34% by 2023 and the coal share will decline from 23% to 22%.
One of the most significant shifts in the mix of US electricity generation over the past 10 years has been the rapid expansion of renewable energy resources, especially solar and wind. The amount of solar power generating capacity operated by the US electric power sector at the end of 2021 is 20 times more than it was at the end of 2011, and US wind power capacity is more than twice what it was 10 years ago.
Another significant shift in the generation mix has been a steady decline in the use of coal-fired power plants since their peak output in 2007 and the increasing use of natural gas, primarily as a result of sustained low natural gas prices. However, that trend reversed in 2021 when the cost of natural gas delivered to US electric generators averaged US$4.88 per million Btu, more than double the average cost in 2020. As a result, the share of generation from natural gas declined from 39% in 2020 to 37% in 2021, while the share of generation from coal rose for the first time since 2014 to average 23%.
In the EIA’s current STEO, it is forecasted that most of the growth in US electricity generation in 2022 and 2023 will come from new renewable energy sources. It is estimated that the electric power sector had 63 GW of existing solar power generating capacity operating at the end of 2021, and it is forecast that solar capacity will grow by about 21 GW in 2022 and by 25 GW in 2023. It is expected that 7 GW of wind generating capacity will be added in 2022 and another 4 GW in 2023. Operating wind capacity totalled 135 GW at the end of 2021.
This forecast of growth in renewable electricity generation over the next two years leads to a forecast of a reduced need for fossil-fuelled generation. Although it is expected that natural gas prices for electric generators will decline, the operating costs of renewable generators will continue to be generally lower than natural gas-fired units. Regions of the country with the largest increases in renewable capacity, such as Texas and the Midwest/Central regions, will experience the largest reductions in natural gas generation.

About Parvin Faghfouri Azar

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