EIA: Gas Use for Power Generation in U.S. Lower than Last Year

Total natural gas use for power generation in the United States was down 14% during the first seven months of 2013 compared to the same period in 2012, mostly because of higher natural gas prices relative to coal prices. High natural gas-fired generation in 2012 occurred as a result of the lowest spot natural gas prices in a decade—in fact, the two fuels contributed approximately equal shares of total generation in April 2012. Despite lower gas use for generation thus far in 2013, natural gas generation remains consistently higher than levels before 2012.

Trends in natural gas use for power vary by region because of differences in the availability of generating plants, generating plant age and efficiency, and the relative cost of fuels to operate power plants. While natural gas prices in most parts of North America are fairly uniform, the availability and cost of coal varies more by region. In addition, coal transport costs can reflect a high portion of the overall cost of delivered fuel. In some regions, such as the Southeast and Mid-Atlantic, natural gas use for power is significantly lower in 2013. This larger drop is because natural gas made greater inroads in 2012 compared to regions like Texas where low natural gas prices in 2012 did not displace nearly as much coal-fired generation. Fuel competition is less intense in parts of the country where coal fuels a very small portion of the generation or where the delivered coal price is extremely low, resulting in relatively greater coal consumption.

The analyses show both national and regional trends in natural gas use for power by comparing generation to average daily temperatures. Isolating the influence of weather on natural gas use for power generation allows other factors, such as the price of natural gas relative to coal discussed above, to be more readily apparent.

Unlike types of coal used in the Northeast, Southeast, and Midwest regions, the coal mix in Texas consists of significantly cheaper varieties, including locally mined low-grade lignite, as well as larger volumes of Powder River Basin (PRB) and Uinta Basin coal. Coal from these basins is significantly less expensive than coal from other U.S. supply sources and has lower transport costs compared with the costs of longer haul deliveries to the Mid-Atlantic and Southeast.

Compared with other regions in the United States, natural gas use for power generation has not fallen as much in 2013 compared to 2012. As gas prices increased between April 2012 and April 2013, gas-fired power did not decline significantly in 2013 below 2012 levels, since it was not competing with that region’s relatively lower-cost coal-fired generation to the same degree as in other regions.

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Source: EIA, September 25, 2013