With storage inventories soaring to record-high levels and production remaining relatively flat, the U.S. natural gas market is in dire need of record demand this summer to balance storage. All eyes are on power generation to soak up the gas storage surplus. Low gas prices and increased gas-fired generating capacity makes natural gas the go-to generation fuel this year. However, in the largest summer demand market – Texas – natural gas is facing increasing competition from wind. Wind power still provides a much smaller share of Texas’s power than natural gas, but the addition of several big wind farms in 2015 gives wind a stronger footing in the Texas market this year. Today we take a closer look at the potential impact of growing wind generating capacity on natural gas demand, particularly in Texas.
We talked about the market’s dire need for incremental, even record demand recently in our “Carry That Weight” series of blogs. The gas market started the storage injection season in April (2016) with a record storage overhang, and mild weather since then has suppressed demand and limited the market’s ability to whittle down the surplus. However, if we discount the effects of the milder-than-normal weather, demand actually has been exceptionally strong on a degree day basis and could easily reach record highs this year if we get a normal-to-hotter summer weather. But now there is another potential factor that could blunt demand as well – wind generation, especially in Texas. Before we get to that though, first let’s put Texas power generation and wind into perspective.