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Page added on July 12, 2015
Gas overtakes coal at US power stations
The US generated more of its electricity from gas than from coal for the first time ever in April — in a sign of how the shale boom is putting mounting pressure on the country’s mining industry.
Plunging prices for natural gas, which have fallen alongside oil since last summer, led to it being used to generate 31 per cent of America’s electricity in April, while coal contributed 30 per cent.
This was the first month in US history that gas-fired electricity generation surpassed coal-fired generation, according to SNL Energy, a research firm — although it came close in 2012 when gas prices were also very weak. In 2010, coal provided 45 per cent of US power.
Since then, competition from cheap shale gas — unlocked by the rise of horizontal drilling and hydraulic fracturing — plus a growing regulatory burden on coal-fired power plants, has squeezed out coal use. That trend has accelerated in 2015.
Brett Blankenship of Wood Mackenzie, the research company, said the combination of cheap gas and new environmental regulations such as curbs on mercury and related pollution from coal-fired plants was having a particularly deleterious effect on coal generation.
“Low gas prices mean coal plants are running less, and when they run their margins are typically compressed,” he said.
“So companies find it difficult to make the investments needed to comply with regulations and keep those plants running.”
US coal production is expected to fall by 7.5 per cent this year, according to the government’s Energy Information Administration. US coal mining companies’ shares and bonds have plunged.
There were 593 coal-fired power plants in the US in 2009 but, by 2013, that was down to 518, with a total summer capacity of about 303 gigawatts.
Since then, the shift away from coal has gathered pace. US coal capacity dropped by about 3.3GW during 2014, and the EIA expects it to shrink by a further 12.9GW this year, while wind power capacity rises by 9.8GW and gas by 4.3GW.
In addition, the surviving coal plants are being run less often. In April 2015, US coal plants generated 42.8 per cent of their capacity, down from 51.3 per cent in April 2013. They switched places with gas-fired combined cycle plants, which generated 47.5 per cent of their capacity in April 2015, up from 40.4 per cent in the same month of 2013.
A Supreme Court ruling against the administration’s Environmental Protection Agency last month, which found that the government should have considered the costs of compliance, is likely to lead to the mercury pollution regulations being dropped.
However, many companies have already made the decision to either fit the necessary equipment or shut the plans down to comply with the rules.
Mr Blankenship said it was likely to make a difference only to “a few plants” at the margin.
Minnesota Power, a division of Duluth-based Allete, said after the Supreme Court ruling that it planned to idle its coal-fired plant at Taconite Harbor from next year, and shut it in 2020, while adding new gas-fired plants.
Lynn Good, chief executive of Duke Energy – the electricity group that is the second-largest user of gas in the US – told the Financial Times last month that the fall in long-term prices had made utilities more confident that the cost of gas-fired generation would remain low.
“This visibility for a longer period of time is clearer today than it would have been three years ago or five years ago,” she said.
Shares in Peabody Energy, the largest US coal producer, have fallen by 98 per cent since April 2011, while those of Arch Coal have dropped by 99.2 per cent and of Alpha Natural Resources by 99.6 per cent.
Bonds issued by these companies are trading at levels that suggest investors see a high probability of default. Peabody’s 2018 bonds, for example, yield 17.9 per cent, according to Morningstar.
Earlier this month, Arch launched a debt exchange that gives investors at most $400 or $450 of face value for every $1,000 of principal that they hold.
21 Comments on "Gas overtakes coal at US power stations"
Plantagenet on Sun, 12th Jul 2015 2:36 pm
Good news that NG is replacing coal at US power plants. NG releases less CO2 and is cheaper, thanks to a NG glut created by fracking tight shale. And, if President Obama is right, we’re got a 100 supply of NG we can rely on for decades into the future.
rockman on Sun, 12th Jul 2015 2:45 pm
Their chart of NG is still a tad misleading: the inflation adjusted price of NG has fallen more then 50% from the average price between 2004 and 2007. The current price of NG is essentially the same as it was for most of the 80’s and 90’s. And what was the inflation adjusted price of coal as the price of NG dropped: it increase 40% from 2003 to 2010. So what a shocker: utilities starting switch from coal (with booming prices) to NG (with crashing prices).
How f*cking green of them. LOL. I wonder what they’ll do when NG prices increase significantly and coal prices are still depressed? Looks like England may answer that question before it’s answered in the US.
Nony on Sun, 12th Jul 2015 2:47 pm
But, but…Art Berman said the Marcellus would disappoint expectations.
http://www.theoildrum.com/node/7075
You know, back in late 2010 when it was under 3 BCF/day. Before it exploded to 16+, along the way routinely beating even the most cornie of cornie estimates, year after year.
Ooooooopsala! (Kinda like David Hughes in 2006 talking about how we couldn’t build LNG IMPORT fast enough to keep up with the 1.5 BCF/d/year declines!!!)
Nony on Sun, 12th Jul 2015 2:53 pm
Rock, maybe the Yank Donk NIMBYies will build some more pipelines out of the mighty Marcellus. You know…where price is a dollar or more UNDER Henry Hub. (It’s freaking hilarious…that they can’t get from NE PA to Boston.)
http://www.naturalgasintel.com/data/data_products/daily?region_id=northeast&location_id=NEALEIDYT?region_id=northeast&location_id=NEALEIDYT
Nony on Sun, 12th Jul 2015 2:58 pm
David Hughes…predicting we were post nat gas peak in 2006.
https://www.youtube.com/watch?v=poRAEL7M9Ds
Why should anyone who is not an advocate listen to his biased estimates now? How can you even trust him? Has he ever faced up to how wrong he was before?
Davy on Sun, 12th Jul 2015 3:22 pm
NOo, is money being made or is this just allot of fracking education for the rough hands? My point is until debt levels are reasonable we may have ourselves a big money pit.
apneaman on Sun, 12th Jul 2015 3:31 pm
Hey Planty, as with most things in this world, nothing you Americans do makes any positive difference anymore. 100 years? In a 100 years most of the planet will look like those just burnt 4 million acres of forest in Alaska. The only thing that will grow there now is weeds and scrub. So Hurray for NatGas and fracking and obsessively counting barrels and all the dead grand babies to come. Modern apes are awesome.
There are 2,100 new coal plants being planned worldwide — enough to cook the planet
http://www.vox.com/2015/7/9/8922901/coal-renaissance-numbers
apneaman on Sun, 12th Jul 2015 3:37 pm
Killing Us Softly: The Industry of Lies Around Climate Change
“Perhaps the most depressing—and important—story you should read this month is John H. Richardson’s account in the print edition of this here magazine about the numerous American climate scientists who simply have given up trying to convince this country to ignore the oil-sodden yahoos in our public discourse—not to mention the various species of ignorami in our national legislature—and do something about the fact that the planet is slip-sliding toward oblivion. One guy got so harassed for telling the truth about the situation that he moved his family all the way to Denmark, and his assessment of the direness of the problem got him in trouble even there.”
http://www.esquire.com/news-politics/politics/news/a36337/climate-change-liars/
Pennsyguy on Sun, 12th Jul 2015 3:38 pm
I agree that more natural gas use and less coal is good news for the biosphere and its inhabitants. Of course natural gas isn’t “a bridge fuel” or a panacea, green or otherwise IMHO.
‘Think I’ll wait until 2020 before investing my life savings in Marcellus drilling A skeptic once told me that bubbles can burst. “100 years of gas?”
“Saudi America?” We’ll see.
Nony on Sun, 12th Jul 2015 3:38 pm
Davy, if the purpose is roughneck make-work, why have gas rigs gone down to close to 200? (from a high of 1600).
https://marketrealist.imgix.net/uploads/2015/05/US-rig-ng-count-may-18-2015.png?w=660&fit=max&auto=format
As far as profits, I would be wary of assuming someone offering something at a low price is not making money. I did a project for an automotive client and they liked to claim that the competition (which had entered and wrecked a cozy oligopoly) was pricing below cost. The truth was they had increased efficiency over what my fat client had done…
Davy on Sun, 12th Jul 2015 4:15 pm
NOo, I am happy as a clam about shale. It bought me some time to do what I needed to do at the doomstead. You have not answered the question on profit nor can you because it is not clear yet. I believe any movement of rates up and oil prices stagnant is starting to spells out “money pit” on the “Wheel of Fracking”
Boat on Sun, 12th Jul 2015 4:17 pm
Buying junk bonds is a way to get a better rate of return with more risk.
The energy sector’s high-yield bonds – so-called “junk bonds” considered at risk of default – have climbed to $247 billion in the last two months, the largest share of any industry with 17.5 percent of high-yield bond market. This was in March. Make money or not investors take the risk. America is not China, investors were not forced to buy them, sell them or hold onto them.
Davy on Sun, 12th Jul 2015 4:30 pm
Nope, Boat, ain’t China by a long shot. Here in the good O’ll US of A investors were just legally lied to or IOW got a fair and square hosing.
Nony on Sun, 12th Jul 2015 4:36 pm
Davy,
1. The shale gas bubble talk has been going on since 2009, but volume is up and price is low. When is the bubble supposed to burst? 2050? Besides, if it does, so what. That is how markets function.
2. A simpler explanation is that the market is just reaching a new equilibrium with significant extra supply. Yes, a few companies that bought land at the peak had problems (Chesapeake), but so what. There will be some winners, some losers. But in the end, the consumer is winning big time. And companies are not going to stay in markets forever if all of them are losing money.
Plantagenet on Sun, 12th Jul 2015 8:07 pm
We don’t have a shale gas bubble.
We have a shale gas GLUT.
They are two entirely different things.
CHEERS!
Nony on Sun, 12th Jul 2015 8:16 pm
http://srv-web.peyto.com/ia/pmr/PMR20150702.pdf
Fascinating article, look to the right, about propane rejection. I had heard that it went negative in pricing in Canada. Now we have propane rejection. Ethane rejection has been happening for a while.
Note also how good the prices are for pentanes. I guess they are sent to the tar sdands for diliuent?
Jimmy on Mon, 13th Jul 2015 3:47 am
For fuck sake nony since you’re such a fucking know it all why don’t you fuck off and go start your own blog you fucking loser. Get a life dip shit. If I ever see you in person I’m gonna kick you in the teeth and shave 1/2 your head. Fucking goof ball.
rockman on Mon, 13th Jul 2015 6:59 am
FYI – Switching from coal to NG to generate the same amount of Btu’s is a good thing. Increasing the production of GHG from increased NG consumption to satisfy the demands of an ever increasing global population is not a good thing.
Davy on Mon, 13th Jul 2015 8:10 am
Jimmy boy, why not meet the NOo on the even playing field of knowledge and ideas? If you talked like that to me and we met well who knows. If you are bigger than me and it is not a fair fight I will make it a fair fight with my 45 or a knife. Where does that end? The NOo is a responsible and valuable contributor. I have learned allot from him. I don’t agree with his outlook and personal values but hey who the frig am I to say I am God’s gift to earth. The potty mouth makes you look weak not strong. Kick the NOo in the teeth with words and you will make so much more of an impact.
dave thompson on Mon, 13th Jul 2015 8:55 am
More planetary FF destruction in any form, seals the fate of all life on mother earth.
Kenz300 on Mon, 13th Jul 2015 9:37 am
If the world is to have any hope of dealing with Climate Change then we need to stop building any more coal fired power plants and begin shutting down the oldest and dirtiest ones first.
Climate Change is real….. we need to deal with the cause (fossil fuels)
Listen Up: Pope Calls for the Replacement of Fossil Fuels, Renewable Energy and Solar Subsidies – Renewable Energy World
http://www.renewableenergyworld.com/articles/2015/07/listen-up-pope-calls-for-the-replacement-of-fossil-fuels-renewable-energy-and-solar-subsidies.html