If all the new natural gas-fired power plants planned for this year and next come online, gas-fired generating capacity could reach its highest level since 2005, the Energy Information Administration (EIA) said Monday in a Today in Energy note.
The agency said the power sector plans to increase gas-fired generating capacity across the country by 11.2 GW in 2017 and by 25.4 GW in 2018 for a combined increase of 8% from year-end 2016. Even if natural gas prices rise moderately during that time, the planned additions could help gas maintain its status as the nation’s primary source of electricity.
EIA said many of the new plants are currently under construction in Texas and Mid-Atlantic states — including Ohio and Pennsylvania. A rush is on to build more gas-fired power generation in the PJM Interconnection market in particular. One of the greatest pushes is underway in the Appalachian Basin, where cheap shale gas has prompted developers to make plans for dozens of new plants in Ohio, Pennsylvania and West Virginia. More than 100 facilities are planned and scheduled to come online through 2021 across a broad swath of the PJM market.
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Most capacity additions over the last 20 years have been gas-fired units, and the trend has intensified in recent years. Tighter environmental regulations and an abundance of shale gas has led to more coal-fired power plant retirements or coal-to-gas switching. Available coal-fired capacity fell by 15%, or an estimated 47.2 GW between 2011 and 2016, the EIA said. Moreover, the agency said the cost of natural gas delivered to power generators fell from an average price of $5/MMBtu in 2014 to $3.23/MMBtu in 2015, and averaged $2.78/MMBtu from January to October — the latest data available.
EIA’s Short-Term Energy Outlook (STEO), however, anticipates rising natural gas prices during 2017 and 2018. The increases, EIA said, could lead developers to postpone or cancel some of the gas-fired power additions. Firming prices could also encourage power generators to reduce the amount of natural gas they use. Despite the planned additions, the STEO forecasts that natural gas’ share of U.S. electricity generation could fall from 34% in 2016 to 32% this year, whereas coal’s share could rise from 30% to 32%.
Even still, the EIA said that if the scheduled gas-fired expansions come online they could “more than offset” higher prices and reduced utilization, which would result in a slight increase of natural gas for electricity generation by 2018.
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