The monthly natural gas share of total U.S. electricity generation surpassed the coal share in July of this year for the second time ever, with natural gas fueling 35% of total generation to coal’s 34.9% share, said the U.S. Energy Information Administration in the Oct. 7 edition of its Today in Energy feature.
Compared to the previous July, coal-fired generation fell in every region of the country, while natural gas-fired generation rose in every region. Earlier this year, natural gas-fired generation surpassed generation from coal for the first time. This switch occurred in April, generally the month with the lowest demand for electricity. In times of low electricity demand, many generators schedule routine maintenance, and utilization rates for generating plants are low. As demand increases during the summer, output from both coal- and natural gas-fired generators increases.
Total electricity demand, excluding demand met by distributed (largely renewable) sources, increased from 384 billion kilowatthours (kWh) in July 2014 to 398 billion kWh in July 2015. Coal-fired generation fell from 150 billion kWh to 139 billion kWh, while natural gas-fired generation rose from 114 billion kWh to 140 billion kWh, EIA reported.
This decrease in coal and increase in natural gas occurred in every region of the country. The Mid-Atlantic region had the largest decline in coal-fired generation, followed by Texas, while the Southeast and Central regions had the largest increases in natural gas-fired generation.
Natural gas prices continue to be relatively low, EIA pointed out, which is driving much of the coal displacement. The monthly average price at the Henry Hub, a natural gas benchmark point, declined from $4.14 per million Btu (MMBtu) in July 2014 to $2.91/MMBtu in July 2015, and it has since fallen to $2.72/MMBtu in September.
The average price of wholesale natural gas in New York City during July ($2.06/MMBtu) was below the average wholesale price of Central Appalachian coal ($2.31/MMBtu), even before accounting for differences in fuel conversion efficiencies between coal- and natural gas-fired generators.
Prior to this year, the last time electricity generation from natural gas came close to surpassing coal-fired generation was April 2012, when monthly average spot prices for natural gas were near $2.00/MMBtu. Power generation shares for coal and natural gas diverged as natural gas spot prices rose to about $3.50/MMBtu by the end of 2012.
Electricity generation dispatch decisions, especially between coal and natural gas, are complex. The ultimate level of generation reflects delivered costs, emission costs (where applicable), heat rates, supply availability, and other factors in fuel markets, EIA said.
One factor not mentioned by EIA is that in the April-June period of this year, thousands of MWs of coal-fired capacity were retired due to a need by comply with the federal Mercury and Air Toxics Standards. Much of that capacity was in the Midcontinent ISO and PJM Interconnection regions. Much of that aging coal capacity didn’t run much even before being retired, but those plants are no longer available to meet summer peaking needs.
With the shutdown of older coal plants, and a frenetic program to build new gas-fired generating capacity, natural gas at some point in probably the relatively near future will move permanently ahead of coal as the leading power generation fuel.