Gas is falling as an electricity source and may have peaked

Use of natural gas to generate electricity likely peaked in 2020, according to research from the Institute for Energy Economics and Finance (IEEFA). 

After steadily climbing for about a decade, IEEFA projected that gas-fired capacity flatlined in 2021 and that gas-powered electricity generation peaked the year before.

Going forward, the institute projected that gas-fired generation will begin a decline as solar and wind generation grows. The report attributes the decline to a number of factors, including increased prices and environmental concerns around methane emissions. 

The share of gas in electricity generation soared in the 2000s amid the fracking boom. However, as gas prices have increased, generation fell from 1.62 billion megawatt-hours in 2020 to 1.57 billion MWh in 2020, according to the U.S. Energy Information Administration (EIA). In the short term, the EIA projects it will drop further to 1.4 billion MWh. 

The Russian invasion of Ukraine is likely to further intensify these factors. As the U.S. ships more gas to Europe to replace Russian imports, the increased demand has caused the price of U.S. natural gas to climb even further. 

Fossil fuels for power generation are down across the board, according to the report, while renewables-based generation is on the rise. Corporate demand for renewable energy is on the upswing, driven largely by private corporations setting net-zero targets, according to the report. This demand could result in up to 94 gigawatts of renewable energy capacity by the end of the decade. 

Renewables like solar, wind and hydropower are expected to comprise a larger share of total power generation in the years ahead, according to the IEEFA. If wind and solar projects currently in the works are online by the end of 2026, the Institute projects that renewables generation will increase by about 444 million, or more than twice last year’s total, according to the report.