The United States set a new record for natural gas consumption by electric power plants (power burn) of 44.5 billion cubic feet per day (Bcf/d) on Friday, July 19, according to S&P Global Platts. Since July 1, 2019, U.S. power burn has exceeded the previous record of 43.1 Bcf/d―set on July 16, 2018―on five days: July 10 and July 16–19. Much higher-than-normal temperatures, structural changes to the power sector (particularly in the Northeast), and low natural gas prices all contributed to increased natural gas consumption by electric generators.
Higher electricity demand for space cooling in the past week was the main driver of increased natural gas-fired power generation as a record-setting heat wave affected much of the Lower 48 states. Although the hottest temperatures occurred over the weekend, most states east of the Rocky Mountains experienced warmer-than-normal weather in the days leading up to the heatwave. From July 16–21, the average maximum temperature exceeded 85 degrees Fahrenheit (°F) in most parts of the country; furthermore, average minimum temperatures, particularly in the Midwest and Northeast, were 8°F–10°F higher than average, resulting in increased cooling demand during off-peak periods.
Another contributing factor to the record power burn was relatively low natural gas prices, which averaged $2.33 per million British thermal units (MMBtu) from July 16–21 at the Henry Hub in Louisiana, according to Natural Gas Intelligence. So far this summer, Henry Hub prices have averaged $2.34/MMBtu, 19% lower than during the same period last year. Although the Henry Hub price represents regional prices along the Gulf Coast and in Southeast markets, natural gas in the Midwest and Northeast markets typically trades at a discount to Henry Hub during summer months. This summer, spot natural gas prices at the Chicago Citygate—the regional price benchmark for Midwestern states—have averaged 19¢/MMBtu lower than Henry Hub prices, and regional spot prices in the Northeast (e.g., Dominion South) have traded 30¢/MMBtu lower than Henry Hub.
Structural changes to the electric power sector also contributed to record-breaking natural gas-fired generation this summer, particularly in the PJM Interconnection, the regional transmission organization (RTO) responsible for managing wholesale electricity in 13 states and the District of Columbia. Approximately 12 gigawatts (GW) of new natural gas-fired electric generation capacity―primarily highly efficient combined-cycle units―have entered service in PJM since January 2018, increasing total natural gas-fired capacity by 18%. As a result, during periods of increased demand, natural gas-fired plants have been dispatched at higher levels than in previous years. On July 19, when natural gas consumption reached its highest level last week, PJM dispatched 66 GW of natural gas-fired generators at the point of peak demand during the day, 30 GW more than its base level in the early morning. In comparison, only 43 GW of coal-fired generation capacity, which was the second-highest fuel source on that day, was dispatched at its highest point.
