Natural gas power production capacity jumped nearly one-fifth last year, and the vast majority of these new gas-fired plants have—unsurprisingly—sprung up in and around America’s most productive shale formations. The EIA reports:
Natural gas-fired power generation increased 19% in 2015, because of low natural gas prices, increased gas-fired generation capacity, and coal power plant retirements. EIA’s May 2016 Short-Term Energy Outlook forecasts that this year, natural gas-fired generation will exceed coal generation in the United States on an annual basis.
Growth in natural gas-fired generation capacity is expected to continue over the next several years, as 18.7 gigawatts (GW) of new capacity comes online between 2016 and 2018. Many of the new natural gas-fired capacity additions in development are near major shale gas plays. The Mid-Atlantic states and Texas have the most natural gas-fired capacity additions under construction with planned online dates within the next three years (2016–18).
American natural gas production has steadily increased in recent years, growing 6.3 percent in 2015 despite the fact that the number of active rigs drilling for the resource fell by nearly half last year. Like what we’ve seen with tight oil operations, the least productive operations have come offline in recent years but their production has been offset by increased productivity by those rigs that remain.
Our growing natural gas supplies have brought prices down to bargain basement levels, and last year’s average Henry Hub spot price hit a 16-year low. As a result, we’ve seen a sharp uptick in natural gas-fired power production (a 19 percent increase last year) coming largely at the expense of coal. Shuttered coal-fired power plants accounted for more than four-fifths of lost generating capacity in 2015, displaced by cheaper shale gas that emits just half as much carbon.
Shale gas is dethroning Old King Coal, and the EIA expects natural gas to finally displace its sootier cousin this year as the dominant energy source in America, a remarkable green achievement brought about not by heavy government subsidies or convoluted green tax breaks, but rather by innovative new technologies that have unlocked vast new reserves of domestic sources of baseload power.