Changing power generation mix will drive natural gas demand in 2015 and beyond, firm says

Bernstein Research said Jan. 22 that it expects utility natural gas consumption to rise by an estimated 3.6 Bcf/day in 2015, equivalent to roughly 5% of estimated 2014 domestic gas production.

The surge is largely due to the shifting fuel mix in the U.S. power generation industry. This was part of a document authored by several Bernstein officials, including Senior Analysts Hugh Wynne and Bob Brackett.

The research firm expects to see more switching from coal to natural gas at U.S. power plants in 2015 due to lower gas prices and the EPA’s Mercury and Air Toxics Standards (MATS) come into effect on April 16.

“Through the end of the decade, we expect utility gas consumption to rise by an estimated 5.6 Bcf/day or ~8% of estimated U.S. natural gas production in 2014, even in the absence of CO2 regulations,” Bernstein said in the report. “If the EPA’s proposed CO2 regulations come into effect as scheduled over 2016-2018, the aggregate increase in utility gas burn through the end of the decade could rise to 12.8 Bcf/day or ~18.5% of estimated U.S. natural gas production in 2014.”

The EPA MATS regime will force a wave of coal unit retirements, the firm said. The MATS rule could drive about 46 GW of coal plant retirements from 2015 through 2020, according to Bernstein.

In addition to MATS, EPA’s pending Clean Power Plan to reduce CO2 from existing power plants by 30% “could drive a huge shift from coal to gas fired generation in the final years of the decade,” Bernstein said.

Energy Information Administration (EIA) forecasts put annual load growth at 1.2% over the next several years. In addition, the rapid growth of renewable generation could further suppress utility consumption of fossil fuels, Bernstein said.

Bernstein Research is affiliated with Sanford C. Bernstein.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.