Despite significant efforts by the government to expand wind and solar energy, natural gas and coal continue to provide more than half of the United States’ electricity. These traditional energy sources accounted for 58% of U.S. electricity generation during the first eight months of this year, according to LSEG data. This is a slight decrease from 60.4% over the same period in 2021, as reported by Reuters’ Gavin Maguire. However, the absolute output from coal and gas plants has increased, meaning these sources are supplying more electricity than they did in 2021, even though their share of the total output has slightly dropped.
The main reason for this continued dominance is the rising demand for electricity and the limitations of wind and solar power. Wind and solar energy depend on weather conditions and cannot provide power on demand without large-scale battery storage, which is still not economically feasible. As a result, the grid remains dependent on the reliable, around-the-clock power provided by coal and gas plants.
Population growth and the increasing use of artificial intelligence are significant factors driving up electricity demand. The Energy Information Administration reported in June that U.S. electricity demand had rebounded post-pandemic, with notable growth in states expanding large-scale computing facilities, such as data centers. These data centers and AI applications are creating substantial challenges for the energy transition by increasing electricity demand and straining current infrastructure. Moreover, constructing the necessary data centers requires raw materials, further adding to electricity demand.
In this context, natural gas is seeing rising demand. The International Energy Agency’s December report highlighted a notable increase in natural gas use due to lower gas prices, coal plant retirements, reduced wind and hydropower output, and high cooling demands in certain regions. Gas reached 45% of total generation during the summer months of 2023.
The demand for gas is expected to grow further, driven by increasing electricity needs. Despite the growth in solar and wind energy capacity, new gas-fired power plants are less popular due to their environmental impact. The Federal Energy Regulatory Commission’s data revealed that only 67 megawatts (MW) of new natural gas capacity was added in the first four months of this year, compared to 5.1 gigawatts (GW) during the same period in 2023. In contrast, solar power additions during this period were 7.9 GW, up from 3.8 GW the previous year.
Building new natural gas plants has become more challenging due to updated EPA emissions regulations, which impose costly and stringent requirements. However, this may change due to the increasing demand for reliable power from technology companies. Doug Kimmelman of Energy Capital Partners noted that gas remains the only cost-effective option for providing continuous power needed for the AI boom.
As the push for electrification of transport, heating, and cooking continues, it will further strain the grid and increase demand for hydrocarbons. Although electrification is crucial for reducing emissions, it also intensifies electricity demand, which wind and solar alone cannot fully meet. This creates a paradox where the transition to cleaner energy sources relies on increasing the use of natural gas and, to a lesser extent, coal. In essence, while the shift to renewables is necessary, the transition process itself depends on continuing use of hydrocarbons.