Electricity, coal, and renewables

Electricity generation
As a result of growing U.S. demand for electricity, especially in the commercial and industrial sectors, we expect that the U.S. electric power sector will generate 2% more power in 2025 compared with 2024—an increase of 100 billion kilowatthours (kWh)—and then grow by 1% next year.

Although natural gas remains the largest source of electricity generation in the United States, we expect that generation from U.S. natural gas-fired power plants will decline by 3%—or 58 billion kWh—this year from 2024. The main reason for less expected natural gas generation is rising prices for the fuel compared with last year’s historic lows. We forecast that the price of natural gas delivered to power generators will average $4.50 per million British thermal units in 2025, up 63% from the average price in 2024.

The higher natural gas prices encourage more generation from coal, which we expect will increase by 6% (41 billion kWh) in 2025. Last month, the Environmental Protection Agency (EPA) announced a temporary exemption of emissions regulations for a number of coal-fired power plants. These relaxed constraints could encourage more coal generation in the near-term, especially in tandem with higher fuel costs at competing natural gas-fired power plants.

Coal-fired power plant operators are currently reporting that they plan to retire about 5% of their generating capacity in 2025, but most of that will occur at the end of the year. As a result, we expect coal generation will fall by 9% in 2026 (61 billion kWh). Some provisions of a recent Executive Order intended to support the coal industry could affect retirement decisions in coming months, creating an area of uncertainty in our forecast.

Solar generating capacity
The largest increases in electricity generation come from utility-scale solar power plants. We forecast that U.S. solar generation will increase by 34% (74 billion kWh) in 2025 and by 18% (52 billion kWh) in 2026. The increase in generation from solar power plants is also limiting growth in natural gas-fired generation this year.

Solar photovoltaic generating capacity has been expanding rapidly in recent years, and we expect utility-scale capacity to increase by about 60 gigawatts (GW) over the next two years, reaching 180 GW by the end of 2026. The expected annual additions in 2025 and 2026 would be similar to the 31 GW of solar capacity added last year.

Coal markets
We have revised our forecast of U.S. coal production upward from last month’s STEO, and we now expect the United States will produce 506 million short tons (MMst) this year. Increased expectations for coal production are largely driven by recent inventory drawdowns and our expectation of more coal consumption in the electric power sector. Stronger production in our forecast follows an increase of 18% in coal consumption in January and February of this year compared with the same months in 2024.

Despite higher consumption in 1Q25, coal production was unchanged from a year earlier, and coal-fired power plants withdrew coal held in stockpiles. U.S. power sector coal stocks fell from 128 MMst in December 2024 to 107 MMst in February, before rising to 117 MMst in March as the shoulder season began. Although natural gas prices have decreased over the past two months, we expect natural gas prices to remain above 2024 levels through 2025 and 2026, supporting the dispatch of coal-fired power plants in 2025.

We expect that increases in production will begin to catch up with increases in consumption in 2Q25. With coal consumption forecast to rise 4% in 2025 compared with 2024, and coal stocks at U.S. power plants below where they were at this time last year, we expect coal production will rise by 9% in 2Q25 versus the same time last year.

With coal-fired power plant retirements expected to increase later in 2025, we forecast an 8% decline in coal consumption in 2026, leading to a 6% decline in coal production, which we expect to fall to 475 MMst in 2026. We expect the power sector will continue to draw down coal stockpiles next year, with stocks falling from 116 MMst at the end of this year to 112 MMst by the end of 2026.