Natural Gas Passes Coal in the Race for Electric Generation

coal power plant

by | Jun 10, 2016

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coal power plantWhile it is not a surprise that natural gas is now the leading fuel used to fire up electric generators, it is a bit of a shock how quickly that this happened. For the first quarter of 2016, natural gas provided 32 percent of the total US electricity at utility-scale plants, and coal supplied nearly 29 percent.

A year ago, coal had the lead, says the US Energy Information Administration: coal provided 36 percent while natural gas supplied nearly 29 percent. For comparative purposes, it says that renewables provided 9 percent in the first quarter of this year compared to 7 percent for the same time period in 2015.

“Sustained low natural gas prices have led power generators to significantly expand the share of electricity produced by that fuel,” says the agency’s report.

It expects natural gas to provide more than 34 percent of the total electricity generation this year, which is up from nearly 33 percent last year. The increase is coming at the expense of coal.  In 2017, the agency expects natural gas to give up some share — about a percent — because of rising prices.

Just this week, DTE Energy said it would close 11 of its 17 coal plants in Michigan in the next seven years. The retirements are part of an overarching fundamental transformation in the way DTE will produce energy for Michigan, the company said, noting that the coal plants were aging and had lived a pretty good life.

It said that natural gas as well as wind and solar would replace those units.

DTE says that it is also working on legislation to ensure the state has adequate generating capacity as power plant closures continue in Michigan and across the broader region. This is important, it continues, given that 10 percent of Michigan’s power is supplied by marketers who depend upon excess supply from plants like those being retired.

“DTE Energy will work with the state of Michigan on a plan that ensures electric reliability for our 2.2 million customers, places a premium on affordability, and is seamless for our employees and the communities that are home to these plants,” said Gerry Anderson, the utilities chief executive officer, in a formal statement.

None of this sits well with the American Coalition for Clean Coal Electricity. It says that a new study using data complied by the Bureau of Labor Statistics, the US Census Bureau and the US Energy Information Administration says that 40 percent of American families (51 million households) take home an average of $1,643 each month and spend 17 percent of that on energy bills. The poorest 25 million families spend 22 cents of every dollar they take home on energy.

To boot: electricity from coal is 92 percent cleaner than it was in the 1970s, and the industry will have spent more than $122 billion by the end of next year to further reduce emissions, albeit because of the regulations foisted upon them by Congress under the various provisions of the Clean Air Act.

“It is a sad fact that family incomes have been declining, and that forces families to make difficult decisions whether to spend their shrinking take-home pay on food, clothing, health care, or electricity,” said Mike Duncan, chief executive of the coal group. “Using all of our country’s abundant resources, including coal, helps lower- and middle-income families by keeping electricity prices affordable.”

The just released analysis by the Energy Information Administration does that U.S. residential electricity price averaged 12.7 cents/kWh in 2015 and that figure is expected to stay about the same in 2016. However, it does predict those rates will rise 2.5 percent to an annual average of 13.0 cents/kWh in 2017.

That coal study fails to take into account the external costs of burning coal — the medical expenses and ecological renovations, say coal’s critics.

Regulations, no doubt, are having an impact on electricity generation portfolios. But the coal plants that are being retired are at least 50-years-old and they are dirtier than new ones built today — ones that use natural gas, or wind and solar. Market forces and technologies are even more powerful dynamics at play here.

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