Generation of electricity from coal is losing the “war” against natural gas in the US. According to the Energy Information Administration, gas has overtaken the coal share in July for the second time in history, reaching 35% of total generation compared with 34.9% of the black fuel. The reason: the price of gas is so low that coal is overthrown.
Natural gas is displacing coal and this trend will continue in the coming years. For now, in the United States the trend is clear, the monthly natural gas share exceeded the coal in July for the second time in the history of total electricity generation. Compared to the previous month of July, electricity generation with thermal power plants fell in all states of the country, while natural gas generation increased in all.
More demand, more gas
Earlier this year, for the first time in US history, natural gas based power generation surpassed that based on coal. There was only one break in this ascent in April, because this is usually the month with the lowest demand for electricity and at times of low electricity demand, many plants only work with maintenance programs so that levels of use are low. As demand increases during the summer, the production of both technologies coal and natural gas increases.
And so it happened last July. The total electricity generation was distributed among the different technologies (largely from renewable energy sources), up from 384 million kilowatt-hours (kWh) in July 2014 to 398 million kWh in July 2015.
However, production in thermal coal plants decreased from 150 million kWh to 139 million kWh, while natural gas generation increased from 114 million kWh to 140 million kWh.
This decrease in coal and increase in natural gas was experienced in all regions of the country: Mid-Atlantic region had the biggest decline in coal generation, followed by Texas, while the Central and Southeast regions had the highest increases in natural gas.
Natural gas prices remain relatively low. The average monthly price at Henry Hub, the benchmark price of natural gas fell from $ 4.14 per million Btu (MMBtu) in July 2014 to the $ 2.91 / MMBtu in July 2015, and it has since fallen to $ 2.72 / MMBtu in September.
The average wholesale price of natural gas in New York City in July ($ 2.06 / MMBtu) was below the average wholesale price of coal from the Central Appalachian region ($ 2.31 / MMBtu ), even before considering the differences between coal and natural gas in the efficiency of fuel conversion.
In these years back, this price difference did not exist, in fact, in April 2012, natural gas nearly surpassed coal generation when monthly average spot prices for natural gas were about $ 2 / MMBtu, but later that same year, spot prices for natural gas rose to about $ 3.50 / MMBtu, which resulted in regaining the previous situation.
The relationship between the different technologies for providing electricity to the system is complex, especially between coal and natural gas which now also has to reflect costs, emission costs (if any), heat rates, supply availability and other factors in fuel markets.