The extent and intensity of gas versus coal competition is simply astonishing, as the respected Brattle Group documents in a new study. http://www.brattle.com/_documents/UploadLibrary/Upload1081.pdf.
Brattle predicts that 59,000 to 77,000 megawatts of coal plants will retire by 2016, if gas prices are around $4.30 in 2015 or roughly 20% of the nation's coal fleet and 7% of total, current US generation of all types. The latest estimate is about twice its previous number.
Brattle states: "Our new analysis shows about 25 GW [25,000 megawatts] higher retirements than the levels we projected in December 2010 due mainly to lower expected gas prices--despite the somewhat more lenient environmental regulations that we currently envision." See page 2 of the Executive Summary. So Brattle boosts its estimate of expected coal retirements, because much lower gas prices and lower power demand are powerful, negative factors that overwhelm regulatory concessions and flexibility for coal plants included in finalized rules.
Indeed, the number of actual coal retirements is highly sensitive to the price of natural gas. As of July 2012, retirements of 30,000 megawatts of coal plants had been announced, but Brattle finds that coal retirements would fall to as low as 21,000 megawatts, if gas prices are $1 per thousand cubic feet higher than its $4.30 modeled price.
Conversely, coal retirements skyrocket to as much as 141,000 megawatts or about 43% of the nation's entire coal fleet, if gas is $1 below the $4.30 mark.
Yesterday's spot natural gas price averaged $3.17. If prices stayed close to that level, the Brattle Group study concludes that an enormous 115,00 to 141,000 megawatts of coal generation would retire due to competition from gas.
The price of gas is the pivotal variable. Put simply, the price of gas is king!