Power demand growth will require breakthrough technologies and a new approach to gas

Keeping U.S. energy affordable and globally competitive in the years ahead will be no easy task.

While U.S. power demand has remained essentially flat for the past decade, this is set to change. Looking ahead, an expected surge in demand growth will be the biggest challenge for the U.S. energy sector in decades.

On multiple fronts, progress is being made on the road to energy affordability and energy sustainability. Consider the goals of the Energy Act of 2020. That legislation set onshore renewable energy permitting targets of 25 gigawatts (GW) by 2025 – and those targets have already been surpassed.

The impetus behind the act was a bipartisan effort to enact the first comprehensive update to energy policies in 13 years. It prioritized research and development (R&D) and focused on demonstrating next-generation technologies that will reduce greenhouse gas emissions from the power sector, industry and buildings.

Since President Joe Biden took office, the federal government has been implementing the Energy Act of 2020. The Department of Interior facilitated the development of more than 44 GW of clean energy capacity on federal lands and waters, including 8.16 GW onshore and 15 GW offshore.

Data for the entirety of 2024 is not yet available, but we have this data covering the first half of 2024:

• Fossil fuels (including natural gas, coal and petroleum) accounted for about 60 percent of electricity generation.
• Renewable sources (including wind, solar, hydropower and others) provided approximately 26 percent of total generation. Wind reached a record high of 47.7 terawatt-hours (TWh) in April and is forecast to grow by 6 percent in 2024 overall.
• Nuclear energy contributed 19 percent to the electricity mix.
• Coal-fired generation produced 37.2 TWh in April 2024. Its share of electricity generation has been declining, falling to 16.2 percent in 2023.
• Natural gas is the largest source of U.S. electricity generation, accounting for 43.1 percent of total generation in 2023 – more than the year earlier – and that growth continued in 2024.

Rethinking our approach

If the U.S. is to make simultaneous progress on the nation’s multiple goals, it will need other breakthroughs that expand energy self-sufficiency, reduce negative climate impacts from fuels and increase accessibility and affordability.

This effort requires rethinking our traditional approach to gas, which is likely to be a central resource during the transition to a greener system. For instance, not all gases are the same, fortunately, meaning that choices are available to policymakers, investors and lenders, and consumers.

A report from the Paris-based International Energy Agency, released in October, found that global demand for natural gas is increasing at a faster rate in 2024 than in the previous two years. The U.S. situation mirrors that broader phenomenon.

Propane’s positioning within the broader U.S. energy sector in 2025 and beyond depends on several factors. One of these will be the new administration’s positions on natural gas fractionation and nuclear energy.

Ahead of the 2024 elections, the National Propane Gas Association (NPGA) tracked major candidates’ energy policies. “Despite claims that the Biden administration limits conventional fuel production, the Energy Information Administration reports record propane production up over 27 percent since 2019,” says Steve Kaminski, NPGA’s president and CEO. “With the lion’s share of domestic propane production coming from natural gas processing, fractionation is a key issue.”

The pace of transition – from heating oil and diesel to propane – is one of NPGA’s areas of focus. Kaminski thinks that “propane is poised to gain market share from fuel oil in the residential heating market. State policies are steering the thermal sector toward more environmentally friendly fuels, and propane excels in this respect, even if not acknowledged by every policymaker.”

NPGA is advocating for states to use federal funding from the Home Efficiency Rebate Program to incentivize propane retrofits for residential customers who use fuel oil.

Similarly, in the fleet vehicle and bus markets, a transition from diesel to propane has enormous upside, and we see the potential in these sectors as sizable. Kaminski says that “many states continue to artificially increase demand for electric vehicles by compelling manufacturers to produce them.” But his assessment is that “the marketplace is still not convinced that EVs, especially across the medium- and heavy-duty sectors, can meet the unique transportation needs of businesses.”

Propane autogas vehicles are well-positioned to erode diesel’s market dominance by offering a clean-burning fuel with a lower carbon content that still has the energy needed to meet the payload and operating range needs of commercial fleets.

Kaminski predicts “propane market growth from other liquid fuels to propane may be offset by anti-gas electrification policies.” NPGA is pushing back against anti-gas proposals from the federal government, states, municipalities and codes-setting bodies using sophisticated legislative and regulatory strategies, litigation and coalition building.

According to NPGA, these are some areas worth looking at closely in 2025:

• Growth of new applications: Propane has long been a vital energy source for home space and water heating, agriculture, industrial applications and transportation, and it is increasingly suited for emerging technologies and applications.
• Prime power generation: In the expanding electric vehicle market, propane presents a clean, cost-effective option for temporary, mobile and permanent charging stations.
• Power co-generation: Also called “combined heat and power” or “CHP,” propane systems are gaining traction for their efficiency in producing both electricity and thermal energy.
• Generators: As electrification mandates challenge aging electric grid infrastructure and natural disasters require off-grid solutions, communities are reassessing their energy needs and turning to propane generators for resilience.
• New tractor applications: Maritime ports, airports, warehouses and military facilities are all positioned to cut emissions by adopting propane-powered tractors and lift trucks.

Positive trend

Propane will remain at around 3 percent of the total energy budget in the near term. It’s much harder to quantify the medium-term and long-term outlook for propane.

But Tucker Perkins, president and CEO of the Propane Education & Research Council, notes one of the positive trends of 2024: “DOE (Department of Energy) investment and interest in propane is growing. This is especially true of renewable propane produced using CO2 and other waste streams. When that is coupled with electricity produced by wind and solar, we then have the potential to cement propane’s role in powering hard-to-decarbonize industries – well into the future.”

The DOE’s Advanced Research Projects Agency – Energy rolled out an ambitious new program entitled “GREENWELLS: Grid-free Renewable Energy Enabling New Ways to Economical Liquids and Long-term Storage.”

James Seaba, the program’s director, had his team support a CO2-to-propane project at the Illinois Institute of Technology (IIT). The IIT’s renewable propane production project was awarded $3.8 million in this first-ever DOE funding.

Perkins announced that PERC “has been pursuing renewable propane pathways that can produce fuel with a potential carbon intensity significantly below zero, and this project will show it can be done at scale.”
Perkins is encouraged by the fact that there is now huge demand for renewable propane “to lower carbon emissions, particularly in hard-to-abate industries like transportation and port operations.”

Some of the most important U.S.-based advanced R&D centers are now using CO2 to produce renewable propane. And that progress is being rewarded with federal research funding.

The DOE’s GREENWELLS says that the transportation sector, including aviation, marine and heavy-duty vehicles, “simultaneously require technological solutions to lower their emissions. Biofuel production will not be able to meet the global demand for liquid fuels, and other alternative fuels are currently expensive. Renewables-to-liquids projects could achieve lower overall costs and minimize project timelines by using cheap – albeit intermittent – renewable energy sources.”

According to Cinch Munson of the World Liquid Gas Association, “Propane is essential to the energy mix today and in the future because it is inherently clean, accessible, affordable, transportable and safe, which makes it one of the most versatile fuels available to help decarbonize hard-to-decarbonize sectors. Plus, the industry is investing in renewable production, which lowers the already-low carbon intensity of propane even further.”

Essential energy

It’s not hard to see that propane is important to the U.S.

According to the 2020 Residential Energy Consumption Survey, about 11 million U.S. households used propane as a major fuel (about 8.7 percent of all U.S. households) and about 42 million U.S. households used propane for outdoor grilling. Residential demand accounts for about 53 percent of the total propane demand in the U.S. and 47 percent of propane demand for essential energy in commercial, industrial, agricultural and on-road applications.

In his new book, “Path to Zero: 12 Climate Conversations That Changed the World,” Perkins provides a central argument: The simple and seductive “electrify everything” solution is flawed, but he reassures readers that net zero by 2050 is possible when you marry the innovation of today with optimism and a “wide path” or collaborative approach that incorporates different energy solutions, including electrification.

The U.S. produces about 35 billion gallons of propane annually, but only consumes about a third of it, while the rest is used for industry and plastics production or exported to other countries. If the U.S. used all the propane it produces, it could replace 23 billion gallons of diesel and reduce greenhouse gases by 35 million metric tons each year – the equivalent of taking 7.8 million gasoline-powered cars off the road. Propane autogas is the world’s third most common transportation fuel, behind gasoline and diesel.

Gordon Feller is a Global Fellow: The Smithsonian Institution; a White House appointee of a federal commission advising the U.S. secretary of energy; and an adviser to U.S.-based companies.