Despite robust Lower-48 electricity demand from load growth and average to hotter-than-average temperatures, power sector consumption of natural gas has been relatively weak this summer. Substantial amounts of gas demand have been lost to renewables, and while low prices may encourage some coal-to-gas switching, it has not been enough to make up the difference. This has resulted in large storage builds and negatively impacted Henry Hub prices.
The chart above shows the weekly average Lower-48 natural gas demand from the power sector. For much of summer 2026, demand was below the five-year average and the last two years. This comes despite Lower-48 electricity demand making new seasonal highs this summer. While news headlines would imply data centers are driving an increase in gas power demand, that has yet to show up in the data. Over the next several years, this likely will be the case, that growing electricity demand will translate into higher gas consumption, but this year the story has been more about renewables.
Solar capacity has surged over the past several years, rising from a peak of 23.8 GWh in 2023 to 52.1 GWh this summer. Solar directly competes with natural gas and has been one of the primary drivers of the lower year-over-year gas power demand. In addition to more solar generation, utility-scale batteries have been increasingly deployed to the grid. While batteries only operate for a few hours per day, they are typically discharged during periods that would typically see demand being met by the less-efficient natural gas peaking plants, thereby having an outsized negative impact on gas demand.
The impact of higher renewable penetration can be seen in the chart above, which shows daily average gas burn on the Y-axis and the daily number of CDDs on the X-axis. The blue 2026 trend line is considerably lower than prior years, implying that for the same temperature, less gas is consumed by the power sector. On average, this has amounted to about 1.5 Bcf/d this summer.
It is important to note that this has come at a time when gas prices are relatively low. Oftentimes, low gas prices will support additional gas consumption as it becomes more economical compared to coal. However, despite the improved economics of gas generation, it was not enough to offset the impacts of renewables.
Summer 2027 will likely see similar dynamics at play as the buildout of solar and battery continues to outpace electricity demand growth. However, this trend may begin to reverse in 2028 before a potentially sharp rise in gas power demand in 2029 as the data center buildout accelerates. The expectation of a 2-3 Bcf/d rise in gas consumption from the power sector into the end of the decade is based on current estimations of data center buildout, which is subject to change especially given the shifting political climate and pushback from communities.