American Oil and Gas Reporter - June 2016 - 113

a mass-based CPP implementation, increasing by more than 67 percent from
2021 through 2040, when it is by far the
largest generation source."
EIA says the growth in renewable
generation occurs with or without the
CPP, more than doubling from 2015 levels
in both cases. "Lower costs, particularly
for solar installations, are a big driver of
the renewable growth, along with tax
credit extensions and state-level renewable
mandates," the agency reasons.
Natural gas's share of power generation
grows more substantially in the reference

case than in the no-CPP case, as gas is
used to replace retiring coal generation
to comply with the CPP, EIA goes on.
Natural gas generation increases 44 percent
in the reference case and 32 percent in
the no-CPP case.
In the reference case, AEO2016 projects
477 gigawatts of natural gas and renewable
electric generating capacity will be added
during the forecast period, compared with
385 gw in the no-CPP case. After subtracting plant retirements, the AEO2016
projects 361 gw of additional generating
capacity by 2040 in the reference case

and 274 gw in the no-CPP case.
EIA suggests coal's share of total electric generation, which was 50 percent in
2005 and 33 percent in 2015, will fall to
21 percent in 2030 and 18 percent in
2040. The agency adds that the total
amount of electricity generated by coal
in the United States falls 32 percent from
2015 to 2040 in the reference case, but
remains flat in the no-CPP case.
Nuclear generation remains flat
throughout the forecast period, EIA adds,
with new units offset by retirements. ❒

Gas-Fired Generation Seizes Top Spot
WASHINGTON-Coal has been the
dominant energy source for electric generation in the United States for decades,
but the U.S. Energy Information Administration forecasts that 2016 will be the
year that natural gas-fired generation exceeds coal generation on an annual basis.
According to EIA, gas generation first
surpassed coal generation on a monthly
basis in April 2015, and the generation
shares for both were nearly identical in
2015, with each providing about one-third
of all electric generation (Figure 1).
The decline in coal's share of power
generation and the concurrent rise in the
share of natural gas was mainly a marketdriven response to lower natural gas prices,
EIA assesses. Between 2000 and 2008, it
says coal was significantly less expensive
than natural gas, and coal supplied about
50 percent of total U.S. generation.
However, beginning in 2009, the gap
between coal and natural gas prices narrowed, as large amounts of gas produced
from shale formations changed the balance
between supply and demand in U.S. gas

markets, the agency points out.
Coal and natural gas generation shares
over the past decade have been responsive
to changes in relative fuel prices, EIA
observes. It cites the particularly low gas
prices throughout much of 2012 following
an extremely mild 2011-12 winter that
led to a significant increase in gas generation between 2011 and 2012, often displacing coal-fired generation. With higher
natural gas prices in 2013 and 2014, the
agency says coal regained some of its
generation share. However, with a return
to lower natural gas prices in 2015 favoring
natural gas-fired generation, coal's generation share dropped again.
The agency says environmental regulations affecting power plants have played
a secondary role in driving coal's declining
generation share over the past decade,
although it notes plant owners in some
states have made investments to shift
generation toward natural gas at least
partly for environmental reasons.
Looking forward, EIA says environmental regulations may play a larger role

FIGURE 1
Annual Share of Total US. Electric Generation by Source
(1950-2016)
60%

Percent of Total

50%
40%

2016 Forecast
Natural Gas (33%)
Coal (32%)

30%
20%
10%
0%
1950

1960

1970

1980

1990

2000

2010

Source: U.S. Energy Information Adminstration, Monthly Energy Review
and Short-Term Energy Outlook (March 2016)

Nuclear (19%)
Nonhydro
Renewables (8%)
Hydro (6%)
Other (1%)

in conjunction with market forces. Owners
of some coal plants will face decisions on
whether to retire generating units or reduce
their utilization rates to comply with federal
requirements to reduce carbon dioxide
emissions under the Clean Power Plan.
The agency notes that program was scheduled to take effect in 2022, but has been
stayed by the U.S. Supreme Court, pending
the outcome of ongoing litigation.
Renewables
Beyond the growing market share for
natural gas-fired generation over the past
decade, EIA says coal's generation share
also has been reduced by the increasing
market share of renewables other than
hydroelectric power, especially wind and
solar.
Unlike the growth of natural gas-fired
generation, which has been largely market
driven, the agency says increased use of
nonhydroelectric renewables has been
driven mainly by a combination of state
and federal policies. The use of wind
and solar energy sources has increased
to the point where those renewables now
surpass generation from hydropower, EIA
says.
EIA's March Short-Term Energy Outlook predicts the combination of market
forces and government policies will continue to stimulate the use of natural gas
and nonhydroelectric renewables for power
generation. EIA forecasts a 33 percent
power generation share for natural gas in
2016, while coal's share declines to 32
percent. The expected share of nonhydroelectric renewables increases to 8 percent, while hydroelectric's share is put at
6 percent, the agency reveals.
❒

Coming In July
Oil Industry Banking Strategies
JUNE 2016 113

American Oil and Gas Reporter - June 2016

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2016