Renewables Grow But Gas Dominates

The U.S. Energy Information Administration (EIA) just published a Short-Term Energy Outlook (STEO). It forecasts that “rising electricity generation from renewable energy resources such as solar and wind will reduce generation from fossil fuel-fired power plants over the next two years.”

The share of generation for U.S. non-hydropower renewable sources, including solar and wind, is forecast to grow from 13% in 2021 to 17% in 2023. During that same period, the share of natural gas is predicted to fall from 37% in 2021 and to 34% by 2023, and the coal share from 23% to 22%.

“One of the most significant shifts in the mix of U.S. electricity generation over the past 10 years has been the rapid expansion of renewable energy resources,” said Tyler Hodge, a senior economist in the Office of Energy Analysis at the EIA.

The rise of renewables has certainly been meteoric. It now generates 20 times more power than at the end of 2011. Coal’s fall from grace has been even sharper. And with more coal plants being shuttered over the next couple of years, expect coal’s share to plummet below 20% soon.

“We see the retirement of coal continuing to move forward,” said Britt Burt VP of Research Power for Industrial Info Resources. “Since 2012 there has been more than 107 GW of coal fired capacity retired in the U.S., and we are tracking an additional 67 GW of coal-fired capacity scheduled for retirement from 2022-2030, according to Industrial Info’s Global Market Intelligence. During that same time period 2022-2030 there is more than 200 GW of solar and wind capacity scheduled for construction starts with more to come.”

Solar is the big winner. The grid had 63 GW of solar power generating capacity (not output) operating at the end of 2021. The forecast is for capacity to jump by 21 GW in 2022 and 25 GW in 2023. Further, 7 GW of wind generating capacity will be added in 2022 and another 4 GW in 2023. Operating wind capacity totaled 135 GW at the end of 2021.

Natural Gas Contention

The tone of the EIA release overall is one of hopeful optimism that natural gas is falling off the cliff in the same way as coal. Yes, there will be reduced need for fossil-fueled generation over the next two years. But the decline will be felt primarily in the coal sector.

Hodge pointed out that natural gas prices surged to an average of $4.88 per million British thermal units in 2021, more than double the average cost in 2020. That is probably the dominant factor in drop from 39% in 2020 to 37% at the end of 2021. That prompted a slight uptick in coal generation to 23%. Unless natural gas prices remain high, coal will soon falter and natural gas will probably regain that lost ground.

Hodge has a different take.

“Although we expect natural gas prices for electric generators to decline, the operating costs of renewable generators will continue to be generally lower than natural gas-fired units,” he said. “We expect that regions of the country with the largest increases in renewable capacity, such as Texas and the Midwest/Central regions, will experience the largest reductions in natural gas generation.”

Certainly, renewable generation should continue to rise steadily for the rest of the decade. But natural gas remains the top source of power in the nation. It is unlikely to relinquish that position for at least through 2030, and probably longer.

“There is over 64 GW of natural gas fired capacity that has the potential to start construction for the remainder of this decade,” said Burt. “This has the potential to increase unless battery storage to support renewable energy is built in a rapid fashion. Another constraint to the build out of renewable energy is the lack of transmission infrastructure to support it.”