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US on track to use record amount of natural gas for electricity in 2022, EIA says

More electricity is being generated from natural gas than ever in the United States as coal-fired power plants retire, and the latest Department of Energy forecasts show the country is on track to use a record amount of gas this year.

Natural gas consumption is expected to average 86.6 billion cubic feet per day in 2022, up from 83 Bcf/d last year, according to the Energy Information Administration, the statistics and analysis arm of the Department of Energy. The increase is expected even though natural gas prices have soared this year as demand outstrips tight global supply.

So far in 2022, natural gas has cost an average of $6.41 per million British thermal units, according to the EIA, compared to $3.43 last year and $1.86 in 2020.

“When natural gas prices are relatively high, electricity providers have traditionally turned to cheaper fuels such as coal for power generation,” the EIA said in a statement on its latest forecast. “Despite a sharp increase in natural gas prices this year, natural gas consumption in the electric power sector increased by 7% in the first eight months of 2022, compared to the first eight months of 2021, for achieve an average of 33.2 10 cfd.”

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In part, more electricity is generated from natural gas as coal-fired power plants are phased out. The EIA also cites historically low on-site coal inventories and constraints in delivering fuel to coal-fired plants.

Natural gas helped fill the gaps as demand for electricity increased during high temperatures this summer. The heat has boosted electricity demand so much that on July 21 of this year, the contiguous United States hit a record high for electricity generated by gas-fired power plants at 6.37 million megawatt hours, according to the EIA.

The ministry said gas consumption would increase across all “end-use sectors”, meaning the transport, industrial, commercial and residential sectors, with the electric power sector leading the way.

The United States is a major natural gas producer with Texas leading – however, Europe is in a gas crisis as it strives to move away from Russian oil and gas in retaliation for the war in course of Moscow against Ukraine.

Norwegian company Rystad Energy estimates that Russian pipeline deliveries to Europe have fallen by around 80% since the same time last year. Rystad senior analyst Zongqiang Luo said in a statement that Russia’s overall gas supply now accounts for less than 10% of European gas imports.

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“Gas is now the most important commodity in Europe,” Luo said, noting that only Germany is on track to double gas spending this year.

European countries have rushed to replace Russian gas with liquefied natural gas shipped from countries like the United States. In addition, Norway has increased its gas pipeline to other European countries.

Electricity prices in Europe have been on a rollercoaster ride this year as Russia’s invasion of Ukraine threw energy markets into chaos and cast doubt on Russia’s future supplies of oil and in gas. Rystad predicts that uncertainty in Europe will continue.

In the United States, high natural gas prices have driven up utility bills and contributed to high inflation. The EIA expects natural gas consumption in the power sector to begin to drop with the summer heat. The Authority also expects a decrease in the first months of 2023 due to the commissioning of more renewable electricity generation capacity.