(John Kemp is a Reuters market analyst. The views expressed are
* Chart 1: tmsnrt.rs/2dOroBg
* Chart 2: tmsnrt.rs/2dOrHvX
* Chart 3: tmsnrt.rs/2dKGyre
* Chart 4: tmsnrt.rs/2dKHFan
By John Kemp
LONDON, Oct 4 The United States is experiencing
a structural increase in gas demand with more gas-fired power
stations operating more hours per year and consuming a record
volumes of gas.
But domestic gas production is turning down, with output
nearly 4 percent lower in July 2016 compared with July 2015
("Falling U.S. gas output meets stronger demand", Reuters, Oct
Growing demand for gas and shrinking supplies are not
sustainable, so gas prices will have to rise to encourage more
drilling and limit the use of some gas-fired power plants.
U.S. power producers had 448 gigawatts of gas-fired
generation capacity in July 2016, an increase of 25 gigawatts
since the end of 2012, according to the Energy Information
Installed gas-fired capacity is scheduled to grow by another
11.5 gigawatts to 459 gigawatts by the end of 2017, when it will
be almost 9 percent higher than five years earlier.
Most of the extra capacity uses combined-cycle technology.
Total gas-fired capacity will have risen nearly 9 percent
between 2012 and 2017 but combined-cycle will increase by almost
14 percent over the same period (tmsnrt.rs/2dOrHvX).
Historically, most gas-fired power plants burned gas in a
boiler to raise steam (similar to a coal-fired plant) or
combusted it directly in a gas turbine (similar to an aircraft
Steam turbines and especially combustion turbines waste lots
of heat and are relatively inefficient and expensive ways to
But they can ramp production up and down more quickly than
coal-fired steam turbines, which made them ideal for meeting
short periods of peak power demand in summer and winter.
Used mostly in peaking mode, gas-fired steam turbines were
used for less than 12 percent of the time on average in 2015
while combustion turbines were used less than 7 percent of the
Combined-cycle units, however, are designed to operate far
more efficiently: gas is first burned in a combustion turbine
and then the exhaust heat used to raise steam in a boiler.
Both the turbine and the boiler can be used to drive
generation sets, enabling more of the fuel's energy content to
be converted into electricity.
Combined-cycle units are designed to provide baseload
throughout the year rather than just during periods of peak
The average combined-cycle plant operated more than 56
percent of the time in 2015, according to the Energy Information
Capacity factors for combined-cycle plants have been
trending upward over the last few years as they replace
coal-fired units thanks to stricter emissions regulations and
falling gas prices.
The average gas-fired combined-cycle plant operated for the
equivalent of 4,932 hours at full power in 2015, up from 4,489
hours in 2012, an increase of almost 10 percent.
Average coal unit operation dropped to the equivalent of
4,783 hours from 4,981 hours over the same period ("Average
utilization for natural gas combined-cycle plants exceeded coal
plants in 2015", EIA, April 2016).
Capacity factors at combined-cycle units continued to
increase in 2016, while coal-fired power plants sat idle more of
the time, thanks to low gas prices.
The proliferation of combined-cycle plants with high
capacity factors is driving a big structural increase in gas
consumption and tightening the gas market.
Unusually high temperatures across the most populous parts
of the United States since the end of May helped drive record
gas combustion by power producers this summer (tmsnrt.rs/2dKGyre).
But with more gas-fired power plants being installed and
running for more hours, underlying gas demand has been
increasing, whatever the weather.
With more combined-cycle capacity due to come online, gas
consumption will continue to increase, other things being equal.
The combination of rising gas consumption with stagnating or
falling gas production is clearly unsustainable in the medium
Gas prices will have to rise to reverse the slump in gas
production and cut capacity utilisation at combined-cycle plants
to conserve fuel.
The EIA forecasts gas use in the power sector will decline
by 2.3 percent in 2017 as rising gas prices spur a modest switch
back towards coal ("Short-Term Energy Outlook", EIA, September
(Editing by David Evans)