Wednesday, September 12, 2012

Stunning Fact: Gas Price Falls About 40% For Power Plants In First Half Of 2012

From 2000 to 2008, gas was only slowly eroding coal's market share.  Coal lost about 0.5 percentage points of market share per year. Moreover that slow erosion was likely going to be ended and reversed by 150 new coal plants that were in development, as of 2005.

But then the shale gas boom, starting in 2008, crashed the price of gas, and the invisible hand of market forces transformed how electricity is made in the US. ( While gas prices have headed down since 2008, the price tipping point that made gas cheaper than coal was reached at the end of 2011 through the first 6 months of 2012.

In the first 6 months of 2011, gas delivered to power plants across America averaged $5.06 for a thousand cubic feet, and the market gains of gas were increasing, but the stampede to gas had not begun. When gas cost more than $5, coal continued to provide more than 40% of the nation's electricity and as much as 48% for the full year of 2008.

But by the first 6 months of 2012, gas delivered to power plants averaged $3.08 or about 40% less than in the same period during 2011.  And in many parts of the country, power plants were burning gas at prices well below $3.

In Texas, the power plant gas price was $2.59; Pennsylvania $2.83 down 45% from 5.11 in 2011; and in Ohio it was $2.66.

Those low gas prices created a massive stampede to gas electricity generation, during the first 6 months of 2012, and pushed coal's market share down to 32% and 34% in April and May 2012 respectively.

The stampede to gas set off by these low prices shoved down electricity prices and slashed carbon emissions.  More on both points soon.

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