Natural gas demand for U.S. electricity generation this coming winter is likely to look a lot like it did this past winter, 2.5-2.6 Tcf, a top official in the U.S. Energy Information Administration (EIA) told the LDC Gas Forums mid-continent meeting Tuesday in Chicago.
In addition, a lot of coal-fired generation will still be around, said EIA Deputy Administrator Howard Gruenspecht, who is an economist. How much of that coal-fired generation capacity gets used will depend on natural gas prices, he said. Projections on prices this winter are shrouded in uncertainty.
"We're again expecting the power burn to run between 2.5 Tcf and 2.6 Tcf of gas for the period of December this year through March 2013," he said. "There is about 500 Bcf going to generation that could switch back to coal should natural gas prices start to rise above our expectations."
Gruenspecht noted that earlier this year, the power burn was running more than 24 Bcf/d of gas to generate electricity. "If you apply that rate to the December 2012 to March 2013 period you could increase the amounts of gas for power generation by 600 Bcf above the current projection levels." The 24 Bcf/d statistic was from April -- a shoulder month -- so if it is extrapolated to the winter months of higher demand it could drive the gas power burn above expectations, he said.
Providing more "quantitative" basis for gas pricing uncertainties is becoming an increasingly bigger challenge for EIA, particularly for its constituents on Capitol Hill, said Gruenspecht. He noted that for a long time his agency has been using the value of futures contracts to assemble gas price range estimates.
"We're now expecting over the course of this year for the Henry Hub natural gas price to average about $2.65 and the average to move up to $3.34 next year," Gruenspecht said. "There is a lot of uncertainty about natural gas prices, in September we are looking at a future contract price ranges from $2.30/MMBtu to almost $4.70/MMBtu." Congressional staff people are uncomfortable with this uncertainty, but "it is what it is."
In terms of overall energy demand, Gruenspecht said EIA has more certainty. Demand is expected to grow slowly nationwide and it will not be "until the middle of the next decade" before the nation gets back to pre-recessionary 2007 demand levels.
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