Natural gas production continues to grow during the entire projection period, driven by end-use consumption and opportunities to sell natural gas through LNG exports for international consumption. Large amounts of natural gas are consumed in the United States for various uses, for example space heating in buildings, thermal and feedstock requirements in industrial processes, and natural gas-fired electricity generation that is subsequently delivered as purchased electricity. Natural gas consumption growth between 2020 and 2050 is concentrated in two areas: exports and industrial use. All sectors in the United States are projected to increase natural gas consumption in 2050 relative to 2020 in the Reference case, except the residential sector.
In the AEO2021 Reference case, the industrial sector is responsible for more of the growth in domestic natural gas consumption than any other U.S. sector because of the economic growth driving increased U.S. industrial output, coupled with a limited economic fuel-switching capability. Industrial firms are very price sensitive and tend to continue using natural gas as ample supply keeps industrial pricing attractive in the Reference case projection.
Although natural gas is consumed across the entire U.S. industrial sector, increased production of natural gas as well as low natural gas prices will especially benefit the chemical industry because of its requirements for raw material (feedstocks) and heat and power inputs. The bulk chemical industry, which includes production of organic chemicals (including petrochemicals), inorganic chemicals, resins, and agricultural chemicals, is responsible for almost half of the growth in industrial natural gas demand, including growth in both heat and power and feedstock used in producing methanol, nitrogenous fertilizers, and hydrogen. Most of this growth in liquid feedstock consumption is for hydrocarbon gas liquids (HGL), of which ethane and propane from the natural gas stream are the main components.
Taking advantage of combined-heat-and-power (CHP) technologies, the bulk chemical, refining, and paper industries use the most CHP in the United States because these large industries have high, well-defined heating needs, and therefore, process steam is readily available onsite to use for electricity generation. Low natural gas prices contribute to the increasing use of natural gas-fired CHP technology in the projections. Furthermore, paper and refining also use byproducts of their manufacturing processes as CHP fuel, so use of CHP in these industries tends to increase with output.
In the AEO2021 Reference case, power sector demand for natural gas-fired electricity generation increases at a much slower rate than either exports or industrial demand between 2020 and 2050. Even as natural gas-fired generation increases during the projection period, increased fleet efficiency from natural gas-fired generator additions of new combined-cycle electric generating technologies that operate at high usage levels—coupled with existing, less-efficient natural gas-fired technologies declining in use or retiring from the fleet—slow growth in natural gas consumption. Use of natural gas for transportation steadily increases through 2050 because of the improved economics of natural gas as a fuel for heavy-duty vehicles, but it remains at relatively low levels. The residential sector’s consumption of natural gas is nearly flat, and commercial buildings show low-to-moderate growth, both as a result of final demand growth being tempered by energy efficiency improvements (particularly energy management controls and sensors) in space heating.
In the AEO2021 Reference case, the industrial sector is responsible for more of the growth in domestic natural gas consumption than any other U.S. sector.