For the first time natural gas has matched coal as the primary fuel for U.S. power generation.
The BGOV Barometer puts natural gas in a parallel position with coal. According to the BGOV Barometer, natural gas fired plants provided 32 percent of generation in May and coal generated 34 percent. Energy experts have attributed these numbers to low prices.
In the past four years, natural gas prices have decreased by 69 percent. The decrease is credited to new technologies in fracking.
The Energy Information Administration projects that coal will provide 38 percent of U.S. power generation mix in 2035, compared with 45 percent in 2010. Natural gas will rise to 28 percent from 24 percent, according to a July 30 study by the agency.
Retirement of Coal-Fired Plants
Retirements of coal-fired power plants is a stark contrast to the growth of natural gas well drilling. According to Energy Information Administration projections, current trends in the electric power market put many coal-fired generators in the United States at risk for retirement. In the Annual Energy Outlook 2012 (AEO2012) Reference case, 49 gigawatts of coal-fired capacity are retired through 2020, representing roughly one-sixth of the existing coal capacity in the U.S. and less than 5 percent of total electricity generation nationwide.
Most of the generators projected to retire are older, inefficient units primarily concentrated in the Mid-Atlantic, Ohio River Valley, and Southeastern U.S. where excess electricity generation capacity currently exists. Lower natural gas prices, higher coal prices, slower economic growth, and the implementation of environmental rules all play a role in the retirements. AEO2012 features several alternative cases that examine how changing assumptions about natural gas prices and economic growth rates influence the electric power sector, including projected retirements of coal-fired generators.
According to the Energy Information Administration, around the country, several factors are likely contributing to the increase in planned coal unit retirements:
- Modest demand growth. Slowing electricity demand growth has led to declining use of some of the smaller, older, less efficient coal plants.
- Relative fuel prices. Relative prices of natural gas and coal as sources of energy, which have moved in favor of natural gas with the boom in shale gas production. The variable costs of operating natural gas-fired capacity have fallen relative to those of coal-fired plants.
- Availability of the combined-cycle plant fleet. The availability of highly efficient natural gas combined-cycle power plants that are currently not fully utilized.
- Aging coal-fired generators. Most of the country’s older coal capacity is concentrated in the Mid-Atlantic, Ohio River Valley, and Southeastern U.S (see map above) due to proximity to the primary U.S. coal supply regions at the time of their construction.
- Environmental compliance costs. The cost of compliance with anticipated and existing Federal environmental regulations such as the Mercury and Air Toxics Standards (MATS) is a factor. Particularly in the case of older, smaller units that are not used heavily, owners may conclude it is more cost efficient to retire plants rather than make additional investments.
- Other compliance costs. The cost of compliance with anticipated and existing state laws and regulations including renewable portfolio standards.
Coal Could Be Dethroned
While coal is projected to retain the largest share of the electricity generation mix through 2035, analyses included in the Annual Energy Outlook 2012 (AEO2012) anticipate its share declining as more generation comes from natural gas and renewable technologies. Coal’s role as the preeminent source of electricity generation in the United States has lessened in recent years, declining from 49 percent of total electricity generation in 2007 to 42 percent in 2011.