Gas Generation Surpasses Coal By 2020

The rate at which coal is losing and gas is gaining electricity generation market share is quickening, yielding agreement that gas will surpass coal as America's dominant electricity source.  But when?

Exxon says in its annual energy forecast that America will get more electricity from gas than coal in 2025. Yet current trends indicate that gas could surpass coal by 2020, when both coal and gas could have about 34% of the electricity generation market.

Low gas prices mean that existing, often under-utilized gas plants are being dispatched much more and new gas plants are being ordered. At the same time that gas generation grows, low gas prices, plain old age of coal plants, and requirements for coal plants to invest in modern pollution controls cause closing of perhaps 231 existing coal units and cancelling orders for up to 150 new coal plants.

These powerful market forces are reshaping electricity generation in America. As recently as 2000, coal provided 52% of America's electricity and gas just 16% or coal had a 36 percentage point lead over gas.

By 2011, coal's market share will stand at 43.5% while gas' will be 24.2%. Further EIA states in last week's Short Term Energy Outlook that in 2012 coal's share will drop even further and more quickly, reaching 41.9%, and gas's will rise to 25.5%.

In other words, from 2000 to 2012, coal's lead over gas will have fallen from 36% to 16%.  In twelve years, the market share gap between coal and gas closed by 20 percentage points.

Most importantly, the rate at which coal is losing market share and gas is gaining share is increasing.  From 2000 to 2010, coal lost each year 0.7% and gas gained 0.8%, with the gap closing a combined 1.5% per year on average.

But in 2011 and 2012, coal will have lost 1.45% per year and gas will have gained 1.3% per year, with the gap closing about 2.7% per year or 80% faster than from 2000 to 2010.

Whether the year that America gets more electricity from gas than coal is 2020 or 2025, the rise of gas and the decline of coal is a stunning market transformation.  It is also one that will cut sharply America's carbon emissions, even in the absence of any price placed on carbon.