Texas natgas use up in 2012 as coal-fired power output slides

HOUSTON Thu Jan 10, 2013 7:57pm EST

HOUSTON Jan 10 (Reuters) - Natural gas was used to fuel nearly 45 percent of the electricity consumed in Texas last year, up from 40 percent in 2011 as cheaper gas prices allowed generators to pare coal use to 34 percent in 2012 from 39 percent, the Texas grid operator said Thursday.

Overall, electric use in the state's primary electric market dropped 2.7 percent compared to 2011, a year which included the hottest summer on record along with a period of extremely cold winter weather, said the Electric Reliability Council of Texas (ERCOT), the state's grid operator.

It was the first annual drop in Texas power use since 2009 when the nation was in a deep economic slump.

With milder weather in 2012, Texas power consumption dropped to 324,859 gigawatt-hours from the record of 334,000 GWh set in 2011, ERCOT said.

Nuclear power contributed 11.8 percent to the state's power mix, little-changed from 2011, but down from more than 13 percent in the three previous years, ERCOT said.

Wind power generation increased slightly to 9.2 percent, up from 8.5 percent the previous year, as growth in new wind farms has slowed.

Wind's contribution has tripled since 2007 and a $6 billion program to expand the high-voltage network into areas where wind farms operate will be completed by the end of 2013.

Power generators around the country have favored use of natural gas over coal as gas prices tumbled with increased shale gas production.

U.S. gas production set records in 2011 and 2012 and are projected to rise again this year, according to government estimates.

The average spot price of gas at the benchmark Henry Hub dropped 30 percent last year to a 13-year low, according to Reuters data.

Normal Texas population and economic growth pushes demand for electricity up by an average of about 2 percent a year, ERCOT said. In 2011, record-breaking weather conditions pushed electric use up by nearly 5 percent.

Last year, ERCOT said power consumption was lower in six of 12 months, but the grid operator set peak hourly demand records in four months: May, June, July and September.

Despite lower overall electric use, Texas regulators remain concerned that the state's supply of new generation is not keeping pace with the trend of higher consumption.

ERCOT has said the state's power reserve - a cushion against blackouts - will fall below the agency's target for the next several summers, the time of year when demand soars to keep air conditioners running.

Major power producers in the state include Luminant, a unit of Energy Future Holdings, which is owned by Kohlberg Kravis Roberts & Co LP and several private equity firms; NRG Energy ; Calpine Corp ; NextEra Energy and Exelon Corp.

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