Natural gas-fired generating capacity is expected to rise by 11.2 gigawatts in 2017 and by 25.4 gigawatts in 2018, according to U.S. Energy Information Administration. If the plants start operating as planned, net generation capacity from natural gas would rise to its highest level since 2005. Total natural gas generating capacity would increase 8% by 2018, compared to the end of 2016.
“Depending on the timing and utilization of these plants, the new additions could help natural gas maintain its status as the primary energy source for power generation, even if natural gas prices rise moderately,” according to EIA. The planned capacity expansion comes after five years of net reductions in coal-fired power generating capacity. Coal-fired capacity fell 15% to about 47.2 gigawatts between 2011 and 2016. The electricity industry has retired some coal-fired generators and converted others to run on natural gas as a result of environmental regulations and the low cost of natural gas. According to the most recent data, the cost of natural gas for power generators fell 13% to $2.78 per million British thermal unit, from $3.23 per million Btu in 2015.
Many of the gas-fired plants under construction are in Mid-Atlantic states and Texas, where most of the major natural gas shale plays are located. Production from these shale formations is one of the top reasons natural gas prices have remained low.
The expansion of natural gas pipelines has also led to the increase in natural gas-fired generating capacity.
Natural gas prices are expected to increase this year and in 2018, according to EIA’s Short-Term Energy Outlook. This might lead developers to delay or cancel some of the projects to build the plants. The plants are being built quickly. As of October 2016, construction had yet to start on more than half of the natural gas-fired generation capacity set to start in 2017 and 2018.