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Natural Gas-Fired Generation Topped Coal in This Key Metric Last Year

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Natural gas continues to play a growing role in U.S. power generation. 

Last week, the U.S. Energy Information Administration (EIA) reported that the average capacity factor for natural gas combined-cycle power plants topped coal steam plants for the first time ever in 2015. Last year, the average capacity factor for U.S. natural gas combined-cycle plants hit 56 percent, narrowly edging out the 55 percent for coal steam power plants.

"Capacity factor" simply refers to the operating intensity of a generating unit or fleet. For example, a capacity factor near 100 percent indicates that the unit is operating almost around the clock and close to its maximum possible output.

The table below highlights the average capacity factors for coal steam and natural gas combined-cycle generators over the past decade. 

Source: U.S. Energy Information Administration, Electric Power Monthly

Combined cycle plants — which are essentially an efficient hybrid of combustion and steam turbine technologies — served the lion's share of natural gas-fired generation last year. While capacity factors can vary significantly from plant to plant, the average capacity factor of the U.S. natural gas combined-cycle fleet has grown steadily from 35 percent in 2005 to more than 56 percent in 2015. Conversely, the average capacity factor for coal steam plants — the primary type of coal generating unit — has dropped nearly 13 percent since 2005. 

What has contributed to the increased utilization of natural gas combined-cycle plants? 

Low natural gas prices — spot natural gas prices at the Henry Hub in Louisiana recently hit the lowest annual average level since 1999 — have been the primary driver. With the decline of natural gas prices, power plant operators have found it more cost-effective to run combined-cycle units at higher levels.

Looking ahead, natural gas-fired generation is expected to maintain its growing role in the U.S. power generation mix, with combined-cycle plants playing an important role in added capacity and meeting U.S. electricity demand in 2016. While the EIA's Short-Term Energy Outlook expects natural gas prices to rebound in the next two years, natural gas-fired generation is expected to remain near record levels.

You can read the EIA's full report here. To learn how your business can potentially take advantage of low natural gas prices, please visit our GasPortfolio page

Posted: April 13, 2016