EIA: natural gas usage for power generation falls in 2013

For the first eleven months of this year, natural gas consumption in the electric power sector was below 2012 levels because of relatively higher natural gas prices compared with coal prices, and cooler summer weather compared with 2012.

The U.S. Energy Information Administration, in its Dec. 4 Today in Energy installment, said it estimates that electric power sector natural gas consumption was, on average, down by 13% in the January-December 2013 period, relative to the same time period in 2012. By contrast, industrial sector natural gas consumption in 2013 was up 3% compared with 2012.

Changes in electric power sector consumption of natural gas are primarily attributable to higher gas prices this year, against historic low prices in 2012, particularly in the early part of last year. For the first eleven months of 2012, the benchmark natural gas spot price at the Henry Hub averaged $2.70/MMBtu. For the same months in 2013, the average Henry Hub price was $3.68/MMBtu, which had the effect of lowering electric-sector demand for natural gas. Accordingly, natural gas lost some of its electric-sector market share to coal in 2013, but it is still being consumed at rates generally above the 2007-2011 range.

Because natural gas and coal are the primary fuels used to generate electricity in the United States, the decline in gas prices delivered to electricity generators (from an average level of $8.87/MMBtu in 2008 to $3.43/MMBtu in 2012 and $4.37/MMBtu for the first eleven months of 2013) and the increased role of natural gas in electric generation are applying downward pressure on coal prices, EIA noted.

In addition to less gas being consumed in 2013 versus 2012 because of the price effects, there has been an overall reduction in cooling degree days (CDDs) this year, meaning less power demand for air conditioning load. July and August, which are typically the hottest months, both saw substantially fewer CDDs in 2013 than in 2012. This cooler weather further reduced electric-sector demand for natural gas compared with last year. As a percentage of total natural gas end-use consumption across all sectors, the electric sector has accounted for 35% so far in 2013 (through November), down from 40% in the same months of 2012.

Industrial consumption of natural gas has been increasing in recent years. Continuing the trend from earlier in the year, industrial gas consumption was up 0.6 billion cubic feet per day (Bcf/d), or 3%, through November 2013, compared with the same months in 2012. Nearly all facilities with the ability to switch from oil to natural gas as a fuel or feedstock made this change before 2011, given the large cost advantage of natural gas.

At the same time, lower natural gas prices in the U.S. relative to those in Japan and Europe have made U.S. energy-intensive industries more competitive globally, allowing them to capture a larger share of global markets. New industrial demand for natural gas is expected to continue to grow as additional manufacturing capacity in gas-intensive industries comes into operation, EIA added.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.