The projections have already been there for some time now; natural gas is in. As of 2023 the US is a key player in the international natural gas market. What’s more, this shift in the global market may signal the beginning of a larger shift in the way energy is consumed and traded.  So what exactly does this mean for domestic energy production and distribution in the US?

The US leads in Liquified Natural Gas Exports

The US liquefied natural gas (LNG) industry made headlines. Domestic shale production continues to help the US wean itself from gas imports, paving the way for a surplus supply of American natural gas. Meanwhile, 2022 brought high European demand coupled with Russian embargos, creating the perfect conditions for a US-led export market.  

Just like oil, natural gas is a commodity whose cost is determined by market-based pricing. Fluctuating international demands and events mean fluctuating costs, both in the export and domestic markets. So how do gas producers find a balance between meeting these differing demands? According to the Center on Global Energy Policy, it’s not easy.

“US gas producers want higher US gas prices to maximize their returns at the wellhead; US and Mexican liquefied natural gas producers want lower US gas prices to maximize their netbacks, or gross profits per barrel, overseas. As US gas exports become a larger and larger share of US gas demand, these divergent needs will… add further risk of price volatility in the global gas market.”

On one hand, strong US gas production ensures domestic energy security, but on the other it signals the beginning of an uncertain period for utilities and electric cooperatives.

Natural gas is here to stay

According to the EIA, in 2021 natural gas accounted for 38.3% of the total utility-scale generation by all sectors in the United States. Not only was it the most-consumed fuel type, followed by coal at 21.9%, but it has also historically been the highest-cost fuel for electricity generation. This makes it a significant factor in the determination of wholesale electricity prices.

Liquifed Natural Gas Exports
Source: EIA

Countless projections have predicted the slow retirement of coal and nuclear power. Spurred on by The Great Recession and growing environmental concerns, US coal consumption has been steadily declining since 2008. As this trend continues, new energy technologies will take its place. Clearly natural gas is leading the way. However, even with a secure domestic supply, continuing emissions concerns coupled with price volatility make it seem like a shaky investment. If the highest cost fuel is also the most widely used one, what will that mean for the future cost of electricity?

Leveraging natural gas supply at the REC level


Rural electric cooperatives need to be able to provide reliable electricity to their members at stable rates. This shifting commodity landscape will undoubtedly create unease among REC leaders. However, the American dominance in the natural gas market has its benefits. For one, a stable supply can give decision makers the confidence to include new natural gas-powered technologies to their power supply portfolios.  

Natural gas-powered reciprocating internal combustion engine (RICE) units are becoming an increasingly popular addition as REC’s look to new distributed generation solutions. The technology itself isn’t new, but recent advances have made them a very viable option. These relatively small units could ultimately be a game changer when it comes to boosting both reliability and resilience.  

Modern RICE units are capable of producing up to 19 MW each. They can easily be deployed to solve specific issues and allow for adjustments as demands shift and rate structures change. Many lean-burning engines have the advantage of boasting relatively low O&M costs while also producing fewer emissions per kw/h than other fossil fuel technologies. With proper maintenance, they’re reliable, have good availability and high part-load availability.  

Perhaps what makes them most beneficial to RECs though is that RICE units can be deployed fast. In fact, reciprocating engines can start up quickly and efficiently, even in “black-start” scenarios. Given the uncertain and often high cost of natural gas, on their own reciprocating engines aren’t the answer. However, they could fill a major gap left by renewable technologies like PV solar during peak demand and emergency outages.

Renewable energy - the stable energy source of the future

Natural gas alone can’t meet future demands. Renewable energy alone can’t meet current demands. However, a mix of the two may just be the solution we’re looking for to achieve short- and long-term goals and stabilize pricing.  

Distributed technologies like storage and PV solar create independence from the commoditized fuel market. The sun is free, after all. As global initiatives work to reduce the cost of materials necessary to create these technologies, the already low-cost of implementing and maintaining renewable energy systems will continue to fall. 

PV solar already has a very attractive value-cost ratio when using the National Energy Modeling System (NEMS) model.  In fact, PV solar only comes in second to geothermal with a maximum weighted ratio of 1.02 and unweighted of 1.14. Who comes in third? Gas-fired combined-cycle. 

Liquified Natural Gas Exports versus other energy solutions
Source: EIA

Finding the balance

Several years ago it’s unlikely that anyone could have predicted that in 2023 the United States would be the global leader in LNP exports. This certainly won’t be the last major event to impact the domestic energy market. As the energy landscape changes, the international market will continue to have an impact on domestic generation. It’s only a matter of time before renewable energy is commoditized and traded on an international scale. What will that mean for RECs? 

We don’t know yet, but we’re also not there yet. As the energy industry looks to the future, it’s important that we maximize the technology already available to us right now and leverage it in the most cost-effective way. It’s impossible to predict exactly what will happen, but a combination of renewable and natural gas-fired distributed generation seems like a smart step toward a secure and independent future. 

Our co-founder Scott Tampke has been closely following the US natural gas market and its recent changes. If you’d like to talk with him about what these changes mean for the future of the power industry, you can reach him on our contact form here.