Electricity, coal, and renewables

Electricity generation
Growing U.S. demand for electricity is spurring more generation. In 2024, electricity generation from the U.S. electric power sector grew by 3%. We expect U.S. power plants will generate about 4,240 billion kilowatthours (kWh) of electricity in 2025, up 2% from last year, with growth of another 1% in 2026. If U.S. electricity generation grows in each of the next two years, it would mark the first three years of consecutive growth since 2005–2007.

Increased generation from renewable energy is the main contributor to growth in U.S. electricity generation over the Short-Term Energy Outlook forecast. In particular, the share of total U.S. generation from utility-scale solar power grows in the forecast from 5% in 2024 to 7% in 2025 and 8% in 2026 as a result of an expected 45% increase in the amount of solar generating capacity between 2024 and 2026. The forecast share of generation from wind stays relatively flat in 2025 at 11% but grows to 12% in 2026. Our forecasts for increases in solar and wind generation are based on the planned generator projects reported to us in our Preliminary Monthly Electric Generator Inventory.

The relatively rapid increase in the share of U.S. generation from solar is likely to reduce generation from traditional fossil sources. Most of the reduction in fossil fuel generation will be from natural gas, currently the largest source of U.S. electricity, because of forecast increases in natural gas prices. We expect the share of U.S. generation from natural gas to fall from 43% in 2024 to 40% in 2025 and to 39% next year. Coal supplied 16% of U.S. electricity last year and we expect it to continue to supply between 15% and 16% in the forecast.

Residential electricity prices
We forecast that retail electricity prices for the residential sector will rise 3% in 2025, which is about the same as the expected rate of inflation. This increase would be the lowest annual increase in residential electricity prices since 2020. The price increase mostly reflects continuing expenses for improvements in grid infrastructure. We forecast residential electricity prices to again grow by 3% in 2026.

Coal markets
Cold weather increased U.S. coal consumption in January, particularly in the midcontinent and mid-Atlantic regions that rely on coal for a significant portion of their electric power generation. The U.S. electric power sector consumed 7% more coal in January than in January 2024. As a result, we have increased our forecast of electric power consumption of coal to 386 million short tons (MMst) in 2025, 4% more than 2024. More coal consumption this year is the result of our expectation of more U.S. power generation and higher average natural gas prices in 2025 than in 2024. We expect electric power consumption of coal to decrease to 368 MMst in 2026 following an expected increase in coal plant retirements in December 2025.

The rise in coal consumption in January led U.S. coal plants to draw down stockpiles by 11 MMst. At the end of January, the power sector held 114 MMst of coal stocks, which is 6 MMst less than we had expected in last month’s forecast. We expect power sector coal stocks will fall to 91 MMst by the end of the year as U.S. coal production falls by 7% in 2025 while U.S. consumption rises by 3%.

Following China’s imposition of an additional 15% tariff on imports of U.S. coal, along with the temporary idling of the Leer South metallurgical coal mine in West Virginia, we reduced our forecast of U.S. coal exports to 102 MMst in 2025, compared with 104 MMst in the January STEO. The adjustment reflects our assumption that the Leer South mine will not resume to full production until mid-2025 and the tariff on U.S. coal by China remains in place through 2025. The adjustment also assumes that coal exporters will be able to find alternative customers for coal originally destined for China.

Although we expect coal consumption to fall 4% while production remains steady in 2026, we forecast a drop in inventories held in the electric power sector to 68 MMst as exports remain robust at 101 MMst. Our forecast for coal exports is subject to volatility due to various factors, chief among them China’s potential tariff policies.