Providing coverage of Alaska and northern Canada's oil and gas industry
May 2024

Vol. 29, No.19 Week of May 12, 2024

EIA forecasts solar to exceed hydro in '25

US electric generation to be up 3% this year, 1% next, with increase from renewables as natural gas, coal shares continue to drop

Kristen Nelson

Petroleum News

The U.S. Energy Information Administration is forecasting that generation of electricity in the U.S. will grow by 3% this year and by 1% in 2025, with the increase powered by renewables, primarily solar power.

In its May Short-Term Energy Outlook, issued May 7, EIA said it expects solar, wind and hydropower will account for 22% of domestic power generation this year, and 24% in 2025, up from 21% in 2023.

The agency is forecasting solar to provide 41% more domestic electricity this year than last, with wind-powered generation up 5%. The share of wind, however, is somewhat speculative, as it is based on expected wind speeds, which could change.

"Renewables have historically generated the most electricity in the spring when output from wind turbines peaks," EIA said. But the agency said wind speeds have been slower than normal in recent months and if that continues, "annual wind generation this year could be less than expected." In addition to a 5% increase from wind this year, EIA expects wind generation to grow 3% in 2025.

In addition to the 41% growth in solar expected this year, especially pronounced from June to September, the agency is forecasting a further 25% growth in 2025.

The rank of solar among renewable resources is also expected to change.

"In 2025, we expect generation from solar to exceed the contribution from hydroelectricity for the first year in history," said EIA Administrator Joe DeCarolis.

The agency said domestic hydropower can vary greatly year to year, typically peaking in late spring during water runoff. U.S. hydropower is expected to increase 6% this year, driven primarily by higher water supply in the Southeast and Northwest. "Most hydropower is generated in the western half of the country," EIA said, but the largest increase this year is expected in the Southeast, which is forecast to see an increase of 10% from last year. Hydropower is expected to grow by 6% next year, with that growth centered in the Northwest.

The growth in renewables "is likely to constrain growth in generation from natural gas-fired power plants, even with relatively low natural gas prices in the forecast," EIA said, with gas generation expected to be "relatively flat" this year and next. Coal-fired power is expected to continue to decline as coal-fired plants are retired, with a 6% decline expected this year and a 7% decline in 2025.

Natural gas production

U.S. dry natural gas production is forecast to fall 2% from the first quarter of the year, averaging 102 billion cubic feet per day in June, down 4% from a monthly record set last December, driven by low natural gas prices, EIA said.

Some producers have announced curtailment of gas production because of low prices, the agency said, and "a wide price difference between the price of natural gas and petroleum products is encouraging producers to extract higher-value hydrocarbon gas liquids (NGLs) from the natural gas stream."

While EIA expects domestic natural gas production to be down 1% this year, it is expected to rise by 2% next year and reach a record of almost 105 bcf per day, based on a forecast of rising natural gas prices, along with forecast increases in oil production next year, resulting in more associated natural gas production.

The natural gas price at Henry Hub was $2.50 per million British thermal units in 2023 and is forecast to average $2.20 per million Btu this year before rising to $3.10 in 2025.

Crude production

U.S. crude oil production averaged 12.9 million barrels per day last year and is forecast to average 13.2 million bpd this year and 13.7 million in 2025, with the Brent crude oil spot price expected to average $88 per barrel this year, up from $82 in 2023, and $85 in 2025.

EIA said Brent averaged $90 per barrel in April, up $5 from March, "the fourth consecutive monthly increase," but settled at $84 May 2.

The agency noted "subdued" crude oil price volatility for much of this year, attributing that to "significant spare crude oil production capability. If holders of spare production capacity choose to deploy it, supply can be available to the oil market in the event of any short-term supply disruption," with spare capacity in the Organization of Petroleum Exporting Countries estimated at some 4 million barrels per day through next year.

EIA said its forecast of domestic crude oil production growth "does not increase inventories because we expect relatively tight global oil markets in the coming months will mean that additional production will either be exported due to strong global demand for U.S. crude oil or displace some existing crude oil imports."

Globally, oil production is expected to increase by 1 million bpd this year, slower growth than the 1.8 million bpd increase last year. The agency said that although OPEC+ liquid fuels production is expected to decrease by 0.8 million bpd this year, production outside of OPEC+ is expected to increase by 1.8 million bpd, led by production increases in the U.S., Canada, Brazil and Guyana.

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