EIA projects rising electricity demand and natural gas price to shift US electricity fuel mix

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The U.S. Energy Information Administration (EIA) has projected significant changes in the country’s electricity generation mix for the remainder of 2024. According to the EIA’s July Short-Term Energy Outlook (STEO), rising electricity demand and natural gas prices will drive an increase in electricity generation from renewables and coal.

In the report, the EIA anticipates that natural gas prices will surge by approximately 36 percent in the second half of 2024 compared to the first half. This price hike is expected to lead to a reduction in electricity generation from natural gas, currently the largest fuel source for U.S. electricity.

Electricity demand is projected to grow by about 2 percent in the second half of 2024 compared to the same period in 2023. To meet this increased demand, renewables and coal will need to supply more power.

“The increase in electricity demand paired with a decrease in natural gas generation creates a gap between the power we need and the power being produced,” stated EIA Administrator Joe DeCarolis.

EIA says utilities will look for more economical alternatives as natural gas prices rise. With substantial renewable capacity added in recent years, EIA expects renewables — especially solar — to fill most of the gap in the power mix. Utilities will turn to coal as a less expensive fuel source for the rest of the year.

The EIA forecasts a 42 percent increase in electricity generation from solar in the second half of 2024 compared to the same period in 2023. Wind generation is expected to rise by 6 percent, hydropower by 3 percent, and coal by 3 percent during the same timeframe.

The hotter-than-normal start to the year led to a 5 percent increase in U.S. electricity generation in the first half of 2024 compared to the first half of 2023, driven by higher air-conditioning use due to increased temperatures. For the second half of the year, the EIA expects about 2 percent growth in electricity generation, with commercial sector demand, including data centers, being a significant factor. This growth will be moderated by temperatures that are predicted to remain relatively stable compared to the latter half of the previous year.

Additional Highlights from the July STEO:

Crude Oil Prices: The EIA forecasts that Brent crude oil prices will average $89 per barrel in the second half of 2024 and $91 in the first quarter of 2025, up from an average of $84 per barrel in the first half of the year. This increase is attributed to declining global crude oil supplies coupled with rising global consumption of liquid fuels.

Household Gasoline Expenditures: The EIA projects that U.S. households will spend an average of about 2.3 percent of their disposable income on gasoline in 2024 and 2.2 percent in 2025. Improved vehicle efficiency and rising household income are expected to offset the forecasted increases in gasoline prices and consumption.

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