Gas-Fired Power Generation Extends Dominance Over Coal

Average cost of fossil fuels for electricity generation (per Btu) for natural gas, monthly
Photo of Siemens gas turbine.
Natural gas-fired combined cycle turbine (Siemens press picture)

For the first time ever, the rolling 12-month total of natural gas-fired power generation in the United States ending in January 2016 was higher than the rolling total for coal-fired generation. According to reports from the U.S. Energy Information Agency, this was not a one-month anomaly: the running 12-month totals for natural gas continued to be higher in February, March, and April 2016.

Rolling 12-month and monthly output of natural gas and coal-fired generatorsUntil as recently as March 2015, gas-fired generators had *never* produced more power in a single month than coal-fired generators. This graph shows coal’s historical dominance:Net generation by coal and natural gas, 2001 - 2015The gap between coal and gas has been slowly narrowing, and in April 2015 electricity generated from natural gas-fired sources for the first time exceeded generation from coal-fired sources.Net generation by fuel type, March 2015 - March 2016The turn toward from coal to gas is small but decisive: Although coal-fired generation narrowly regained the lead in May and June of 2015, since that time gas-fired generation surpassed coal-fired generation in eight out of nine months (relinquishing it only in January, 2016, when coal produced 113,750 MWh to 109,979 MWh for natural gas).

Natural gas’s surge in the power sector is driven by two factors: (1) a flight from coal due to costly new emissions requirements that challenge coal’s economics, and (2) a falling commodity price that helps even in the absence of environmental factors. The following graph shows the long-term decline in the price of natural gas:Average cost of fossil fuels for electricity generation (per Btu) for natural gas, monthlyThe dominance of natural gas is expected to continue, as demonstrated by a report from PJM Interconnection showing that natural gas accounts for a whopping 87 percent of all queued capacity rights.

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