Power Plant Gas Demand May Drop 37% Over Next 17 Years

Demand for natural gas in California is expected to fall at an annual rate of 1.1 percent between 2015 and 2026, according to the latest outlook performed by the California Energy Commission. Gas use for power generation is expected to fall 2.1 percent annually.

Energy Commissioner Andrew McAllister said at a Nov. 3 workshop the decline “is fundamental to where we’re going with energy policy in the state.”

The state as a whole is expected to see total daily natural gas demand—including for homes, businesses, industries, and power generation—drop 8 percent over the next 17 years, declining from 6.4 billion cubic feet in 2013 to 5.9 bcf in 2030.

Much of the falloff in demand over the period is due to declining use of gas for power generation.

In 2013, statewide natural gas demand in the energy sector, including gas used to refine oil or process other fuels, was just over 2.8 bcf/day. This year, however, it’s projected to fall to 2.69 bcf/day and drop to 1.77 bcf/day by 2030, a 37 percent decline over the 17-year period.

Demand in the power generation sector rebounds after 2026, but by 2030 still remains below the 2015 level at about 1.7 bcf daily.

A key factor affecting natural gas demand is expected to be the state mandate that requires investor-owned utilities, electric service providers, and community choice aggregators to have half their resources be from eligible renewable resources by 2030.

Natural gas demand in the state will remain below the 2015 level.

Regarding natural gas prices, a relatively moderate rise is expected over the next 15 years, from nearly $3 per thousand cubic feet this year to $4/tcf in 2030.

“From 2015 to 2030, the gas market reflects traders’ expectations of slowly rising gas prices combined with fundamental market forces driving prices upward at an average rate of four percent per year,” according to the outlook.

California currently imports about 90 percent of its natural gas. By 2025, the outlook estimates California will import about 98 percent of its natural gas. Commission staff says it expects the state to continue gas imports from the Canadian, Rocky Mountain, and San Juan basins, with varying amounts coming into the state from each source, depending on price and availability. The outlook made other findings too.

California’s projected downward trend for natural gas demand differs from the rest of the nation, where commission staff estimates natural gas demand for power generation to increase by about 13 percent due to aggressive coal plant retirements.

Although annual per capita demand for natural gas varies in response to annual temperatures and business conditions, it has been generally declining since the late 1990s. Commission staff expects the trend to continue as population grows faster than total natural gas demand.

Commission staff said more funding is needed for research, development, and deployment projects involving new technologies to monitor and address pipeline safety and integrity assessment. — Mark Edward Nero