Sorry, Solar and Wind, but Natural Gas Wins

Renewables might be growing fast, but natural gas is expected to be what powers America in the future.

Aug 24, 2014 at 12:00PM

Fracking is expected to fuel an astounding 56% surge in U.S. natural gas production from 2012 to 2040 according to projections from the U.S. Energy Information Agency, or EIA. Because of that, surging production utilities are expected to build 1,600 million megawatt hours of new natural gas-fired electric power generation by 2040. That's an incredible amount of new natural gas power generation, and well above the expected additions of renewable power generation from wind and solar.

A closer look at why natural gas wins
The EIA prepared three graphics that detail the projected rise of natural gas power generation in key power regions over the next few decades. The following chart takes a look at the Eastern region of the country.

Natural Gas

Source: EIA

As that chart points out, natural gas power generation in the East has already doubled since 2005 as it has directly taken market share from coal. Looking ahead, the combined power regions in the East are expected to add 212 million megawatt hours of new natural gas power generation from 2012 to 2040, which is by far the most in the country. This is because natural gas is expected to be the fuel of choice to support the growth in power demand in this population-heavy region.

This is happening even as coal and nuclear power supply are expected to remain roughly static so that natural gas eventually passes nuclear as the second largest power supplier in the East. Natural gas also easily beats the expected growth in renewable power generation, which will add less than 100 million megawatt hours and remain a distant fourth to nuclear power.

Next, we see in the Texas region that natural gas is really expected to be the dominant power source in the years ahead as noted in the following chart.

Natural Gas

Source: EIA

The EIA projects that natural gas will extend its lead in Texas as the dominant power source as it sees natural gas power generation surging by 81 million megawatt hours from 2012 to 2040, which is the fourth largest increase in the U.S. Like the East, this surge is due to the growth in power demand, which will almost be completely satisfied by new natural gas power generation. Meanwhile, the EIA is forecasting little to no growth in power generation from coal, nuclear, or renewables over the next few decades in Texas.

Finally, out in the West the EIA actually does see a brighter future from renewables as noted in the following chart.

Natural Gas

Source: EIA

However, while renewable power will remain the leading generator of electricity in the West, natural gas growth will more than keep pace. In fact, the 105 million megawatt hours of growth that that EIA is projecting from 2012 to 2040 is the second-largest increase in the U.S. One of the reasons for this is that California in particular needs natural gas generation to complement its renewable generation for load-balancing purposes, which shows just how important natural gas is even in supporting the growth of renewables. Because of this, natural gas power generation will nearly rise lock-step with renewables to meet rising power demands.

Final thoughts
Across the country natural gas is projected to be the fuel of choice to meet America's growing electric demand. While renewable generation will grow in much of the country, it won't grow anywhere near fast enough to meet demand growth. Further, even where renewables are growing, natural gas is needed to supplement that demand. So, sorry wind and solar, but natural gas is what will really be powering America in the years ahead. 

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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