Consumption of natural gas by U.S. power generators fell by 3% year/year in 2021 after four straight years of growth, the Energy Information Administration (EIA) said Monday.
“High natural gas prices in 2021 made natural gas a less competitive fuel, particularly compared with coal; coal prices for electricity generators remained relatively stable in 2021,” said EIA researchers led by Kristen Tsai.
Wholesale spot prices at the Henry Hub in Louisiana nearly doubled from 2020 to 2021, driven by surging LNG export demand, researchers noted.
“U.S. natural gas prices rose throughout 2021 because of tighter supply and demand balances, low inventories, and weather-related consumption limitations and production outages,” the EIA team said. “High natural gas prices in global markets also encouraged natural gas exports. In 2021, the United States exported 30% more natural gas compared with 2020.”
Researchers highlighted that gas-fired generation capacity “has continued to increase with the ongoing retirement of coal-fired generation capacity. Despite relatively high natural gas prices, natural gas accounted for 37% of all power generation in 2021, nearly equal to the combined shares of coal and nuclear (the next two largest sources).”
They added, “Historically low coal inventories at power plants limited coal-fired electricity generation in summer and early fall, which, in turn, could have also pushed natural gas prices higher.”
This year, meanwhile, EIA expects gas-fired generation to rebound by 5% “because of constraints in alternative sources of generation, which is partly the result of rapidly rising coal prices,” researchers said, citing the agency’s latest Short-Term Energy Outlook. “We expect total U.S. natural gas consumption to rise by about 5% in 2022, a result of more natural gas consumption across almost all sectors.”
U.S. gas consumption as a whole averaged 83 Bcf/d in 2021, down from a 2019 peak of 85.3 Bcf/d, researchers said. The 2021 figure was down by about 500 MMcf/d versus 2020, with the decline driven by the power sector.
“U.S. natural gas consumption rose slightly or remained flat in all other key sectors,” the EIA team said. “In 2021, consumption by both the commercial and industrial sectors rose by 0.2 Bcf/d, and residential natural gas consumption remained flat.”
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