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Natural Gas Share of U.S. Power Generation Rises Amid Growing Demand

Natural gas-fired electricity generation in the United States has jumped year-to-date compared to the same period last year, as total power demand rose with warmer temperatures and demand from data centers.

For years, natural gas has accounted for the largest share of U.S. power generation, at around 40% of all electricity-generating sources.  

This year, natural gas is expected to provide around 42% of America’s electricity, similar to last year, as total consumption is set to grow by 3% in 2024 and another 2% in 2025, per data from the U.S. Energy Information Administration (EIA).  

This growth in demand “reflects more demand for air conditioning based on our assumption of warmer temperatures in the forecast, along with more electricity use related to the expansion of data centers,” the EIA said in its latest Short-Term Energy Outlook for June.   

So far this year, between January 1 and June 17, U.S. natural gas power generation exceeded 30 million megawatt hours (MWh), per LSEG data analyzed by Reuters columnist Gavin Maguire. That’s the highest natural gas power generation since at least 2021.

During the same period of 2023, U.S. electricity output from natural gas was 28.4 million MWh.

As demand rises with warmer temperatures and higher demand for cooling, as well as data centers necessitating more and more power, utilities in the U.S. have raised the generation from gas-fired capacity to meet higher peak loads.

Renewable power generation has set record highs from both solar and wind, but natural gas – and, now to a lesser extent, coal – continue to be the baseload backbone of the U.S. power generation system.

Natural gas could also be a winner in the AI-driven power demand surge in the U.S. While many tech companies prefer to power their AI development centers with solar and wind, the need to get these data centers built and powered fast would boost demand for natural gas, too, analysts say.

By Tsvetana Paraskova for Oilprice.com

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