With coal being minimized in the energy mix, renewables and natural gas will be left to challenge each other for the market share in the immediate future, according to a report released by Drillinginfo this week.
The report, which takes into account historical data as it relates to the time of year, weather and traditional power use, shows how natural gas has made significant gains in recent years. But the report predicts that a significant shift could be coming in the next five years as more wind and solar projects are anticipated to come online.
“While no one can predict the future—or the weather—our modeling is projecting a glimpse of how renewables will affect power burn in the U.S.,” said Rob McBride, senior director of market intelligence, Drillinginfo. “From forecasting out a year in advance to next-day load forecasts, we’re finding utility operators, power marketers and other power buyers are tapping machine learning technology to obtain accurate, actionable information. When it comes to load forecasting, accuracy matters.”
While the report analyzes energy demand across all regions during the summer and energy months, the summer months represent the critical usage period because solar and wind are most active during those times which can create price sensitivity. There are no substitutes for winter heating demand from the residential and commercial sectors like there are for summer cooling, which makes prices insensitive during the cold months.
Natural gas demand makes up a larger share of total domestic gas demand in the summer months compared to winter. According to the report, the power burn represented 49% of the total gas demand consumed in the United States last summer.
Grid operators can respond to changes in pricing of fuels by substituting coal and gas for each other in the current market share. But due to changes infrastructure, the share of total power generation because of gas has been growing over the past several years, according to the report. There are more power plant fleets fueled by gas and then there is additional gas transport capacity.
Demand for power during May through August of this year is expected to average 35.2 billion cubic feet per day (Bcf/d). Anticipated warmer weather, similar to the summer of 2011, will cause gas demand power burn to surpass 2018 and hit 36.5 Bcf/d.
But that trend toward natural gas will shift some as the battle with renewables heat up with more wind and solar projects coming online in 2020 and 2021. Natural gas demand could be displaced by 1.2 to 1.4 Bcf/d if all of the anticipated renewable projects come online and run at 100% capacity.
The bulk of renewable projects are scheduled to come online fall between 2019 and 2021. But the shift could swing back in the favor of natural gas demand for power burn with fewer renewable slated to come online from 2022 to 2024.
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