In March, a significant decline in gas demand within the US power sector was noted, primarily attributed to fuel switching and an increase in renewable energy generation. According to data from S&P Global Commodity Insights, gas demand in the power sector averaged 27.8 billion cubic feet per day (Bcfd), marking a year-over-year decrease of nearly 1.9 Bcfd. This decline, the largest since July 2021, occurred despite a trend of rising gas usage over the previous years as it gained market share from coal.
Interestingly, US power demand rose in March compared to the previous year, but this increase was offset by a substantial rise in renewable energy generation. Preliminary data from the Energy Information Administration (EIA) indicated that renewable sources like wind and solar added about 350 gigawatt-hours per day (GWh/d), surpassing the overall demand increase of roughly 300 GWh/d. Moreover, coal-fired generation also grew by approximately 350 GWh/d year-over-year, further reducing the reliance on gas, which saw a 400 GWh/d decrease.
The winter months of January and February also reflected an increase in coal-fired generation. However, the harsh weather conditions during these months kept total power demand high, mitigating the impact on gas-fired generation. Looking ahead, analysts predict that coal generation’s capacity factors will continue to rise through 2025, primarily due to sustained high gas prices.
In March 2025, Henry Hub cash prices averaged $4.07 per million British thermal units (MMBtu), compared to just $1.49/MMBtu in March 2024. It is expected that power sector gas demand will remain about 3% lower year over year in 2025 due to fuel switching. However, analysts caution that the flexibility for switching from gas to coal is diminishing as more coal-fired plants retire, potentially leading to heightened prices during winter 2025-26.