The U.S. Energy Information Administration (EIA) released the report “Trends in U.S. Residential Natural Gas Consumption” last week detailing a long term decline in residential demand. From 1990-2009, average residential consumption has decreased 22% from 95 mcf down to 74 mcf in ’09. Residential demand has decreased 16 out of the past 19 years. Below, see a chart cited in the report.
Key drivers of this long term trend include improved building standards since 1987 that have required greater use of insulation and tighter construction. Other factors such advances in technology in natural gas appliances and space heating equipment, population migration to the South and Southwest as well as a decline in the number of consumers who use natural gas as their primary heating fuel have all contributed to this decline. EIA forecasts this trend to continue through 2015.
What does all this mean for power demand? The decline in residential natural gas consumption makes available greater amounts of gas for power generation. With declines in the industrial sector’s use of natural gas occuring at the same time, the power sector is the one end user that can consume surplus gas. Coming on line in the next few years will be an expanding supply of new shale gas, adding further potential competition for storage space. The maturity of Smart Grid techonology has the potential to further reduce residential demand for natural gas. These trends point to a gas market that will be able to meet demand and further put pressure on gas fired generation to displace coal fired generation.
Risks to this assessment include increased regulation and taxation of shale gas production that could limit growth of supply, further reductions in Canadian imports or further declines in Gulf of Mexico production.
To view the full EIA report: http://www.eia.gov/pub/oil_gas/natural_gas/feature_articles/2010/ngtrendsresidcon/ngtrendsresidcon.pdf