Electricity

Electricity Consumption. EIA forecasts total U.S. electricity consumption, including direct use of electricity by combined-heat-and-power plants, will decline by 0.4% in 2020 and remain flat in 2021.

The reduced need for air conditioning in the typical household, partly offset by continued growth in the number of retail electricity customers, contributes to EIA’s forecast that total retail sales of electricity to the residential sector will decline by 0.5% in 2020. EIA expects the average residential electricity customer will use 1.6% less electricity in 2020 than last year, primarily as a result of milder expected summer temperatures. According to data from the National Oceanic and Atmospheric Administration (NOAA), there were 5% more U.S. cooling degree days (CDD) during 2019 than on average over the previous 10 years. NOAA is projecting that CDDs in 2020 will be about 4% lower than the 10-year average. In 2021, EIA expects total sales of electricity to the residential sector to rise by 0.4%.

Milder expected summer weather in 2020 also affects the forecast for retail sales of electricity to the commercial sector. The reduced need for air conditioning in the commercial sector is generally offset by continued economic growth. As a result, EIA’s overall forecast for U.S. commercial sector retail sales of electricity in 2020 is similar to the level in 2019. In 2021, EIA again expects little change in retail electricity sales to the commercial sector.

EIA forecasts that industrial production by electricity-intensive industries will decline by 1.1% in 2020. This decline in industrial production contributes to EIA’s forecast that retail sales of electricity to the industrial sector will fall by 1.1% in 2020. In 2021, EIA forecast retail sales of electricity to the industrial sector will fall by 0.9%.

Electricity Generation. EIA expects 1.0% less total U.S. power generation in the electric power sector during 2020 than in 2019. Electric power sector generation in the forecast falls by an additional 0.3% in 2021. Electricity produced by combined-heat-and-power generators in the industrial and commercial sectors will grow by 1.9% in 2020 and 2.9% in 2021.

The share of U.S. electricity generation supplied by natural gas-fired power plants has increased significantly during the past decade, rising from 23% of total generation in 2010 to an estimated 37% in 2019. This increase in the natural gas share of generation has been offset by reduced generation from coal-fired power plants. Coal supplied 46% of U.S. generation in 2010, compared with an estimated 24% in 2019. Much of this change in the generation mix is a result of sustained low prices for natural gas, which have made it competitive.

EIA expects this trend in the U.S. generation mix will continue in the near term. The electric power sector has added or plans to add 11.4 gigawatts (GW) of generating capacity at natural gas combined-cycle power plants in 2019 and 2020. These additions represent an increase of 4% of the capacity that existed at the end of 2018. In contrast, the industry has retired, or plans to retire, 18.5 GW (8%) of coal-fired capacity in 2019 and 2020. As a result of these changes in generating capacity and fuel prices that continue to favor natural gas, EIA forecasts that the natural gas-fired share of generation will remain fairly steady and close to its 2019 share of 37%, averaging a 38% share in 2020 and 37% in 2021. The forecast share of generation from coal-fired power plants declines to 21% this year, and slightly less than that in 2021.

EIA expects the share of generation from renewable sources will increase from 17% in 2019 to 19% this year and to 22% in 2021. Within the renewables category, hydropower was 7% of total generation in 2019, and EIA forecasts that it will be about that share in 2020 and in 2021. In the forecast, the share of total generation for renewables other than hydropower, which was 10% in 2019, will rise to 12% in 2020 and to 14% in 2021.

According to the latest information about the U.S. inventory of generating capacity, five nuclear reactors are scheduled to retire in either 2020 or 2021. The nuclear share of total electricity generation, which averaged slightly more than 20% in 2019 will be slightly less than 20% by 2021, consistent with upcoming retirements.

Renewables Capacity. EIA forecasts 13 GW of utility-scale solar photovoltaic (PV) capacity will be added in 2020 and 13 GW more will be added in 2021. EIA also expects a total of 11 GW of small-scale solar PV capacity will be installed during 2020 and 2021, mostly in the residential sector. Various state and federal policies support EIA’s forecast solar capacity growth, including California’s requirement that, beginning in 2020, all new home construction has rooftop solar panels.

Tariffs on PV modules imported into the United States started at 30% in January 2018, but they have declined to 20% in January 2020 and are expected to decline to 15% in 2021 and expire completely after 2021. During 2018 and 2019, increases in U.S. domestic module prices were, to an extent, offset by declines in global module prices. This price decline was in response to reductions in China’s domestic PV installation targets and subsequent release of module inventories for global markets. Although global PV module prices showed signs of stabilizing in 2019, the net price impact of the tariffs versus the surplus of modules is uncertain over the short-term forecast.

EIA expects wind capacity will increase from 106 GW at the end of 2019 to 125 GW at the end of 2020 and to 130 GW by the end of 2021. Because wind capacity is often added at the end of the calendar year, increases in generation frequently lag behind increases in capacity for the year they occur in, and they are reflected in the generation for the next year.

In 2019, onshore wind installations grew as many developers worked to meet the deadline on December 31, 2019, to secure the production tax credit (PTC). However, the Taxpayer Certainty and Disaster Tax Relief Act of 2019 that passed in December included a one-year extension to the wind PTC. The legislation extended the PTC through 2020 and restored it to 60% (from 40%) of its full 2.5 cents per kilowatthour (kWh) value for facilities that either enter service or secure 5% safe harboring (spending at least 5% of the total estimated project cost) through the 2020 calendar year. Because of the safe harboring provision, EIA does not expect the extension to have an effect on capacity additions until after the 2021 forecast horizon.

Electricity Prices. EIA expects wholesale electricity prices in many areas of the country in 2020 will be lower than last year, reflecting the lower cost for natural gas as a fuel for power generation. EIA forecasts that wholesale prices in the Southwest will rise 5% this year as a result of the recent retirement of some coal-fired generating units. In 2021, EIA expects wholesale power prices will increase in most areas as a result of an expected 9% increase in the cost of natural gas.

EIA forecasts the U.S. retail electricity price for the residential sector will average 13 cents/kWh in 2020, which is 1.2% higher than the average retail price in 2019. Forecast residential prices increase by an additional 1.2% in 2021.