Natural gas generation capacity additions likely to reach 13-year high in 2018

The U.S. Energy Information Administration (EIA) recently found that, if new plants go online as planned, annual net additions in natural gas generation capacity in 2018 would be at their highest since 2005.

According to the information reported to EIA, the electricity industry plans to increase natural gas-fired generation capacity by 11.2 gigawatts (GW) in 2017 and 25.4 GW in 2018. These additions would lead to an 8 percent capacity increase over 2016 levels.

The expansion follows five years of net reductions in coal-fired electricity generation capacity. Coal-fired capacity fell by approximately 47.2 GW between the end of 2011 and the end of 2016, which represents a 15 percent drop in electricity generation from coal.

While some of these coal plants have been retired, others have been converted to natural gas facilities. The cost of natural gas delivered to power generators was reduced from an average price of $5.00 per million Btu (MMBtu) in 2014 to $3.23/MMBtu in 2015 and averaged $2.78/MMBtu from January through October 2016.

Construction timelines for natural gas plants are relatively short, with more than half of the plants scheduled to begin operation in 2017 and 2018 were not yet under construction in October 2016.

By 2018, expansion of natural gas capacity is predicted to offset potential cost increases and possible reduced utilization, leading to a slight increase in natural gas’ share of the U.S. electricity generation mix. Natural gas is expected to be the most used source at 33 percent of the total mix, slightly ahead of coal’s 32 percent.