Amid milder temperatures, electricity demand is expected to drop about 1% during the second quarter of 2023 compared to the same period last year, according to the Energy Information Administration.
The decrease in demand, along with more generation from renewable energy sources and lower natural gas prices, will also “significantly" lower wholesale electric power prices over the next two quarters this year, EIA said in its latest Short-Term Energy Outlook.
EIA projected that electricity use will drop to 4,000 billion kilowatt-hours in 2023 from last year's record high of 4,048 billion kWh. As economic growth ramps up, power use is expected to rebound to 4,062 billion kWh in 2024.
Coal-fired power plants will account for “significantly less generation" this spring than in the past, EIA said. “We forecast 17% less U.S. coal-fired generation in the spring of 2023 than in the spring of 2022. Coal plants that retired in the past year will reduce coal-fired generating capacity by about 11 gigawatts (5%) compared with the spring of 2022," the report said.
For all of 2023, EIA expects coal to provide an average of 17% of generation, down from 20% last year. About 24% of generation is expected to come from renewables, up from 22% last year. New solar capacity drives much of that growth in renewables—an additional 27 GW of new solar capacity this year, up 38%. The natural gas share of generation is expected to remain about the same at 39%, while nuclear's share will inch up to 20% from 19%.
As natural gas inventories start to rise, EIA forecasts the Henry Hub natural gas spot price will average about $2.65 per million British thermal units (MMBtu) during the second quarter of 2023. And with inventories remaining above the five-year average, EIA expects natural gas prices to average less than $3.00/MMBtu for the year, a more than 50% decrease from 2022.
This month's report took an early peek at summertime gasoline prices. EIA expects U.S. gasoline prices to average around $3.50 per gallon this summer, peaking between $3.60 and $3.70 in June.