Consumers can expect to pay more for electricity this year than they did last year amid higher prices for natural gas, federal energy researchers say.
According to the Energy Information Administration’s latest Short-Term Energy Outlook, the residential price of electricity will average 14.8 cents per kilowatt hour this year, up 7.5% from 2021. Higher retail prices “reflect an increase in wholesale power prices driven by rising natural gas prices,” the report said.
Natural gas prices will hit their highest levels in 14 years this winter as global consumption remains high and inventories stay low, EIA said. The natural gas spot price at Henry Hub will reach a monthly average of $9 per million British thermal units (MMBtu) during the fourth quarter of this year—the highest inflation-adjusted monthly average since 2008.
“There are limited options for replacing natural gas in the short-term, especially for electricity generation,” said EIA Administrator Joe DeCarolis.
Next year, however, natural gas production is expected to rise and Henry Hub spot prices are expected to drop to an average of $6/MMBtu, the report said.
Meanwhile, the largest increases in electricity generation will continue to come from renewable energy sources, mostly solar and wind. EIA expects renewables to provide 22% of the nation’s generation in 2022 and 24% in 2023, up from 20% last year.
As renewables’ share of the generation mix increases, less power will come from natural gas and coal, according to the report. The share for natural gas is expected to be 37% this year and 36% in 2023. Coal-fired electricity is expected to account for 21% of the generation mix in 2022 and 19% in 2023.
“Growing generation from renewable sources limits growth in natural gas generation while coal’s generation share declines due to the expected retirement of coal-fired capacity,” the report said.