EIA: As coal power fades, natural gas’ growth dependent on price, supply

Dive Brief:

The degree to which natural gas replaces coal as a source of electricity generation in the U.S. by 2040 depends primarily on natural gas prices and that depends on still uncertain supply-demand factors, according to the U.S. Energy Information Administration.
In all scenarios, increasing natural gas supplies drive replacement of coal for power generation both in private industrial applications, which will be 22% of the natural gas use increase through 2040, and on the grid, which will be 78% of the increased natural gas use.
If natural gas supplies are high, the price will fall and it will replace coal sooner, whereas if shale reserves are not as large as anticipated the opposite will occur. In the most likely scenario, coal use will remain flat and natural gas will grow despite rising in price to $8.16 per million British thermal units (MMBtu) by 2040, almost three times coal’s projected 2040 price of $3.19 per MMBtu.

Dive Insight:

The EIA’s Annual Energy Outlook 2014 (AEO2014) offered three scenarios: a Reference case, a High Oil and Gas Resource case, and a Low Oil and Gas Resource case. Only if natural gas supplies are high will it be attractive enough to beat coal in 2040 through grid demand alone.

In the most likely Reference case, natural gas use will fall off through 2015 because supplies are undependable and the pipeline delivery infrastructure is not yet fully built out. Once supplies are more certain and the delivery infrastructure is in place, natural gas use will grow “steadily” through 2040.

The short term obstacles to natural gas growth will be only partially offset by the 22 gigawatts of coal generation capacity scheduled for retirement. From 2015 to 2020, environmental rules will lead to an expected 27 more gigawatts of coal generation capacity retirements.

By 2020, increased demand for natural gas is expected to push its price above $5.00 per MMBtu. After 2020, coal will not be economically competitive with natural gas because of higher construction costs and environmental rules.

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12 Comments on "EIA: As coal power fades, natural gas’ growth dependent on price, supply"

rockman on Mon, 16th Jun 2014 1:03 pm

“If natural gas supplies are high, the price will fall…”. OK let’s try some word substitution and see how that supply/price model looks.

If oil supplies are high, the price will fall. So guess that expands why oil prices are so low today since the producers are current delivering record volumes.

Wow! Just can’t wait for NG prices to fall so the oil patch can spend many $billions drilling NG wells just like the current low oil prices have driven us to frac all those shale formations. At $1 per mcf we should be able to completely end coal consumption as well as eliminating much of our oil consumption by converting a good bit of the auto fleet to CNG.

All together now: Happy days are here again…

rockman on Mon, 16th Jun 2014 1:07 pm

Just an afterthought: until the bureaucrats understand or acknowledge the concept of “time lag” we’ll continue to see such foolish proclamations IMHO.

rockman on Mon, 16th Jun 2014 1:24 pm

It’s also interesting that the EIA wants us to believe they can predict the price of coal Btu to the penny ($3.19…not $3.18 or $3.20) in 26 years when they couldn’t predict neither the recent spike in coal prices nor their retreat just 5 years into the future.

OTOH they didn’t offer a “money back guarantee” to anyone investing in the expansion of the NG infrastructure, did they?

Davey on Mon, 16th Jun 2014 1:25 pm

Rock, you found the theme song for the “lobby of plenty”. Great choice

Pveroi on Mon, 16th Jun 2014 5:45 pm

Rock does word substitutions. EIA are looking at resource substitutions.

Makati1 on Mon, 16th Jun 2014 8:06 pm

These ‘feel good’ propaganda articles will get more and more blatant as we get closer to the crash. They need suckers to keep playing the game or it will all collapse now instead of later.

rockman on Mon, 16th Jun 2014 11:19 pm

I realize most here readily recognize the BS. It just gives me a place to vent. Thanks

Makati1 on Mon, 16th Jun 2014 11:32 pm

rockman, we all appreciate a place to ‘vent’. And if we disagree, it is only because we are looking at the topic from a different perspective, not that either of us is wrong.

You have experience in oil and the ins and outs of the business. I appreciate that. I have a general construction background and can share my knowledge and experiences relating to that area.

We all live under different conditions and have different streams of resources to draw from. That is why I like to express my thoughts and read the responses. I learn something new everyday, even if it is when I look up info to express my views or to support them. The internet is a fantastic source for learning seldom used for that purpose by the current generation. Like a constantly renewing Encyclopedia Britannica which covers every topic with infinite variations of the truth. By that, I mean that two witnesses of an accident see different perspectives and give different stories, but both are true, just different.

rockman on Tue, 17th Jun 2014 10:14 am

M – I agree about the Internet. Which makes some of those foolish positions so frustrating: if you’re patient it isn’t that difficult to develop a good base understanding of the situation. And so many refuse to do just that: they find some support for their prejudice and refuse to look at the counterbalance.

Kenz300 on Tue, 17th Jun 2014 10:19 am