Is U.S. Natural Gas Headed Toward Excess Supply?

Several recent analytical studies, sponsored by EPRI, indicate that there is a plausible scenario that gas supplies will increase and that excess gas supplies could emerge over the intermediate-term, perhaps within two years.

This relatively plausible scenario represents a significant departure from the popular trade press and has a number of implications for both the power and natural gas industries. Chief among these implications is the likelihood for price moderation and the impacts that such price moderation could have on various facets of both industries.


In the United States, natural gas is used for nearly 20% of electric utility generation, yet it accounts for 55% of the industry’s entire fuel expense ($50 billion out of $91 billion in 2005). Over 200,000 MW of gas-fired capacity was added between 2000 and 2006. The majority are combined-cycle units. While those new units have operated at only 33% capacity utilization (annual averages for the past three years), the power sector’s demand for gas has been growing as more and more units have gone online.

Presentations on the studies of natural gas supply were made to the EPRI-EEI Annual Power and Fuel Supply Seminar late last year. In addition, the studies are summarized in a recent issue of the EPRI newsletter Energy Markets and Generation Response.

Electric Power Research Institute