Coal to remain top US generating fuel in near term

OREANDA-NEWS. July 28, 2015.  Coal in May re-emerged as the top US generating fuel, overtaking natural gas, which in April for the first time took a greater share of the US electricity supply mix.

Natural gas-fired generation in early spring surpassed coal plants' output as gas prices plummeted going back to 2014 and gigawatts of coal capacity retired across the US as a result of federal environmental rules.

But coal-fired power plants in May generated 104.9 TWh, compared with 101.1 TWh from natural gas-fired generation, according to the Energy Information Administration's (EIA) Electric Power Monthly released today.

Coal output was 12pc lower than in May 2014 in absolute terms, while gas generation increased by 14pc.

The EIA earlier this year expected natural gas to briefly emerge as the top generating fuel in April and May as a result of price competition and springtime maintenance. Baseload power plants — typically coal and nuclear facilities — pick spring and fall for maintenance because electricity demand falls in those months.

Coal for calendar 2015 should account for 36pc of US generation, ahead of natural gas at 31pc, according to the EIA's latest Short-Term Energy Outlook.

Coal should account for the bulk of US generation in the near future, unless the Environmental Protection Agency's Clean Power Plan for limiting CO2 emissions goes into effect.

The share of coal in electricity generation should reach 42pc in 2020, up from 41pc in 2013, before declining steadily to 37pc in 2040, according to EIA's Annual Energy Outlook projections. Gas' share in primary generation for the grid is projected to decline to 22pc in 2020, from 24pc in 2013, before it rises to 27pc in 2040 under that base-case scenario.

But the Clean Power Plan will force more than 90GW of coal-fired power capacity to retire, with natural gas gaining share in the supply mix, according to the EIA.

The CO2 reduction mandate is the only major factor that would force coal generation to retreat in the US, analysts with credit ratings agency Moody's wrote in a research note today. But capacity factors of remaining plants will continue to increase if the pace of retirements picks up, the analysts said.