In contrast, residential electricity sales is forecast to grow by 3% this summer because more people are working from home and following social distancing practices.
Weather factors normally large determine electricity demand over the summer but this year other factors have a greater impact on demand: Although state and local governments are relaxing stay-at-home orders, social distancing guidelines will likely result in Americans spending more time at home than usual this summer. In addition, many people that had worked in offices are now working from home, shifting electricity demand from the commercial sector to the residential sector.
All eyes on employment
Macroeconomic indicators, especially on employment, are key drivers for the EIA’s energy demand projections. EIA’s short-term economic assumptions are based on the macroeconomic model from IHS Markit. This model projects non-farm employment will fall by 13% in 2020 and that the electricity-weighted industrial production index will contract by 12% in 2020.
Ample supply of cheap domestic natural gas, combined with depressed demand, will accelerate coal-to-gas switch in the electric power sector. Analysts expect the contribution of coal will fall, with coal-fired plants seen generate 178 billion kilowatthours (kWh) between June and August 2020, down from 272 billion kWh last summer.
The EIA expects coal’s share in the US power generation mix will fall from 24% of the electricity generated during summer 2019 to 17% this summer, when the contribution of coal power will be lower than nuclear generation at 207 billion kWh.
Gas-fired power plants, meanwhile are seen generate 467 billion kWh this summer, slightly higher than the 460 billion kWh last year. Forecast natural gas prices remain low this summer, making it relatively more economical than coal for power generation.
The share of natural gas in the US power mix is consequently seen rise from 41% last summer to 44% in summer 2020. Renewables also increase market share. Strong wind and solar additions in the Midwest and Texas is likely to drive up the share of wind power to 7% this summer and utility-scale solar to 3%, the EIA says in its summer 2020 electricity industry outlook.