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Power sector drives development in US natural gas demand: Maguire

The power sector is the only significant consumer of natural gas that has revealed consistent demand development over the last few years, and has actually become the driving force behind gas demand in the United States as consumption from other sectors declines.

Gas usage by power generators has broadened by around 3.5% a year over the previous 3 years, and is by far the largest single source of gas usage in the U.S., data from LSEG programs.

However by volume, growth in natural gas use by the power sector was exceeded by declines in others. Typical gas usage by power companies grew by 70 billion cubic feet daily in 2023, while typical combined intake by market, homes and commercial users fell by 114 billion cf/day.

Power firms represented around 44.4% of overall domestic gas use in 2023, compared to around 29% by market, 15.5% by families and 11% by commercial users.

Industrial gas demand has declined by around 0.3% a year over the past 3 years, while residential and business gas need has diminished by around 0.5% and 0.7% annually respectively, according to LSEG's gas demand designs.

The growing concentration of gas usage within the power sector poses a potential threat to the U.S. gas production sector, as further fast decarbonization of power systems could trigger a. swift decline in gas need for power while other major. intake sources are already in decline.

ELECTRIC PUSH

A broad push to amaze certain heating and power systems. across homes and services has represented much of the cuts. to gas use outside power generation.

Electricity-powered heatpump and boilers have actually replaced. gas-fired heating systems in scores of homes and businesses in current. years, although the rate of heat pump sales has actually slowed due to. high electricity rates and rate of interest.

A record 4.3 million heat pumps were offered in the United. States in 2022, which was the very first year that heatpump sales. gone beyond sales of gas-powered furnaces in the nation,. according to the Air-Conditioning, Heating, and Refrigeration. Institute (AHRI).

Heat pump sales slowed to 3.6 million in 2023, and through. May of 2024 totalled 1.564 million units compared to 1.643. million systems during the same months of 2023, AHRI information shows.

Regardless of the slowing sales speed, the cumulative effect of the. installed pumps on gas demand has expanded, as each unit has. displaced some quantity of direct gas consumption.

POWER SWITCH

Price quotes on the precise volumes of gas displacement. by heat pumps are scant, as a lot of evaluations made by industry. tend to be in terms of cost savings instead of in terms of the. volume of nonrenewable fuel source consumption that is cut.

More complicating the gas-impact calculus is the reality. that lots of heatpump setups frequently replace one type of. energy consumption for another - from the direct burning of gas. in on-site boilers to electrical power provided by power companies.

And as that additional quantity of electrical energy should in turn. be produced primarily by power firms, the net result on total. gas usage in the United States remains difficult to discern.

That said, high-level need information reveal clear patterns.

Overall U.S. natural gas consumption throughout the very first half of. 2024 was up 2.3% from the same months in 2023.

Gas demand from power producers was up 5.2% from the very first. half of in 2015, while need from all other major gas users. was up just 0.5%, LSEG information programs.

Amongst non-power uses, gas need was 3.1% higher amongst. industrial users throughout the first half of 2024 from the exact same. period last year, but down 2.5% among residences and 1.2% lower. amongst industrial users.

That large divergence in use trends recommends that gas. intake may be close to peaking among non-power users, while. continuing to expand in the power generation sector.

GAS GROWTH

A constant increase over the previous 5 years in the proportion. of electrical power produced from gas further shows. the significance of the power sector to the natural gas industry.

Gas created 42.41% of utility-scale electrical power. production in 2023, according to energy think tank Cinder.

That share compares to 35% in 2018 and 24% in 2010, and. reveals how power companies have actually beefed up their reliance on natural. gas for electrical power generation while progressively lowering. generation from coal.

Coal's share of U.S. electrical energy generation was 16% in 2023,

below 27% in 2018 and 45% in 2010, Ember data programs.

Electricity generation from solar and wind farms was 15.6%. in 2023, compared to 9% in 2018 and 2.3% in 2010.

A further steady expansion in eco-friendly electrical power. generation is expected over the coming years, which might help. power companies make further cuts to output from coal-fired plants. as part of emissions reduction objectives.

But power manufacturers look set to stay heavy users of. gas for electricity generation, as gas plants can be. quickly throttled up and down to match the ups and downs of. power demand needs and to plug any generation shortages during. periods of low output from sustainable sources.

DEMAND PATTERN

Overall U.S. electrical power demand looks set to broaden as more. energy end-uses become amazed and as total power. usage climbs up from data centres and due to artificial. intelligence calculations.

Over the close to medium term, that greater power demand. outlook bodes well for the gas production sector, even. if direct gas usage in homes and commercial buildings. continues to agreement.

However over the longer run, the continuing concentration of gas. demand among the power sector poses a potential threat for the gas. market.

Numerous energy systems have plans to phase out gas-fired. generation and replace that power with a combination of. renewable energy generation together with battery storage systems. that can save surplus renewable power for later use.

Over the coming years, battery systems look set to stay. far too small to pose any considerable risk to gas demand.

However if utility-scale battery systems continue their current. quick growth while dropping in expense, goals for wholesale. renewables + battery systems might come true and start to. capture out gas from power systems in a years or so.

And if that occurs while other sources of gas need also. shrink, a major gas supply surplus might emerge. << The viewpoints expressed here are those of the author, a. columnist .>

(source: Reuters)