Energy Business Forecast: Coal versus Natural Gas

 

The Environmental Protection Agency recently cited cheaper natural gas as one of the reasons for lower greenhouse-gas emissions in the United States. Gas prices also declined as a result of increased supply from hydraulic fracturing, or fracking, and responded by using more gas to generate electricity. Natural gas emits about half as much CO2 as coal. While price remains the primary factor in the short-term race between gas and coal, other factors helping gas replace coal in the long term, according to EIA (U.S. Energy Information Administration) are:

Efficiency: The efficiency of power from gas.  The ratio of natural gas prices to coal prices is approximately 1.5 or lower, a typical natural gas-fired combined-cycle plant has lower generating costs than a typical coal-fired plant.”

Competitiveness: Natural gas and renewables (Renewable energy is energy that is derived from natural processes (e.g. sunlight and wind) that are replenished at a higher rate than they are consumed. Solar, wind, geothermal, hydro, and biomass are common sources of renewable energy) are generally more competitive than coal.

Flexibility: In general, combined-cycle (gas) units are considered to be more flexible than steam turbines. They can ramp their output up and down more easily, and their start-up and shutdown procedures involve less time and expense.

Regulation: The interaction of fuel prices and environmental regulations is a key factor in coal plant closings. Higher coal prices, lower wholesale electricity prices, often tied to natural gas prices, and reduced use may make continuing investments in such plants uneconomical, therefore, resulting in plant closings.