Henry Hub natural gas spot prices are expected to trend downward this year, according to a recent EIA analysis, but that forecast is uncertain due to global energy supply chain impacts caused by Russia’s invasion of Ukraine.
In its March Short-Term Energy Outlook, the Energy Information Administration forecasted a lower average Henry Hub spot price of $4.10 per million British thermal units (MMBtu) due in part to higher production. February’s spot price was $4.69/MMBtu, and it was $4.38/MMBtu in January.
Next quarter, the EIA expects the Henry Hub spot price will average $3.83/MMBtu. It also predicted that the price will be $3.95/MMBtu for all of 2022 and $3.59/MMBtu in 2023.
However, the agency noted its energy forecasts are “subject to greater-than-usual uncertainty” following Russia’s invasion of Ukraine and the global response. Russia invaded Ukraine on Feb. 24 and is continuing to wage war against the nation.
On more solid footing was the agency’s forecast for renewable additions. Planned solar additions will make up “nearly half of new electric generating capacity in 2022,” according to the March outlook, with an expected 22 gigawatts in utility-scale solar capacity additions in 2022 and 24 GW in 2023.
“In addition, in 2021, small-scale solar capacity (systems less than 1 megawatt) increased by 5.4 GW to 33 GW,” the report said. “We project that small-scale solar capacity will grow by 4.0 GW in 2022 and 4.3 GW in 2023.”
The electric power sector is also adding more wind power, but not as much as solar. Last year, 14 GW of new wind capacity came online, and EIA expects 10 GW to go on the grid in 2022 and 5 GW in 2023.
Overall higher levels of renewables generation means that less power will come from coal resources, falling from 23% in 2021 to 22% in 2022 and 21% in 2023. In addition, greater renewables generation leads to an expected decline in natural gas generation, which falls from a 37% share in 2021 to 36% in 2022 and 35% in 2023.
Meanwhile, prices are already topping $4 for a gallon of regular gasoline because of the war in Ukraine. EIA expects crude oil prices to push average gasoline prices to $4.10/gallon on average in 2022, “the first time that gasoline prices (not adjusted for inflation) have reached at least $4/gal in any month since July 2008,” according to the report.