Plunging natural gas pushing down coal demand

The growing prominence of natural gas generation is spurring a collapse in coal-fired generation and the coal market more generally, according to Bloomberg. 

The news source calculated that gas prices for natural gas power plants fell as low as $1.16 per million British thermal units below the cost of coal for electricity generation, reaching the lowest differential in favor of natural gas since the introduction of coal futures more than a decade ago. This despite a 26 percent decline in the price of coal from its 2011 high. 

The dramatic decline in natural gas prices, along with greater concern for carbon emissions, is projected to lead to a 5.6 percent increase in consumption from natural gas-fired generation, along with a corresponding 2 percent decline in coal use. 

David Greely, Goldman Sach's head of energy research, explained that these two factors have led to increasing interest in substituting older coal-burning units for new, more efficient natural gas-fired generators.
The Des Moines Register reports that Iowa utility Alliant Energy has announced plans for new natural gas power plants only years after proposing the addition of a massive 600-megawatt coal plant. 

More information on the dramatic decline in natural gas prices can be found at PennEnergy's Research area.



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