December retail sales of electricity showed the second greatest year-over-year decrease for the month since the U.S. Energy Information Administration (EIA) started collecting data in 1973, due in part to a relatively warm winter this season. Despite this 6.1 percent drop in retail sales, natural gas consumed for power generation in December increased 8.2 percent over December 2010 levels. More recent BENTEK Energy LLC (Bentek) estimates show that natural gas consumed in the power sector this February was almost 27 percent greater than the natural gas power burn in February 2011, and 17 percent greater in January 2012 than in the same month in the previous year. In contrast, EIA’s estimates of coal consumed for power generation for December of 2011 were 17.4 percent lower than the previous December.
While much of the increase in natural gas-fired generation has been seen in the Southeast United States, Ohio has also experienced large increases over the last several years, as highlighted in EIA’s recently released Electric Monthly Update. Traditionally, natural gas-fired power plants in Ohio have been used for peaking purposes (run for a few hours on certain summer days when demand for electricity is high). Recently, these plants are being dispatched more throughout the year and not just a few hours of the day in the summer, at the expense of less efficient coal plants.
In Ohio, the Hanging Rock, Waterford, and Washington power plants are three highly efficient natural gas combined cycle plants with a combined capacity of 2,698 megawatts. These plants have increased their generation significantly since 2008, from 1 percent of the electricity generation in Ohio in 2008 to 13 percent last December. At the same time, seven less efficient coal plants in Ohio, with a combined capacity of 7,113 megawatts, have experienced a significant drop in generation. As seen in the chart, the generation share of these seven sample coal plants, expressed as the share of total generation from both sample coal and natural gas plants, is compared to the corresponding share of the three combined cycle plants. As illustrated in the chart, natural gas generation went from 3 percent of total sample plant generation in January 2008 to 47 percent in December 2011.
(For the Week Ending Wednesday, February 29, 2012)
- The return of warmer-than normal temperatures was likely the catalyst that caused natural gas prices to resume their multi-week downtrend. The Henry Hub price closed at $2.44 per million British thermal units (MMBtu) on February 29, down 16 cents for the week.
- At the New York Mercantile Exchange (NYMEX), the April 2012 natural gas contract fell 15.9 cents per MMBtu for the week to close at $2.616 per MMBtu.
- Working natural gas in storage eased slightly last week to 2,513 billion cubic feet (Bcf) as of Friday, February 24, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). The implied net withdrawal for the week was 82 Bcf, positioning storage volumes 756 Bcf above year-ago levels.
- The natural gas rotary rig count, as reported February 24 by Baker Hughes Incorporated, decreased by 6 to 710 active units. Meanwhile, oil-directed rigs dropped by 7 to 1,265 units.