Record Low Gas Prices Drive Surge in U.S. Electricity Generation

U.S. electricity generators used a record amount of natural gas in early 2024 due to plummeting prices, which fell to their lowest real levels in over 50 years. This shift increased gas-fired power production but did little to reduce swollen gas inventories. Gas-fired electricity generation reached all-time highs despite inefficiencies in older turbines.

U.S. electricity generators consumed a record amount of gas in the first four months of the year as prices slumped to their lowest level in more than half a century.

Ultra-low prices encouraged more power production from older, less-efficient gas and steam turbines, pushing out coal. Despite this record combustion, gas stocks remained high due to continued growth in production and sluggish exports.

According to U.S. Energy Information Administration data, generators produced a record 1,334 billion kilowatt-hours (kWh) between January and April. This represented a 4% increase from the same period a year earlier, with most of the additional output coming from gas-fired units and solar farms.

Cheap gas encouraged generators to run their units more, including less-efficient plants that usually operate only during peak periods. Thus, single-cycle gas turbines operated with a seasonal capacity factor of more than 14% in April 2024, up from 12% in April 2023.

Despite the surge in gas-fired generation, surplus inventories persisted due to operational problems at the Freeport LNG export terminal. Even with record high temperatures in July 2024 driving electricity demand, gas inventories remained second-highest for the time of year on record.

Low gas prices continue to signal the need for cuts in drilling and output, with expectations for prices to remain low until inventories normalize by the end of winter 2024/25.

(With inputs from agencies.)