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U.S. Renewables Capacity Growing, but Natural Gas Still King
While solar and wind capacity are on the rise in the United States, natural gas-fired generation remains far and away the main source of power for electric operators across the nation, according to the U.S. Energy Information Administration (EIA).*
The agency said in a recent report that 2023 may continue the trend of “one of the most significant shifts in the mix of U.S. electricity generation” seen over the last few years with the “rapid expansion” of solar and wind.
In its latest Short-Term Energy Outlook (STEO), EIA noted that the total share of U.S. renewables is forecast to increase to 24% in 2023 from 21% in 2022, with about “two-thirds of this forecast increase in renewables generation” the result of utility-scale solar capacity coming online. A majority of the rest would come from new wind projects.
In 2018, combined wind and solar generation made up about 8% of total generation. By the end of 2023, new renewable generation additions could mean the energy’s share in the U.S. generation mix would have doubled in five years, reaching 16% of total generation capacity.
The agency said data it receives on planned additions to wind generation capacity point to growth slowing in 2023 compared with recent years.
From 2017-2022, U.S. wind generation grew by more than 60% to reach 143 GW, an average annual increase of about 12%. For 2023, EIA is forecasting an 11% year/year increase in new capacity, or another 12 GW.
Solar additions, on the other hand, are seen jumping by two percentage points from 2022-2023, EIA said. The U.S. electric power sector currently operates roughly 74 GW of solar capacity, or about 3% of the total generation capacity. Moving forward, that figure may surge 84% to 137 GW by the end of 2024.
The increase in solar capacity “is consistent with its declining construction costs and favorable tax credits,” the agency noted.
What’s more, California and Texas, “where natural gas has been the primary source of electricity,” are leading the growth in solar capacity additions, EIA said.
That said, renewables taking a chunk of electricity generation from natural gas, as well as a forecast drop in overall electricity demand in 2023, may result in a decline in natural gas generation.
The agency’s STEO projected natural gas generation declines from 39% in 2022 to 38% this year, followed by another single percentage point drop in 2024.
Coal-fired generation, on the other hand, could sink below 20% in 2023, falling two percentage points year/year to 18% in 2023 “as lower natural gas fuel costs make coal a less competitive source for energy,” EIA said.
The agency said that natural gas prices could somewhat stabilize after volatile price swings in 2022 amid the European energy crisis and a fire at the Freeport liquefied natural gas export terminal.
The latest available EIA data pins the cost for natural gas in the electric power sector dropping to an estimated $5.212 in 2023 from $6.998/MMBtu in 2022. The average price the sector may pay for coal, on the other hand, is expected to marginally increase from $2.356 in 2022 to $2.475.
Earlier this year, EIA noted that this year’s disruptions among U.S. railroads, the main method of delivery for coal, added another roadblock for generators’ ability to replenish stocks. Combined with decreasing coal inventories, coal inventories at power plants in the first seven months of 2022 averaged 23% lower than 2021.
The agency noted that in spite of higher natural gas prices last year, the electric power sector did not face away from the fuel as coal-fired plants had “not been receiving enough coal to meet demand.”
*The headline and lead paragraph of this story were revised to make clear that while the percentage of growth in renewables capacity is higher, natural gas remains the leading source of power for electric generators. NGI regrets the error.
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