Electricity, coal, and renewables

Electricity consumption
Summer temperatures this year were warmer in the United States than last summer, especially in the upper Midwest and Northeast regions, which helped to push up U.S. electricity demand. We expect 2% more U.S. sales of electricity to ultimate customers in 2024 than in 2023, followed by another 2% forecast increase in 2025.

We expect electricity sales to increase across economic sectors. In 2024, electricity use increases the most in the residential and commercial sectors. We expect 3% more electricity consumption in the U.S. residential sector than last year, which mostly reflects the hot summer this year. Changes in temperature have the most effect on electricity use by residential customers. Forecast residential electricity sales increase by just 1% in 2025 along with our expectation that summer temperatures next year will be closer to the 10-year average.

Commercial sector electricity use is rising this year because of warmer temperatures as well as increasing demand from data centers in some regions. We expect commercial electricity sales will increase by 3% this year followed by a 1% increase in 2025.

We expect U.S. electricity demand to grow fastest in 2025 in the industrial sector, almost 4%, after growing only 1% in 2024. The electricity demand expected from some new battery and semiconductor chip manufacturing facilities that are currently under development contributes to our forecast increase in industrial sector electricity sales next year.

Electricity generation
New solar photovoltaic power projects are driving our forecast that solar will be the fastest-growing source of electricity in 2024 and 2025. We expect that the share of total U.S. electricity generation from solar will grow from 4% in 2023 to 5% in 2024 and to 7% in 2025.

Although we expect the amount of U.S. solar generating capacity will approach the amount of U.S. coal-fired capacity by the end of 2025, coal power plants tend to run at higher utilization rates over time. We expect that coal will account for about 16% of total U.S. generation in 2024 and 2025, down from 17% last year. Increasing generation from new solar is likely to most affect natural gas generation, which we expect will fall from 42% of U.S. generation in 2024 to 39% in 2025. In addition to the effect of more solar generation, we expect less natural gas generation in 2025 as a result of rising natural gas prices as well as very little new generating capacity coming online.

Coal markets We expect 12% less coal will be consumed in the electric power sector during October than in September, when power sector coal consumption dropped 22% from August. The drop in coal consumption typically happens during the September and October shoulder season , which reduces overall electricity generation, and as natural gas prices remain at competitive levels. We forecast a 3% increase in U.S. power sector coal consumption in November, and then a sharper 32% increase in December, as the winter season begins, power demand rises, and forecast natural gas prices approach $3.20/MMBtu in December while coal prices remain relatively low.

Although coal remains a significant fuel source for U.S. power generation in the mid-Atlantic and Midwest, natural gas has become more cost competitive with coal over the past decade due to the greater thermal efficiency of combined-cycle natural gas turbine plants. The higher energy yield that comes with lower heat rates means that the effective price of natural gas relative to coal is even lower than the nominal price indicates. However, with increases in electricity demand expected from the growth of data centers and other sources, we expect overall electric power sector coal consumption to increase from this year, even as coal production declines in 2025. As a result, we expect coal inventories held by electric power plants to fall to about 100 MMst by December 2025 from 130 MMst at the end of 2024.