4 Major Natural Gas Storylines from 2016

It's no secret that natural gas has been a major driver of the U.S. economy. 

This year saw a number of key developments related to natural gas, including significant growth in natural gas-fired power generation and liquefied natural gas (LNG) exports. 

Here are four of the biggest natural gas storylines from 2016. 

1. Natural Gas Surpasses Coal in U.S. Power Generation

Natural gas continues to play an increasingly important role in U.S. power generation. According to the U.S. Energy Information Administration (EIA), the share of U.S. total utility-scale electricity generation will average around 34 percent for natural gas and 30 percent for coal in 2016. This marks the first time that U.S. natural gas-fired generation has exceeded coal generation on an annual basis. 

Last year, both fuels supplied about one-third of all U.S. electricity generation. As natural gas prices are projected to increase in the next couple years (the Henry Hub natural gas spot price is projected to rise from an average of $2.49 per million British thermal units (MMBtu) in 2016 to $3.27/MMBtu in 2017), natural gas and coal are estimated to generate about 33 percent and 31 percent of electricity in 2017, respectively. 

2. U.S. Natural Gas Production Drops for First-Time in 10+ Years

In 2016, the EIA projects natural gas marketed production will average 77.5 billion cubic feet per day (Bcf/d), a 1.3 Bcf/d decline from 2015, which is the first annual production decrease since 2005. However, production is also expected to rebound slightly in 2017, with forecasted natural gas production increasing by an average of 2.5 Bcf/d from the 2016 level.

3. U.S. Exports Record Level of Liquefied Natural Gas (LNG)

In February, the U.S. made history when it began exporting liquefied natural gas (LNG) from Cheniere Energy's Sabine Pass terminal in Louisiana, which is the first LNG export plant in the lower 48 states. In the first six months of 2016, the U.S. exported nearly 50 billion cubic feet (Bcf) of liquefied natural gas (LNG). 

Now, by the middle of 2017, the EIA estimates the U.S. will be a net exporter of natural gas for the first time since 1955. While LNG exports may not have a significant short-term price impact for customers, the U.S. Department of Energy projects that increased LNG exports will eventually force production – and, in turn, domestic natural gas prices – to rise.

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• Direct Energy Named Electric Retail Supplier Exclusively Contracted by the State of Delaware
• Pennsylvania Saved $800 Million with Electric Choice Last Year
• Winter's Impact on Energy Prices and How to Reduce Risk
• How Alberta's Carbon Levy Will Impact Natural Gas Consumers

4. Solar, Natural Gas Make-Up Majority of Generation Additions 

According to EIA's Electric Power Monthly, electric generating facilities added about 26 gigawatts (GW) of utility-scale generating capacity to the U.S. electricity grid this year. Altogether, solar (9.5 GW) and natural gas (8.0 GW) are expected to lead the way, making up more than two-thirds of total additions. 

Natural gas — which has accounted for most of the capacity additions over the past two decades — is expected to add 8 gigawatts (GW) this year, a slight increase over the five-year average of 7.8 GW. In total, four states are projected to add more than 1 GW of natural gas-fired generating capacity in 2016: Pennsylvania (1.6 GW), Virginia (1.4 GW), Florida (1.3 GW) and Texas (1.1 GW).

For a round-up of the year's other top energy trends, watch our interview with Direct Energy Business president John Schultz.