Electricity from Natural Gas 16% Down

by | Apr 12, 2013

The amount of natural gas used to generate electricity this year is significantly lower than last year at this time, when low natural gas prices led to significant displacement of coal by natural gas for power generation, according to figures from the US Energy Information Administration.

By late March, wholesale natural gas prices at the Henry Hub trading center were back to $4 per million British thermal units, a dollar or so higher than a year ago. In response, electricity generators used 16 percent less natural gas this March compared with March 2012. Coal recovered some market share as as result of the natural gas price rise.

During spring 2012, natural gas spot prices fell to historically low levels. This led more natural gas-fired generators to be dispatched ahead of coal-fired generators. As a result, natural gas consumed for power reached multi-year highs for many days throughout 2012, the EIA says.

During the months between the winter heating and summer cooling seasons, which are also known as the “shoulder seasons,” natural gas demand in the electric sector hits a trough. March is the beginning of the shoulder season for much of the country, meaning that natural gas demand for power will likely level out until summer. March 2013 natural gas consumption in the electric power sector averaged almost 3.5 Bcf per day below March 2012, a 16 percent decrease. This lower volume will likely be maintained for the remainder of the shoulder season, and it may indicate a shift back to more coal-fired power generation.

In December, the EIA predicted that the US would become a net exporter of natural gas of liquefied natural gas in 2016, earlier than it predicted a year earlier, and a net exporter of total natural gas in 2020 as American production outstrips domestic consumption.

The continued low prices and resulting high-use of natural gas for electricity generation was one of five trends identified by Forbes in January. When possible, CEOs would choose relatively cheap natural gas over pricey oil, Forbes said.

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