Will summer heat help gas power burns overcome price and renewable headwinds?

In January, with Henry Hub spot prices averaging above $4.60/MMBtu, gas-fired generation's share of the thermal stack fell to 65%, the second-lowest monthly average since the 2022 price surge. Fast forward to May, and although prices have dipped to around $3.15/MMBtu, gas' share has only climbed to 69%. That’s still six percentage points below last May, when prices were closer to $2/MMBtu. 

What’s behind the numbers?

Gas-fired power demand so far in May is averaging 12% below last year. Several factors are at play: relatively higher gas prices, milder weather, and continued renewable generation capacity growth, all contributing to weaker gas demand for power generation.

One side effect? Higher prices are limiting coal-to-gas switching, which has opened the door for a robust storage injection season. In fact, injection rates are setting records this shoulder season.

Looking ahead

Weather forecasts for the coming summer are skewing warmer than normal, but even with above-average heat, gas burn for power is unlikely to reach last year’s record levels. Price sensitivity and growing renewable penetration will continue to cap upside for gas-fired power demand.

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