Electricity Sector Demand for Natural Gas in the United States


We examine determinants of the natural gas share in power generation for the NERC regions in the US. Our results indicate that plant and grid-level fuel-switching, technology in generation, installed capacity and weather all affect the natural gas share of energy input into power generation. Furthermore, we argue that fuel-switching is likely an important demand-side factor in establishing a long run relationship between the prices of petroleum products and natural gas. We estimate two specifications – a translog specification for expenditure share and a double logarithmic transformation of gas-fired capacity utilization – because our analysis calls into question the validity of the translog specification for analyzing fuel shares in the power generation sector.