One of the largest utilities in the U.S. put $8 billion into a bet that natural gas would dominate American electricity much like coal had before. “We really consider this to be a growth play,” Tom Fanning, chief executive officer of Southern Co., said in an interview just five years ago, as his company set on its landmark acquisition: natural-gas distributor AGL Resources Inc.

Gas looked to be on the verge of generational dominance at the time. The American fracking boom had made the fuel superabundant and cheap, hastening coal’s rapid decline, while energy from wind and solar had higher costs and lower reliability. A giant utility like Southern would naturally see gas pipelines and storage as the key to a durable and lucrative future, meeting demand that would continue to grow.

Now those expansive time horizons are in deep doubt. In fact, there are flashing signs that the U.S. power sector is approaching peak gas, with demand topping out decades ahead of schedule. “The era of robust growth in the U.S. natural gas market is likely coming to a close,” says Devin McDermott, an analyst at Morgan Stanley. “It doesn’t mean the market falls apart. It doesn’t mean gas demand falls off of a cliff. It means that we need less new supply going forward.”

Several states including California and New York already have legal mandates to reach 100% renewable or carbon-free electricity by 2050 or sooner. This is just the start.
The others have established mandatory goals below 100% or voluntary targets. All told, more than half of U.S. states have established renewable-energy targets that will push utilities away from gas.
At the local level, more than 30 cities have put in place gas hook-up moratoriums on new construction in support of all-electric buildings.
Source: National Conference of State Legislatures
Note: Colorado’s 100% clean-energy requirement is for utilities serving 500,000 or more customers.

Natural gas only fulfilled its destiny as the nation’s top power source in 2016, backed by hundreds of billions of dollars invested in the creation of a gas-based economy. Renewables could take over as the No. 1 power source on the grid as soon as 2028, according to projections by McDermott and Morgan Stanley analyst Stephen Byrd.

The American gas peak will mark a critical juncture—and it may have already been reached. McDermott expects overall U.S. gas demand growth in the U.S. slow to between 1% and 2% per year through 2030 as use by power generators shrinks by 2% to 3%. Overall demand could flatline or fall slightly if the Democrats win in November, a dramatic shift after years of record growth. “It’s a gradual trend, but it does add up over time,” he says.