The Energy Information Administration has significantly lowered its forecast for 2023 Henry Hub natural gas spot prices due to a warmer-than-expected January and higher inventories.

In its latest Short-Term Energy Outlook, the EIA said Henry Hub prices will average around $3.40 per million British thermal units (MMBtu) in 2023, staying below $4/MMBtu until December. That's down from its January forecast of a $5/MMBtu average for 2023.

The agency warned, however, that natural gas prices remain volatile. “There is still a lot of uncertainty, including the possibility of extreme weather later this winter that could increase demand and temporarily slow down production, but those possibilities decrease we approach spring," said EIA Administrator Joe DeCarolis.  

This month's forecast has renewable sources commanding a 24% share of generation this year and rising to 26% in 2024. Those gains will come from an additional 63 gigawatts of utility-scale solar coming online by the end of 2024 and another 13 GW of wind capacity added in 2023 and 2024.

The new generating capacity from renewables will reduce output from fossil fuel-fired power plants, according to the report. The combined share of natural gas and coal will fall from 59% in 2022 to 54% in 2024, the forecast said. Coal generation is expected to decline the most—from a 20% share in 2022 to 17% in 2024. Natural gas is expected to drop from a 39% share in 2022 to 37% in 2024.

The EIA expects power use to stay flat over the next two years, largely due to lower consumption by residents and businesses. Power use in 2022 was 4,045 billion kilowatt-hours and is expected to fall to 3,999 billion kWh in 2023 before ticking back up to 4,063 billion kWh in 2024.

Power sales to residents and the commercial and industrial sectors over the next two years will follow a similar trajectory, according to the February forecast:

  • Residential sales are expected to average 1,475 billion kWh in 2023 and 1,510 billion kWh in 2024.

  • Commercial sales are expected to average 1,373 billion kWh in 2023 and 1,382 billion kWh in 2024.

  • Industrial sales will see a jump from 1,001 billion kWh this year to 1,021 billion kWh next year.