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Natural Gas Projected to Top Coal in Power Generation in 2016

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This year stands to be a pivotal year for natural gas-fired generation. 

Earlier this week, the U.S. Energy Information Administration (EIA) reported that annual natural gas-fired power generation will top coal for the first time ever.  

Natural gas is expected to make up 33 percent of U.S. electricity generation as coal falls to 32 percent in 2016. Last year, coal and natural gas both provided about one-third of all electricity generation. 

The chart below helps highlight the growth in natural-gas fired generation by year.  

Source: U.S. Energy Information Administration, Monthly Energy Review and Short-Term Energy Outlook (March 2016)

What factors have led to the increase in the share of natural gas-fired generation? 

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 natural gas use in power generation. Coal plant retirements and growing capacity additions for natural gas have also played significant roles. 

The EIA's Short-Term Energy Outlook expects natural gas prices will increase in the next two years, translating to a slight decrease in natural gas-fired power generation, but remaining near record levels. 

You can read the EIA's full article here. To learn about other important natural gas and electricity trends, please watch the Weekly Energy Market Update

Posted: March 18, 2016