By - Michael Drost

Natural gas finally surpasses coal as biggest U.S. electricity source

Energize Weekly, July 15, 2015

Natural gas has overtaken coal as the top source of electric power generation for the first time in the U.S., according to SNL Energy, which looked at data from the U.S. Energy Information Administration (EIA).

According to SNL, the EIA’s June 25 Electric Power Monthly report showed 92,516 gigawatt hours (GWh) of electricity was produced in April using natural gas compared to 88,835 GWh of electricity produced using coal. In terms of share of total output, natural gas produced 31 percent of all electric power generation in April, a 9 percent increase from four years ago. Coal’s share of power generation, on the other hand, has fallen from 44 percent of total output in 2010 to 30 percent this year.

SNL says that low gas prices and new environmental regulations designed to curb carbon emissions are key factors in the shift to natural gas for power generation. Utilities often switch between coal and gas-fired power generation depending on commodity prices, however proposed regulations like the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan and its Mercury and Air Toxic Standards (MATS) have created added pressure to retire older coal-fired plants and switch to natural gas.

The Obama Administration is expected to complete the Clean Power Plan regulations next month, however the U.S. Supreme Court has ruled the MATS rule invalid until the EPA adequately accounts for the cost of implementing the regulations to power plant operators, and have sent the rule back to the U.S. District Court for the District of Columbia for review.

While pending environmental regulations are a factor in the increased reliance on natural gas, a more immediate factor may be economic. Natural gas prices have fallen to levels not seen in almost three years, making gas-fired generation cheaper to operate than coal-fired plants in some areas of the country. Since hitting almost $6 per million British Thermal Unit (MMBtu) in early 2013, natural gas has fallen to just under $3/MMBTu.

SNL noted that around 17 GWh of coal-fired capacity has been retired over the last 18 months, with much of it replaced by gas generation.

Overall, SNL says that the EIA expects coal’s share of U.S. total generation to average 35.6 percent in 2015, down from just under 39 percent in 2014. By contrast, natural gas is expected to produce 30.9 percent of total output on average this year, up from 27.4 percent in 2014.

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