Total natural gas use for power generation in the U.S. was down 14% during the first seven months of 2013 compared to the same period in 2012, mostly because of higher natural gas prices relative to coal prices.
A high level of natural gas-fired generation in 2012 occurred as a result of the lowest spot natural gas prices in a decade, said the U.S. Energy Information Administration in the Sept. 25 edition of its Today in Energy feature. In fact, the two fuels, coal and gas, contributed approximately equal shares of total generation in April 2012, when gas prices reached the bottom of their 2012 plunge, EIA noted.
Despite lower gas use for generation so far in 2013, natural gas generation remains consistently higher than levels before 2012.
Trends in natural gas use for power vary by region because of differences in the availability of generating plants, generating plant age and efficiency, and the relative cost of fuels to operate power plants, EIA pointed out. While natural gas prices in most parts of North America are fairly uniform, the availability and cost of coal varies more by region. In addition, coal transport costs can reflect a high portion of the overall cost of delivered fuel.
In some regions, such as the Southeast and Mid-Atlantic, natural gas use for power is significantly lower in 2013. This larger drop is because natural gas made greater inroads in 2012 in those regions compared to regions like Texas where low natural gas prices in 2012 did not displace nearly as much coal-fired power. Fuel competition is less intense in parts of the country where coal fuels a very small portion of the generation or where the delivered coal price is extremely low, resulting in relatively greater coal consumption, EIA noted.
Gas use for power generation in the U.S. has generally risen since 2008. The increasing gas use for power is a structural change that is occurring across a wide range of temperatures and seasons. Several factors are contributing to this trend, including moderate natural gas prices, increased shale gas production (which is depressing gas prices), and additions of new natural gas-fired generating capacity, EIA said.