We compile information about existing and future capacity on our Preliminary Monthly Electric Generator Inventory , which is based on our monthly survey . When companies report plans for future capacity on these surveys , the projects are generally already in the development process . Although projects may experience delays , the majority of projects reported as future builds eventually come online .
We forecast coal generation to decline this year because the power sector is starting out 2023 with about 5 % ( 11 GW ) less coal-fired capacity than at the beginning of 2022 . U . S . natural gas-fired capacity rose by 3 GW over the past year , but that represents a less than 1 % increase . Unlike electricity generation from renewable sources , generation from natural gas and coal are more affected by relative fuel costs .
Two leading factors that make our electricity forecasts especially uncertain are future weather and fuel costs . Our forecast uses temperature outlooks from the National Oceanic and Atmospheric Administration . Temperatures directly affect overall electricity demand .
Electricity demand typically peaks in the summer when homes and businesses use air conditioning . Over the last 10 years , July 2020 saw the most monthly population-weighted U . S . cooling degree days at 397 cooling degree days ; the most heating degree days were in January 2014 , at 971 heating degree days . Electricity demand increases less during winter months because about 40 % of U . S . households use electricity for their primary space heating needs .
Variability in weather also leads to uncertainty in renewable generation . Our forecast assumes historically typical operating conditions for wind and solar , but weather conditions can cause output from both sources to vary significantly . Similarly , variations in precipitation can lead to uncertainty in hydropower generation . In 2021 , California ’ s drought caused the state ’ s hydropower output to fall 48 % below the previous 10-year average . More recently , precipitation along the West coast increased snowpack , which will likely lead to higher-than-normal hydroelectric generation in California this year .
Natural gas prices are one of the primary factors that determines generation levels from existing coal and natural gas-fired power plants . Natural gas prices have also been one of the most uncertain aspects of the STEO forecast . In the past two months , the daily spot price of Henry Hub natural gas ranged from $ 7.20 per million British thermal units ( MMBtu ) in mid-December to $ 2.65 / MMBtu at the end of January .
In our current outlook we forecast the Henry Hub price to rise slightly throughout 2023 , from $ 3.05 / MMBtu in February to $ 4.11 / MMBtu in December . However , if natural gas prices are higher than we expect , natural gas-fired generation could decline and coal generation could remain relatively flat . Release Date : February 7 , 2023 . l FON
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