Electricity, coal, and renewables

Electricity generation
We forecast that U.S. power plants will generate about 4,300 billion kilowatthours of electricity in 2024, which would be 3% more than in 2023, in response to a hotter-than-normal start to summer and increasing power consumption by the residential and commercial sectors. Forecast electricity generation grows by an additional 1% in 2025.

The fastest-growing source of electricity in the United States is solar power. We expect utility-scale solar in the electric power sector to account for 5% of U.S. generation in 2024, up from 4% last year, and to increase to a share of 7% in 2025. Current plans indicate the electric power sector will increase solar generating capacity by 64 gigawatts (GW) (71%) between 2023 and 2025. Similarly, wind power capacity is set to increase 13 GW (9%) over the next two years, but its generation share remains relatively stable at 11% of total U.S. generation.

The intermittent generation patterns of solar and wind are assisted by additions of battery storage capacity, which charge during low-cost periods of the day and generate power during high-cost periods. We expect battery storage capacity will grow by 26 GW (169%) between 2023 and 2025.

Although natural gas continues to provide more U.S. electricity generation than any other source, we expect growing generation from renewables will displace more natural gas over time. The forecast natural gas generation share in 2024 averages 42%, similar to what it was in 2023, and falls to 40% in 2025. We expect coal’s generation share will fall to a record low of 16% in 2024 as a result of recent capacity retirements and lower utilization rates of the remaining coal fleet.

Residential electricity prices
Our forecast growth rate in residential electricity prices this year would represent the slowest rise in electricity rates since 2020. Electricity prices increased by an annual average of almost 7% between 2021 and 2023 as a result of highly volatile natural gas prices, which is the primary fuel used for power generation. We expect that the U.S. price of electricity to residential end-use customers will average 16.2 cents per kilowatthour in 2024, which would be 1% higher than the average price in 2023. The forecast average U.S. price to residential end-use customers increases by about 2% in 2025.

U.S. natural gas prices started falling in 2023, and the resulting lower costs of producing electricity are now being reflected in retail electricity prices after regulatory authorities have approved new rates. Although natural gas prices in our forecast are lower this year than they were from 2021 through 2023, other factors continue to cause electricity prices to rise. Electricity rates also reflect costs for delivering electricity to end-use customers. Utilities have faced increased costs for building new transmission lines and distribution upgrades in recent years, which are offsetting declines in fuels prices.

Coal markets
For 2024, we forecast that coal production in the United States will total about 500 million short tons (MMst), a 14% decline from last year, and we forecast a further 5% dop in production in 2025. Although coal exports in our forecast remain robust, ongoing declines in coal production are the result of less coal being used to generate electric power domestically due to relatively low natural gas prices and 12 GW of coal-fired electricity generating capacity going into retirement.

We expect the U.S. electricity power sector will consume 384 MMst of coal this year, 1% less than it did in 2023. We expect the power sector will consume an additional 2% less coal next year. With U.S. coal production falling more quickly than coal consumption, we expect that coal will be consumed from inventories next year. The U.S. electric power sector’s coal inventories stood at 120 MMst at the end of July, and we forecast those inventories will be reduced to 118 MMst at the end of 2024 and 84 MMst at the end of 2025.