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In August 2023, the United States experienced a historic shift in its power generation, with over 50% of electricity demand met by natural gas. This increase in gas share was influenced by a drop in natural gas prices, coal plant retirements, low wind and hydropower output, and heightened cooling demand. Over the past two years, natural gas's share in the summer power mix rose from 40% to 45%.
Factors such as the shale revolution, federal and state environmental policies, and the decline in gas prices contributed to this trend. The price drop, notably in gas-producing areas, triggered a switch from coal to gas-fired generation, impacting coal utilization and capacity factors.
Market dynamics played a role, with natural gas replacing coal more rapidly in liberalized markets than in regions with vertically integrated utilities. The economic impact of regulated utilities using must-run designations was also examined, revealing shifts in profitability.
US coal power plants faced challenges during the summer, transforming their operations to address new flexibility requirements, resulting in increased stress on components and reduced efficiency. Despite renewable capacity additions, including wind and solar, gas filled the gap left by coal retirements and high demand.
Lower hydropower output and curtailment of wind and solar due to oversupply and grid constraints contributed to higher gas demand. The switch from coal to gas and increased use of renewables led to a decrease in CO2 emissions in the US power sector.
While carbon pricing is a factor, the trajectory of coal and gas generation depends on renewable incentives, environmental regulations, electricity grid development, and power market design. The evolving energy landscape underscores the need for a comprehensive approach to shape the future of power generation in the United States
SOURCE:GOOGLE
