Friday, June 8, 2012

IEA Projects 2017 As Date Gas Passes Coal In US But Watch This Summer Too

Showing that the market share gap between coal and gas closed from 36 percentage points in 2000 to 4 percentage points, the March 2012 Electricity Monthly Review from EIA documents the rapid change markets bring.

By reporting that coal generated 34% and gas 30% of America's electricity in March, the EIA data poses 2 questions: when will natural gas generate more electricity than coal in the USA? And could natural gas generate more power than coal for a full month as early as this summer?

Only a few years ago, nearly all estimates placed the date for when natural gas would be America's top source of electricity generation as 2025 or later. I, however, actually was a dissenter from the conventional wisdom, an outlier, and projected earlier dates.

After nearly 4 years of the shale gas boom, estimates are changing, and my once unconventional estimates are becoming closer to conventional wisdom.

This week the International Energy Agency estimated that, in the USA, gas may first surpass coal for a full year as early as 2017.  That would end a 100-year reign for coal atop the power generation market.

Yet, if 2017 becomes the first full year when gas generates more electricity than coal, when will the first full month be, when gas passes coal? Perhaps much sooner than later could be the answer.

Though coal will produce more electricity than gas for all of 2012, this summer may see a full month, in which gas generates more electricity than coal.  If it happens, it is most likely to happen in July or August. If it does not happen this year, it may not happen until 2015 or even 2016, since gas prices are projected to climb in 2013.

Factors that will impact whether gas takes over the number 1 spot for a full month this summer include the pace of coal retirements before July, the amount of new gas generation that comes on line by July, the rate of breakdowns for the nation's coal and gas power plants in July or August, gas and coal prices, and whether high summer temperatures cause the very last available gas combustion turbine plants to fire up for a good number of hours to meet peak demands.

In 2013, assuming natural gas prices rebound and reach above $3 for a thousand cubic feet, coal will recover some market share.  But the amount of market share that coal recovers in 2013 an beyond will be limited by coal plant retirements and new natural gas plants starting to generate over the next 5 years. 

The IEA, therefore, may be close to the mark in circling 2017 as the year when gas becomes--on a full year basis--the number 1 electricity generation source in the USA.  If so, even just 2 years ago, nobody would have thought that possible. Amazing.


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  2. Natural gas could actually outgenerate coal in April, but the rest of this summer, no. Utilities need to utilize their fleets more fully in the summer especially at peak time when the heat is on. Coal plants are not effective as peaker plants (too long to bring up to speed), so many NG plants that have been running as base plants will switch back to peaker, while coal gets turned back on for base generation. The fact that utilities are sitting on record stockpiles of coal will also factor into the utilities choices.