Natural Gas Up, Coal Down In US Electricity Generation Mix

Natural Gas Up, Coal Down In US Electricity Generation Mix

Generation of electricity from coal in the U.S. is clearly on the wane these days. In fact, according to the latest data from the Energy Information Administration, electricity production from coal has slipped behind that of gas in July of this year for just the second time ever.

Coal continues to slump as source for U.S. electricity production

The October 7th EIA report highlights that as of July, natural gas was fueling 35% of total electricity generation in the U.S., compared to a 34.9% share for coal. Compared to the previous July, coal-fired generation was down in all regions of the country, and natural gas-fired generation increased in every region.

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Back in April of this year, natural gas-fired electricity generation surpassed generation from coal for the first time ever. Of note, April is typically the month with the lowest demand for electricity. During these times of low electricity demand, many utilities schedule routine maintenance, and utilization rates for generating plants are usually quite low.

Total electricity demand, not including demand satisfied from distributed (renewable) sources, was up notably from 384 billion kilowatt hours (kWh) in July of 2014 to 398 billion kWh in July of 2015. Moreover, coal-fired generation declined from 150 billion kWh to 139 billion kWh, and natural gas-fired electricity production moved up from 114 billion kWh to a solid 140 billion kWh. The EIA report notes that this decline in coal and increase in natural gas use was noted in all regions of the U.S.

Natural gas prices remain low

Keep in mind that natural gas prices remain very low on an historical basis The monthly average price at Henry Hub dropped from $4.14 per MMBtu in July 2014 to $2.91/MMBtu in July 2015, and is down to $2.72/MMBtu as of September. The average price of wholesale natural gas in New York City during July ($2.06/MMBtu) was well below the average wholesale price of Central Appalachian coal ($2.31/MMBtu), and this was prior to accounting for differences in fuel conversion efficiencies between coal- and natural gas-fired generators.

Until 2015, the last time electricity production from natural gas even came close to topping coal-based generation was April 2012, when monthly average spot prices for natural gas were close to $2.00/MMBtu. At that point, power generation shares for coal and natural gas moved part given natural gas spot prices  increased to $3.50/MMBtu by December 2012.

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