Natural gas spot prices at Henry Hub will remain high as parts of the country experience freezing temperatures, according to the Energy Information Administration’s latest Short-Term Energy Outlook.
The EIA expects Henry Hub spot prices to average $4.70 per million British thermal units (MMBtu) this month, compared to $4.38/MMBtu in January and $3.76/MMBtu last December. And just as colder-than-usual temperatures, especially in the Northeast and Midwest, affected last month’s prices, weather will continue to play a role, according to the Feb. 8 report.
“We expect natural gas prices could remain volatile over the coming months, and the way that temperatures affect natural gas demand in February and March will be a key driver of how inventories end the withdrawal season, which will be important for natural gas price formation in the coming months,” the report said.
In addition, natural gas is expected to make up a smaller share of electric generation—35% in 2022 and 2023, down from 37% in 2021. The estimated cost of natural gas deliveries to power plants will fall to $4.16/MMBtu in 2022 and $3.86/MMBtu in 2023.
More renewable generation coming online is leading to smaller deliveries of natural gas, the report said. The share of renewables is expected to rise from 20% in 2021 to 22% in 2022 and 24% in 2023.
Solar installations will account for nearly half of new electric generating capacity, the report said. EIA expects additions of utility-scale solar capacity to be 21.8 gigawatts this year and 24.1 GW in 2023. Nearly 8 GW of new wind capacity will come online in 2022 and 4.3 GW in 2023.
As a result of more renewables coming online, EIA predicts coal’s share of generation to dip from 23% in 2021 to an average of 22% over the next two years. The share for nuclear will remain relatively steady at 20%.
The EIA expects the nation’s coal production to rise by almost 28 million short tons to 606 MMst in 2022 (a 5% increase) and then rise by 18 MMst in 2023 (a 3% increase).