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Short-Term Energy Outlook

Release Date: Jan. 11, 2022  |  Forecast Completed: Jan. 6, 2022  |  Next Release Date: Feb. 8, 2022  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Electricity

Electricity consumption. We forecast that consumption of electricity in the United States, including retail sales and direct use of electricity, will increase by 0.6% in 2022 and 1.4% in 2023. Preliminary data indicate that electricity consumption grew by 2.0% in 2021, and year-over-year growth was fastest in the first half of last year when the economy began to return to pre-pandemic patterns.

Year-to-year changes in residential electricity consumption are most related to changes in temperature, often measured using heating degree days (HDDs) and cooling degree days (CDDs). In 2021, retail sales of electricity to the residential sector grew by 1.2%. Most of this growth last year occurred in 1Q21 when residential electricity consumption grew by 11% from the same quarter in 2020 in response to colder weather. Part of this increased residential consumption during the first quarter may also have reflected changing patterns of electricity use as more people work from home compared with the months in 1Q20 before the pandemic. Residential electricity sales during the last three quarters of 2021 averaged about 1.8% less than the same period in 2020.

In 2022, our forecast include 6.5% more HDDs for the United States than last year, with most of that increase occurring in 4Q22 compared to a mild start to this winter. The increase is less in the southern area of the country where heating with electricity is more prevalent. Cooler temperatures during the summer months of 2022 throughout most of the country (6.4% fewer CDDs) than in 2021 would lead to less use of air-conditioning. The effect of cooler forecast summer temperatures offsets the effect of a colder forecasted 4Q22, leading to an overall 2.2% decline in annual residential retail sales of electricity in our forecast during 2022. We expect residential electricity sales to grow by 2.1% in 2023.

The colder winter weather early in 2021 led to more electricity consumption in the commercial sector, but economic activity and growth in private-sector jobs were still limited at that time. The number of people employed during 1Q21 was 5.6% lower than during the same period in 2020; however, employment during the last three quarters of 2021 returned to an average of 5.8% year-over-year growth. As a result, retail sales of electricity to the commercial sector grew by an estimated 2.7% in 2021. For 2022, we forecast commercial sector electricity use to grow by 1.7%, reflecting the effect of continued economic growth offset somewhat by expected milder summer temperatures this year. We expect commercial sector electricity consumption to grow by 0.4% in 2023.

The U.S. industrial production index for electricity-intensive industries increased by 5.9% in 2021 after declining by 6.4% in 2020. This increase helped to raise U.S. retail electricity sales to the industrial sector by an estimated 2.9% last year. We expect the electricity-weighted industrial production index to grow by 4.1% and 2.5% in 2022 and 2023, respectively, leading to forecast growth in U.S. industrial sector electricity use of 2.8% in 2022 and 1.7% in 2023.

Electricity generation. Electricity generation by the U.S. electric power sector grew by an estimated 2.9% in 2021 after having fallen 2.9% in 2020, which was the largest decline in generation since 2009. We expect the U.S. electric power sector will generate about the same amount of electricity in 2022 as in 2021. Total electric power sector generation in the forecast grows by 1.3% in 2023.

Up until 2021, U.S. coal-fired electricity generation had fallen every year since 2014. However, we estimate that coal generation in 2021 grew by 17%. Some of this increase was a result of the overall increase in U.S. electricity demand last year after the pandemic-related decline in 2020, but most of the increase in coal generation last year was in response to natural gas prices that have been much higher than in past years. We estimate that the cost of natural gas delivered to U.S. electric generators in 2021 averaged $4.88/MMBtu, twice the average cost in 2020. Higher fuel costs also contributed to an estimated 3% decline in U.S. natural gas generation in 2021.

U.S. electricity generation

We expect the delivered cost of natural gas for electricity generation will fall to an average of $4.10/MMBtu in 2022. However, that price remains higher than the average price in recent years. Despite a forecast of lower fuel costs, U.S. natural gas generation is likely to decline in 2022 as rapidly growing renewable energy sources produce more generation. We forecast the share of total U.S. generation from natural gas will average 35% in 2022, down from 37% in 2021. The decline in natural gas generation is especially pronounced in Texas, where a large amount of solar and wind capacity is scheduled to come online.

Lower natural gas prices also tend to discourage generation from coal, and we forecast the U.S. coal generation share to average 22% in 2022, which is slightly below last year. This forecast decline in coal generation is largest in the Northeast and western areas of the country.

We expect the share of generation from renewable sources will increase from 20% in 2021 to 23% in 2022 and to 24% in 2023. We expect most of the increase in renewables generation will come from new solar and wind capacity expansions in the electric power sector. We forecast that hydropower will fuel about 7% of generation in both 2022 and 2023. In 2021, the drought affecting the West restrained electricity generation by hydropower. U.S. hydropower generation contributed about 6% of the total in 2021, which is the lowest share since 2015. In the forecast, the share of total generation for renewables other than hydropower, which was 13% in 2021, rises to 16% in 2022 and to 17% in 2023.

In April 2021, New York’s Indian Point nuclear power plant retired. This retirement contributed to the reduction in the nuclear share of U.S. total generation from 21% in 2020 to 20% last year. The Palisades nuclear power plant in Michigan is scheduled to retire in the summer of 2022. However, we expect the amount of U.S. nuclear generation will remain relatively steady in the forecast as two reactors at the Vogtle plant in Georgia are scheduled to come online in 2022 and 2023.

Over the next two years, our forecast of the U.S. electricity generating capacity from renewable sources continues to grow. Growth in wind capacity begins to moderate, but growth in solar capacity remains strong. Since 2019, more non-hydropower renewables capacity has been added to the U.S. generation fleet than natural gas capacity. This trend continues during the forecast period; operators report 29 gigawatts (GW) of planned utility-scale solar and wind capacity additions in 2022 and 28 GW in 2023. Preliminary data indicate that operators plan to add 5 GW of battery storage capacity in 2022 and 5 GW in 2023, annual increases of 84% in 2022 and 47% in 2023. Most planned battery storage additions will be paired with solar capacity.

U.S. renewable energy supply

We forecast that in 2022 additions of utility-scale solar capacity in GW will exceed wind additions for the first time. We expect that 21 GW of solar photovoltaic (PV) capacity will be added by the electric power sector in 2022. We forecast an additional 25 GW for 2023. We forecast small-scale solar PV capacity will increase by about 5 GW in 2022 and by a similar amount in 2023. Residential PV accounts for 70% of this additional small-scale solar PV capacity for 2022 and 64% for 2023.

Preliminary data indicate that solar PV capacity additions continued in 2021 despite tariff and supply chain issues. Forecast solar capacity growth reflects various state and federal policies to support renewable energy. We expect growth to continue over the forecast period, supported by the solar investment tax credit (ITC) under the Consolidated Appropriations Act. Under the ITC, projects that start in 2022 are eligible for a 26% tax credit. The credit drops to 22% for projects that start in 2023. States such as Texas and Florida are set to add significant solar PV in the next two years.

Wind capacity in the electric power sector grows by 7 GW in 2022 in our forecast and by an additional 4 GW in 2023. This growth in forecast wind capacity for 2022 and 2023 marks a decline from the record of 17 GW added in 2021, which surpassed the previous record of 14 GW set in 2020. This slowing growth in wind can be partly attributed to the phasedown of the production tax credit (PTC) and supply chain issues. The PTC, which at the end of 2020 was extended through the 2021 calendar year, provides a 2.5 cents per kilowatthour (kWh) benefit for facilities entering service or securing 5% safe harboring (spending at least 5% of total estimated project cost). Producers of safe harbored projects are able to claim the PTC four years after they qualify.

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.

Electricity prices. Wholesale electricity prices throughout the country trended higher in 2021, reflecting the increasing cost of natural gas for power generation. Last year, average annual wholesale prices ranged from $38 per megawatthour (MWh) in Florida to $190/MWh in Texas, though the Texas average would be $43/MWh excluding February when severely cold temperatures caused hourly prices to surge in excess of $6,000/MWh. We expect 2022 average wholesale electricity prices at trading hubs in the eastern part of the country will generally be higher than in 2021, with the exception of PJM, where we expect prices will be mostly unchanged. In the central and western areas, we expect wholesale prices will be lower at most hubs in 2021, with the exception of California where we expect slightly higher prices.

We forecast the U.S. retail electricity price for the residential sector will average 14.2 cents/kWh in 2022, which is 3.8% higher than the average retail price in 2021. Forecast residential prices remain relatively constant in 2023.

U.S. electricity prices

U.S. Electricity Summary
  2020202120222023
aConventional hydroelectric power only. Hydroelectricity generated by pumped storage is not included in renewable energy.
bIncludes electricity and heat generation
cOther renewables includes biofuels production losses and co-products
Retail Prices (cents per kilowatthour)
Residential Sector 13.1613.7014.2214.30
Commercial Sector 10.5911.2611.6711.81
Industrial Sector 6.677.207.197.16
Power Generation Fuel Costs (dollars per million Btu)
Coal 1.921.981.941.81
Natural Gas 2.404.884.103.91
Residual Fuel Oil 9.1513.3614.0512.81
Distillate Fuel Oil 10.8915.5717.4715.99
Generation (billion kWh)
Coal 773.39902.73879.05875.36
Natural Gas 1,624.051,574.391,494.251,477.57
Nuclear 789.88779.76781.78789.87
Conventional Hydroelectric 285.27258.43277.86284.08
Renewable (non-hydroelectric) 497.75564.08646.51705.85
Total Generation 4,007.644,117.724,117.324,170.66
Retail Sales (billion kWh)
Residential Sector 1,464.611,482.741,450.581,480.40
Commercial Sector 1,287.441,322.701,344.821,350.79
Industrial Sector 959.08987.051,014.311,031.96
Total Retail Sales 3,717.673,798.873,816.053,869.44
U.S. Renewables Consumption (quadrillion Btu)
Geothermal 0.2030.2050.2070.197
Hydropowera 2.5032.2772.4742.530
Solar 1.2111.4981.9072.389
Waste Biomass 0.4400.4310.4260.427
Wind 3.0023.3593.7963.929
Wood Biomass 2.0812.0942.1172.133
Electricity Subtotalb 9.4249.85810.88911.562
Biomass-based Diesel 0.2760.2660.3130.315
Ethanol 1.0451.1491.1791.194
Biofuels Subtotal 1.3211.4081.4931.509
Otherc 0.6990.7370.7820.782
Total 11.44411.99713.16413.853

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Related Figures
U.S. electricity consumption XLSX PNG
U.S. residential electricity price XLSX PNG
U.S. electricity generation by fuel, all sectors XLSX PNG
U.S. renewable energy supply XLSX PNG
U.S. carbon dioxide emissions growth XLSX PNG
U.S. summer cooling degree days XLSX PNG
U.S. winter heating degree days XLSX PNG
U.S. census regions and census divisions XLSX PNG
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