Natural gas-fired power production likely peaked in 2020 and will gradually be driven lower by higher gas prices and competition from growing amounts of wind and solar capacity, according to the Institute for Energy Economics and Finance, a nonprofit group that supports moving away from fossil fuels.
Any increased U.S. liquefied natural gas exports to help Europe shift away from Russian purchases would put upward pressure on domestic gas prices, making renewable energy in the U.S. even more competitive compared with gas-fired generation, Seth Feaster, IEEFA energy data analyst, said Tuesday during a webinar on the organization's U.S. 2022 Power Sector Outlook.
However, IEEFA doesn't expect the conflict in Ukraine will in any "significant degree" affect the long-term transition toward renewable energy and battery storage in the U.S. power sector, according to Dennis Wamsted, an editor and energy analyst with IEEFA.
IEEFA expects wind, solar and hydroelectric generation will make up a third of U.S. power production by 2027, up from about 19% in December, according to its report. "The transition has just started," Wamsted said. "We do believe that the takeoff is right now."
The recent increase in gas prices and concerns about methane emissions from gas production and distribution are adding to the challenges facing gas-fired generation, which hit a record high in 2020 of 1.47 billion MWh, according to IEEFA.
"The soaring cost of fossil fuels and unexpected disruptions in energy security are now supercharging what was already a torrid pace of growth in solar, wind and battery storage projects," IEEFA said in the report.
The utility sector is speeding up its exit from coal-fired generation, Wamsted said, pointing to recently announced plans by Georgia Power, the Tennessee Valley Authority and Duke Energy to retire their coal fleets by 2035.
Since the U.S. coal fleet peaked in 2012 at 317 GW, about 100 GW has retired and another 100 GW is set to shutter by the end of this decade, partly driven by federal coal ash and water discharge regulations, according to Wamsted.
About three-quarters of the generation expected to come online in the next three years is wind, solar and batteries, IEEFA estimated, based on Energy Information Administration data.
At least 19,000 MW of offshore wind is under development along the East Coast, with about half of the capacity slated to be online by 2028, according to IEEFA. That capacity will displace fossil-fueled generation in the eastern power markets run by ISO New England, New York Independent System Operator and the PJM Interconnection, Wamsted said.
Some of IEEFA's findings were echoed by the EIA's short-term energy outlook issued Tuesday.
The agency expects the share of U.S. electricity generation from wind and solar farms will grow to 22% this year and to 23% in 2023, up from 20% last year. Driven by the expected increase in renewable generation, gas-fired generation falls to 35% of U.S. power production this year and in 2023, down from a 37% share in 2021.
"Although new natural gas-fired power generating units are scheduled to come online in 2022, they are likely to be run at lower utilization rates than in recent years," the EIA said.
The EIA also expects increased renewable energy production will push coal-fired generation down to 21% next year from 23% this year and in 2021.
Reflecting expectations for increased LNG exports to Europe, the EIA forecast Henry Hub Natural Gas prices to average $5.23 per million British thermal units this year, a $1.28/MMBtu increase from an estimate issued last month.
The U.S. will export 12.2 billion cubic feet per day of LNG this year, up 25% from 2021, according to the EIA's estimate.
In another change from earlier estimates, the EIA now expects 20 GW of solar to come online this year, down 9% from its estimate in March. Some solar projects have been delayed into next year when the agency expects 24 GW to start operating.