Natural gas overtook coal as primary fuel for electricity generation for the first time since the 1970s according to an EIA report released on Thursday.
Natural gas overtook coal as primary fuel for electricity generation for the first time since the 1970s according to an EIA report released on Thursday.
The first time in 2015 when natural gas was seen exceeding coal as primary fuel in electricity generation was in April. The trend was observed again in July. For four months, including October, the trend continued unabated. It is expected that November and December will see the same increase in natural gas prevalence over coal.
A number of factors underpin the shift in fuel use for electricity generation. The power sector has seen a dramatic fall in gas prices. As hydraulic fracturing is registering record numbers, drilling operations are flooding Texas and the Midwest. On Thursday, the release date of the EIA report, natural gas traded under 2 dollars/MMBtu with the New York Mercantile Exchange. Compared to the same period last year, the trading price represents a 40 percent decrease.
Natural gas overtook coal as primary fuel for electricity generation. Coal is under increasing federal supervision. With the enactment of tougher federal standards, coal plants must significantly reduce emissions. To meet tougher regulations on carbon emissions and air pollution, coal plants must invest in technologically advanced equipment. Thus, coal plants are forced to also go offline as lower demand ensues to protect investments.
Coal plants and the coal industry is expected to face increasingly tougher regulations in the upcoming years. Fighting global warming effectively means reducing carbon emissions from one of the largest polluting industries in the U.S.
Thus, the numbers begin to mirror efforts to clean up the atmosphere. Texas for instance witnessed the shift in fuel use for electricity generation since May 2014 as per the Electric Reliability Council reports. This year, as per data available up to November, natural gas was the top primary fuel for electricity generation with 48 percent. Coal followed with 29 percent, while wind and nuclear accounted for 11 percent each.
The price fall of natural gas began in 2010. Since then, the gap between coal and natural gas as primary fuel for electricity generation was narrowed considerably. In January 2010, natural gas traded at almost 6 dollars/ MMBtu. Now, it closed on Thursday at under 2 dollars/ MMBtu.
At the same time, the past five years have seen an increase of gas as primary fuel for electricity generation from 25 percent to 25 percent. Coal’s share in the power supply decreased from 43 percent to 31 percent over the same period of time.
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