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EIA: Clean Power Plan Will Drive Growth in Natural Gas, Renewables

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What impact will the Clean Power Plan have on U.S. power generation?

That question was recently tackled by the U.S. Energy Information Administration (EIA) in its 2016 Annual Energy Outlook. In the analysis, the EIA projects that – under the Clean Power Plan – natural gas-fired electricity generation will exceed coal-fired electricity generation by 2022 and renewables — largely driven by wind and solar — will displace coal-fired generation by 2029.

The chart below illustrates current U.S. net electricity generation and two future scenarios: with and without the Clean Power Plan. 

Source: U.S. Energy Information Administration, Annual Energy Outlook 2016

It's important to note that natural gas-fired generation has already topped coal's share in 2016. However, the reference case estimates that natural gas-fired generation will decrease after this year, rise again around 2020 and exceed coal-fired generation permanently beginning in 2022. Low natural gas prices — in 2015, spot natural gas prices at the Henry Hub in Louisiana hit the lowest annual average level since 1999 — have been the predominant driver of increased natural gas usage in power generation. Coal plant retirements and growing capacity additions for natural gas have also played significant roles. 

With renewables generation, significant growth is projected with or without the Clean Power Plan, thanks in large part to Congress's recent extension of investment and production tax credits. Indeed, solar was already two-thirds of all new generating capacity in the first quarter of this year. Without the Clean Power Plan, the EIA projects that renewables will increase at an annual average rate of 3.9 percent and natural gas at 0.6 percent each year. With the Clean Power Plan, renewables and natural-gas fired generation will grow 4.7 percent and 1.6 percent annually from 2015 to 2030. 

The increased use of natural gas and renewables in power generation can have a significant impact on prices. Learn how to get the most out of your business’s natural gas spend.

Posted: June 21, 2016