Over the last four years, net installed gas-fired power capacity in the US has increased by 19 GW, with 30 GW of plants added and 11 GW closed. At the same time, coal-fired generation capacity saw a net decline of 29 GW while renewable generation capacity grew steadily, with wind adding 17.2 GW and solar 13.7 GW.
Total power generation levels have been effectively unchanged since 2010. As such, the biggest impact of these capacity changes has been to reduce the need for thermal generation, with most of the decline falling on coal. In 2016, compared to 2010 generation levels, coal was lower by 495 TWh (-27%), gas was up by 370 TWh (37%), and renewables was up by 144 TWh (74%).
In terms of this observed coal-to-gas switch from 2010 to 2016, this is equivalent to 42 GW of coal plants being displaced by gas plants. That indicates the 30 GW of new gas capacity that came online generally had a significant impact on the competitiveness of generation when combined with the prevailing low gas prices. The 42 GW equates to around 6.8 bcf/d of additional gas use.
While the observed 42 GW of coal-to-gas switching was the result of the structural downwards repricing of gas in the market, there has recently been less visible short-term demand response. The total coal-to-gas switch we have recently seen, on average over a month, given prevailing coal and gas price relativities, has been between 6 GW and 25 GW, depending on the time of year. As a result, power sector gas demand has more recently varied by around 0.9–3.8 bcf/d.
These levels of fuel switching were all observed in the last two years or so, as the US gas market has balanced by pricing gas among the different fuel switch triggers. As a rule of thumb, this suggests that between 0.9 bcf/d and 1.3 bcf/d of additional gas demand is likely to be added/lost as prices move from one fuel switch support line to another.
The regions with the biggest ability to switch are the Mid-Atlantic and South Atlantic states, which have a combined 61 GW of potentially contestable plant (i.e. both gas and coal plants are available, allowing switching to occur), and the West South Central area, which boasts 36 GW of contestable plants, found mostly in Texas, Louisiana and Oklahoma.
During 2017 and 2018, around 20 GW of new gas plants are under construction and scheduled to come online, while another 8 GW of older coal plants are scheduled to be retired. The implication for the US gas market is that the ‘base’ level of gas-fired generation will continue to grow, which means even higher gas prices will be needed to get sufficient demand reduction from power to balance the gas market during any tight episodes. Given prevailing coal prices, the most substantial levels of gas-to-coal switching will only happen at prices above 4 $/mmbtu.