Dec
12
2016

EIA: Winter is Coming… And So Is Coal

Last year, PACE wrote that natural gas had surpassed coal for U.S. electricity generation for the first time. A combination of inexpensive natural gas and restrictive federal regulations governing the use of coal caused a tectonic shift in how American utilities produce power. While that trend largely continued through most of 2016, new reports find that coal will again take over the top spot as a source of electricity, at least for a while, as temperatures drop this winter. The U.S. still needs coal.

Extreme Weather

“While more U.S. electricity is expected to be generated from coal than natural gas this winter, the share of total annual generation from natural gas is forecast to exceed coal during 2016 and 2017,” says Energy Information Administration (EIA) chief Adam Sieminski. The EIA has written in the past that it expects coal generation to grow next year as a result of rising natural gas prices, further bringing the two power resources closer to balance.

In October, natural gas generated 3,197 thousand MWh/day of electricity while coal generated 3,032 thousand MWh/day. According to EIA data, those numbers likely flipped in the month of November and are likely to continue through April 2017.

According to EIA projections, natural gas production will average around 77.5 billion cubic feet per day (Bcf/d) this year, a 1.3 Bcf/d decline from last year. According to the agency, it would “be the first annual production decline since 2005.”

EIA also expects natural gas prices to rise next year due to increasing gas consumption and an increased amount of exports. According to EIA, Henry Hub natural gas prices will rise from $2.49 per million British thermal units (MMBtu) in 2016 to $3.27/MMBtu next year. That is news worth considering as utility regulators and other policymakers plan for the future.

Using coal for electricity generation has many advantages that continue to make its relevant to energy systems across the nation. It is an extremely reliable resource that is not affected by pipeline issues. Coal generation is also not affected by intermittent weather or on-site storage capabilities. The same can’t be said for natural gas, whose equipment can freeze in the event of extremely cold temperatures. This was illustrated, almost with disastrous effect, during the Polar Vortex of January 2014 when natural gas supplies were interrupted at some power plants. During that extreme weather event, coal proved to be indispensable resource.

It is clear that coal still has an important role to play in our nation’s electricity mix, alongside natural gas, nuclear, and renewable sources of power. The latest numbers from EIA shows that. The coming winter, too, should provide a real life example of why we should not – and cannot afford to – walk away from coal.