DOE-STEO Natural Gas Markets Outlook & Electricity Markets Update

For the short-term natural gas outlook, Henry Hub price is expected to average $7/MMBTU in 2022 and $6/MMBTU in 2023. Pricing has been volatile. Consumption is expected to increase this year with a potential slight decline next year. Net exports will increase. Working gas inventories are expected to remain below the 5-year average at the end of October. Natural gas provides 37% of generation but may drop slightly due to increased renewables. Export LNG will increase.

Pipeline exports to Mexico are expected to increase. Gas production is expected to increase. Recent production hit 100 BCF/day. Production is primarily coming from the Permian Basin (associated gas). Right now, LNG production in the US is pretty much maxed out. There are a couple of projects under construction, but they will not come online until 2024.

For the electric generation forecast, the share of renewables is expected to increase. Coal generation increased in 2021, but labor shortages, rail shortages, and some mine closures prevented coal from increasing in 2022. Some areas could not get coal to their plants during the heat wave. Gas prices are expected to rise somewhat into 2023, but decline after the summer of 2023, as normal temperatures are expected and the economy may not be as robust. Industrial consumption is expected to continue to increase.

Renewables in PJM are around 4% (not counting hydro). Gas prices tend to increase in the winter. Industrial electric prices are high in New England, but more modest in rest of the country. In the midcontinent ISO, coal is the dominant fuel. The Southwest Power Pool is higher on natural gas. ERCOT has a lot of wind. Wholesale prices are lower than in the Northeast. Industrial prices are about 2/3 of New England. California has a large amount of solar. Natural gas provides most of the rest. Coal, nuclear, and others are small. Western hub prices are between mid-continent and New England.

Lori Aniti and Kathryn (Katy) Fleury, DOE EIA