US Power Generation Down Again: An Analysis of Trends

According to data released by the EEI (Edison Electric Institute) last week, the United States generated 69,427 gigawatt-hours of electricity during the week ended October 23, 2015. That’s ~3.1% less than the 71,651 gigawatt-hours the country generated during the prior week. In the week ended October 16, US power generation had increased for the first time in six weeks.

However, as we discussed in the previous part of this series, the latest natural gas weekly update showed that natural gas consumption from the power sector increased through October 28. Therefore, we’ll likely see an increase in US power generation numbers for the week ended October 30, 2015. Watch out for our natural gas weekly report next week.

On a year-over-year basis, the United States generated ~1% more power in the week ended October 23, 2015, than in the corresponding week in 2014.

According to the EIA (U.S. Energy Information Administration), a total of ~1.1 Bcf (billion cubic feet), or ~33.7 Bcf per day, of natural gas was consumed for the purpose of electrical power generation in July 2015 in the United States. It’s interesting to note that of the ~1.9 Bcf delivered to end users in July, electricity generation accounted for ~55.6%.

In its monthly electrical update, the EIA also reported that power generation from natural gas increased in all regions of the United States in July, whereas power generation from coal fell in all regions during the same period.

Also according to the EIA, coal consumption is expected to fall by 8% in 2015. Electric power sector consumption of coal is expected to drop, owing to lower natural gas prices and increased electricity generation based on renewable energy.

The EIA forecasts that the share of coal-fired electricity in terms of overall power generation will average 35% in 2015, down from 38.7% in 2014. In contrast, natural gas should account for an average of 31.6% of power generation this year, up from 27.4% last year.

Since electricity generation companies depend mainly on coal or natural gas to generate electricity, increased electricity generation is likely to increase demand for coal and natural gas. This would be positive for both coal and natural gas producers.

However, given that natural gas is a cleaner fuel that is abundant, it’s expected to take a market share away from coal in the longer term. This would be good for natural gas prices, as well as for natural gas producers such as Chesapeake Energy (CHK), Noble Energy (NBL), Range Resources (RRC), and QEP Resources (QEP). These companies make up ~2% of the Vanguard Energy ETF (VDE). In the next and final part of this series, we’ll look at US propane inventories.