Natural gas will increase its market share as a baseload fuel source for US power generation to 32% by 2017 from an average 23% over the last five years, Bentek Energy said Thursday.
Meanwhile, coal's market share is projected at 38% in 2017, from 44% in 2011, Bentek said.
This shift will kickstart a new symbiotic gas cycle in which gas supply and demand growth are more codependent and correlated, Bentek, a unit of Platts, said in a report.
"Ample and still-growing gas-fired generation capacity, regulatory uncertainty, abundant gas production, record-high storage inventories, sufficient gas pipeline transportation and competitive gas prices all contributed to these changes," Bentek said. "This new market cycle will be marked by increased price responsiveness by gas producers and the power industry, greater price volatility, infrastructure expansions, and greater integration of the gas and electricity grids."
This year, gas-fired generation climbed 20%, or 186 million MWh/year, throughout the US and Bentek forecasts that will increase another 15%, or 170 million MWh/year, by 2017. This will arrive at the expense of coal, whose power generation market share fell 9%, or 159 million MWh/year, this year and is projected to remain nearly flat through 2017.
Total US gas burn for power will climb another 4 Bcf/d over the next five years, from a record high of 25.1 Bcf/d this year to 29 Bcf/d in 2017, the report posits, Bentek said. And gas displacement of coal in generation will triple over the next five years, averaging 7.8 Bcf/d by 2017 compared to an average 2.6 Bcf/d over the past five years, it said.
"This incremental demand will test gas pipeline infrastructure and amplify constraints in some regions, contributing to volatility in gas flows and prides," Bentek said.
Overall gas power plant capacity is expected to increase by nearly 40,000 MW by 2017, Bentek said. Some 36% of this new capacity is under construction and more than 50% is located in the eastern US. Meanwhile, a net 16,000 MW of coal plant capacity will be retired nationally during the same time frame, it said. More than 18,000 MW of that retiring capacity will be in the East, but will be offset by about 4,000 MW of new coal capacity coming online in the Rockies and Midcontinent producing regions.
"Increasing reliance on gas for power, however, will result in some new power market challenges, including the need for better integration of the gas and power markets, improved scheduling methods and competition between heating and cooling load," Bentek cautioned.
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