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July 12th, 2012

Coal Use Plummets For Power Generation

by Andrew Price, President & COO

The use of coal as a fuel for generating electricity dipped dramatically in April of this year. Coal was used to generate about 32% of all electricity produced in the US in April. This is the lowest level of coal use in the power sector since the Energy Information Administration (EIA) started tracking in January 1973.

Coal opponents have long argued that there are many health and environmental costs that are not accounted for in the price of a kWh generated at a coal fired power plant. Coal advocates have insisted that coal is a plentiful domestic resource that generates cheap power. “Cheap” coal, however, became expensive relative to natural gas, as natural gas prices hit 10 year lows this spring. Coal was not able to compete on price with natural gas as a power plant fuel – even without fully accounting for any external health and environmental costs.

The following chart from the EIA shows the monthly generation totals from various fuel types. Coal use has been experiencing a slow decline for many years but fell off a cliff after one of the warmest winters on record - combined with high natural gas production in new shale fields - resulted in a record amount of natural gas in storage.

 

 

Natural gas plants could generate power more cheaply than coal plants in April and so displaced them in the generation queue. Natural gas accounted for 32% of all power generation in April – identical to coal for the first time since at least 1973. During the peak summer demand months, both coal and natural gas plants will be needed to meet peak air conditioning loads. As a result, coal usage will increase again. However, the explosion of natural gas production from domestic shale reservoirs due to directional drilling and hydraulic fracturing or “fracking” may increasingly marginalize the aging coal fired power plant fleet in the US.

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