Shale gas is now dominating the overall gas production in the United States and is forecast to reach an average 91.3 Bcf/d in 2019, up 8.0 Bcf/d from the previous year. The gas glut is expected to push down Henry Hub spot prices to $2.50/MMBtu in the second half of this year and further increase gas-burn in the power sector.
In 2020, the shale gas boom is set to continue with average U.S. output forecast to rise by another 1.4 Bcf per day. This oversupply will be partly absorbed by LNG and pipeline exports, so Henry Hub spot prices are likely to rebound to $2.77/MMBtu in 2020.
Henry Hub spot prices dropped from an average of $2.64/MMBtu in May to an average of $2.40/MMBtu in June, with some daily prices in June falling below $2.30/MMBtu. “The recent price declines reflect relatively mild weather in June that led to lower-than-expected natural gas-fired electricity generation and allowed natural gas inventory injections to outpace the five-year average rate,” reads the latest short-term energy outlook the Energy Information Administration (EIA).
Emissions fall as gas-burn rises
Ample supply of comparatively cheap domestic gas is accelerating the fuel switch in the power sector. The EIA expects total utility-scale electricity generation from gas-fired power plants will rise from 35% in 2018 to 38% in 2019 and then decline slightly in 2020.
Gas-burn of the electric power sector is increasing by 1.1 Bcf/d (3.8%) from 2018 levels as a result of favorable natural gas prices and coal-to-gas switching. Last year, gas-burn surged 14.7% amid substantial additions of new gas-fired capacity.
Coal, in contrast, keeps losing market share down from 24% in 2019, to 23% in 2020, compared with over 27% in 2018. Domestic coal production in the U.S. is seen falling to 684 million short tons (MMst), down 72 MMst or 9% year-on-year. Less coal-burn in the power sector, combined with lower exports, is forecast to make U.S. coal production decline by another 45 MMst, or 7%, in 2020.
Energy-related carbon dioxide (CO2) emissions have fallen as cleaner-burning natural gas gets preferred over thermal coal. After rising by 2.7% last year, power sector emissions are seen to decline by 2.2% in 2019 and by 0.7% in 2020.
Wind, solar gain market share
Non-hydropower renewables – notably wind and solar – together provided 10% of U.S. total utility-scale generation in 2018 and the EIA expects they will provide 11% in 2019 and 13% in 2020.
Meanwhile, hydropower averages a 7% share of total U.S. generation in the forecast for 2019 and 2020, similar to 2018.
Nuclear is retreating, down from 20% market share this year to 19% in 2020, reflecting the retirement of reactors at five nuclear plants.