Feds: More power will be generated from natural gas than coal in 2016

Homer City Generating Station in Indiana County on Aug. 6, 2015.
Homer City Generating Station in Indiana County on Aug. 6, 2015.
Photo by Sean Stipp | Trib Total Media
| Tuesday, March 8, 2016, 11:00 p.m.

Natural gas will power a larger share of electricity generation than coal this year in the United States, the federal government predicted Tuesday, continuing what a regional grid operator calls an unprecedented shift in fuels.

The latest short-term outlook from the Energy Information Administration expects gas to fire 33.4 percent of electricity this year, compared with 32 percent for coal, which a few years ago powered half the grid.

“This would be the first time that natural gas provides more electricity generation than coal on an annual average basis,” the agency said. Gas outpaced coal during several months last year, but the EIA originally predicted coal would rebound.

Increased environmental regulations, more access to gas from shale and low prices are prompting power plants to ditch coal in favor of the cleaner-burning fuel. The resulting soft market for coal, exacerbated by above-average temperatures this winter and lower global demand, has resulted in mine closings, layoffs and bankruptcies among top producers.

In a separate report, the EIA said 80 percent of the electricity generation idled by power plant retirements last year was coal-fired. The shuttered plants were mainly built between 1950 and 1970, unable to compete economically with cheaper gas and too expensive to upgrade to comply with air pollution rules, the EIA said.

Regional electric grid operator PJM Interconnection recently called the move from gas to coal an “unprecedented capacity shift driven by federal and state public policy and broader market fuel economics.” Coal still edges out gas by a percentage point locally, but gas will overtake it in several years, PJM said in a recent report.

“Generation owners are weighing investments and operational costs against anticipated revenues ... to determine the economic viability of a facility,” the report states.

Consumers will benefit from the switch this year, the EIA said. The average residential price of electricity is predicted to fall by 0.7 percent in 2016, which would be the first annual decline since 2002, the agency said.

Neither the price drop nor dominance of gas will last, though. The EIA predicts electricity prices to bounce back up in 2017 by more than 2 percent. Coal will pull back even with gas for power generation in 2017 as gas prices are expected to rise with increased demand and exports, the EIA said.

David Conti is assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or dconti@tribweb.com.

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