Originally published for customers March 6, 2024.
What’s the issue?
Among other trends observed in historic and estimated power generation capacity, net natural gas capacity may decrease in 2024 for the first time, partially driven by a drastic reduction in planned new capacity.
Why does it matter?
Despite plateauing natural gas capacity additions and retirements potentially beginning to chip away at net capacity, the United States is producing more power from natural gas than ever before, with nearly a 7% increase in 2023.
What’s our view?
The United States is approaching an inflection point in relation to its continuously increasing reliance on natural gas generation and reductions in nameplate capacity. These conflicting trends cannot continue forever.
After bringing over 40 Gigawatts of capacity online in 2023, the most for a single calendar year in two decades, operators are forecasting even more newly operational generation capacity in 2024. Conversely, after retiring 15 GWs of nameplate capacity in 2023, operators anticipate only 6.3 GWs of retirements in 2024, which would be the lowest amount of retirements in over a decade, and the most drastic year-over-year percentage decline in retirements since the U.S. Energy Information Administration (EIA) began tracking this data in the relevant filings.
With power generation at the center of the United States’ evolving energy landscape, significant changes to our generation capacity, as well as its composition, can have rippling effects throughout the entire industry. Today we take a closer look at recent trends in power generation additions and retirements, and set the scene for what to expect in 2024.
To analyze historical and expected generation capacity changes, we collected data from the EIA, which aggregates information about existing and planned generators at electric power plants with one megawatt or greater of combined nameplate capacity on both an annual and monthly basis. We focused on the December filing from each year to quantify operator expectations for the following calendar year, and referenced the most recently available filing for historic trends. For preliminary 2023 power generation statistics we reference similar filings from the EIA.
Solar’s dominance in new capacity additions not only continued into 2023, but has grown. Solar led capacity additions in 2022, comprising 35% of all additions and outpacing the next highest, wind, by 7%. However, in 2023, solar accounted for a staggering 44.6% of all capacity additions, doubling the contributions of the next highest technology, which was actually natural gas, at 21.6% of capacity additions. The composition of new wind capacity has steadily declined since 2020 when it led all technologies, and reached only 15.4% of new capacity for 2023. Battery capacity additions have shown the opposite trend, consistently growing from only 8.7% of additions in 2021 to 15.3% in 2023. Natural gas additions have remained relatively stable, consistently hovering around 20% of new capacity since 2021.
The graph below illustrates the capacity additions by technology since the start of 2021, alongside preliminary annual estimates referenced from the preceding year’s December filing, as denoted by dotted lines.
Also depicted above are the estimated capacity additions for 2024. As previously mentioned, operators anticipate even more new capacity in 2024, totaling 63 GWs, up from 40 GWs in 2023. Even if we consider that only about 75% of planned capacity additions were realized in 2023, if operators can bring a similar ratio of planned generators online, we could potentially see 47 GWs added in 2024.
Based on 2024 estimates, solar’s dominance continues to grow, comprising 58% of planned capacity additions for the year. Wind additions continue to dwindle, down to only 13% of the estimated additional capacity for 2024, while battery additions maintain their upward trajectory, reaching 22.7% of estimated new capacity for the year. While natural gas consistently accounted for around 20% of new capacity additions in recent years, operators only attribute 4.4% of new capacity planned for 2024 to natural gas. If realized, this would mark the lowest ratio of natural gas capacity additions since 1985, when coal dominated the energy landscape.
The relatively high amount of coal and natural gas retirements continued into 2023, with 9.5 GWs and 5.1 GWs respectively. According to operator estimations, there will be a 57% decrease in retirements in 2024, with 2.6 GWs of planned coal retirements and 3.2 GWs of planned natural gas retirements. While current 2025 estimations imply a return to higher levels of retirements, 2024 marks a notable divergence from the past decade’s trend. However, it is important to note that the gross retirement capacity for a given technology is only half of the equation. For a more complete picture,we subtract capacity retirements for a given year from the same year’s capacity additions, and divide by the given technology’s total generation capacity at that point in time. The result provides the net percent change in generation capacity, which we show in the visual below:
While the reduction in capacity planned for retirement in 2024 is obvious, it is worth noting the change in natural gas net capacity from previous years, marking the first instance of a decrease in net natural gas capacity. If operator estimates are realized, there will be 0.4 GWs more of natural gas capacity retired than brought online in 2024. While this constitutes a relatively small portion of total capacity, merely 0.044%, it could mark the beginning of actual decreases in net natural gas generation capacity in the United States.
Furthermore, while the overall retirement numbers are low for 2024, they can be concentrated, potentially impacting relevant regions. Below, we visualize the percentage of each state’s coal and natural gas generation capacity that is being retired, both for past years and estimated for 2024.
In 2023, Virginia retired just over two-thirds of its total coal generation capacity, evidently aligning with the climate goals set by the Virginia Clean Economy Act. Eight other states also retired a non-trivial amount of their coal capacity in 2023, ranging from 5% in Iowa to 27% in Minnesota. Planned retirements in 2024 are not only reported in much lower numbers, but are also attributed to entirely different states, with the exception of Pennsylvania. This suggests that states will not simply retire plants consistently and continuously, rather, retirements may occur more ad hoc or in batches to meet specific climate initiatives and related state legislation.
Natural gas retirements in 2023 were relatively less impactful and more dispersed compared to coal retirements, with 13 different states reporting retirements to some extent. These ranged from reductions in tenths of a percent in Alabama and Florida to more significant reductions in Maine, which reported a 15% reduction in natural gas capacity. It is worth noting that Maine had a low natural gas generation capacity to begin with, at 1.5GW, meaning the relatively low amount of retiring capacity had a more significant impact.
Planned natural gas retirements in 2024 are more concentrated, with Massachusetts and Tennessee expecting 20% and 15% reductions in their natural gas capacity, respectively.
While nameplate capacity of operational generators provide insight into future power generation trends, it is worth considering actual power generation numbers in order to ground ourselves in the current reality of our generation composition.
Below, the percent difference between natural gas power generation in 2022 and 2023 is visualized on a state-by-state basis:
In 2023, the majority of states, including nearly the entire Midwest, actually produced more power from natural gas compared to 2022. Despite plateauing natural gas capacity additions and retirements potentially beginning to chip away at net capacity, the United States is producing more power from natural gas than ever before, with nearly a 7% increase in 2023.