Coal vs. Natural Gas

Coal’s Not King Anymore

Over the past several years, the US has experienced a shift away from Coal-fired power electric generation plants in favor of Natural Gas–fired power generation.

Most US power plants are powered by either Natural Gas or Coal through steam-powered turbines. The fossil fuels are used to heat a water supply which produces steam, which flows through a turbine to generate electricity. For more than twelve months now, Natural Gas has had a 28 percent market share in US power generation and Coal has had a 39 percent market share, totaling 67% of the overall market share between the two fossil fuels. The balance of US electricity is produced by nuclear, petroleum, and renewable sources such as Hydro, Wind, and Solar.

Many large coal-burning utilities have invested Billions of Dollars to install pollution-control equipment on their biggest coal-fired plants in their effort to meet EPA standards. However they are replacing or shutting down smaller coal plants for which such expenditures can’t be justified.  Several utilities, such as CMS Energy Corp. based in Jackson, Michigan are backing away from coal projects because the recession is giving them more breathing room to figure out other ways to meet future energy needs such as buying electricity from other companies.      Progress Energy Inc. of Raleigh, N.C., plans to close four coal-burning plants and replace two of them with gas-fired plants by 2017. The bottom line: The Company (Progress Energy) says it’s cheaper to build gas-fired plants than it is to outfit the Coal powered units with the necessary pollution-control equipment.

Large US Companies like American Electric Power Co (AEP), based in Columbus, Ohio and Duke Energy Corp. (Duke) of Charlotte, N.C are trying to find ways to use coal more cleanly. But they have each suffered several setbacks; political and otherwise.

Because of circumstances like these, Coal-burning facilities are expected to continue to slip in the years to come, so says the U.S. Energy Information Administration.   Natural Gas, on-the-other-hand, is expected to soar dramatically; primarily, many economists say, because of price.

Falling prices, to a bit more than $3.50 per one million British thermal units (BTUs), has helped Natural Gas capture an ever-increasing share of the power generation market. Hardly a week goes by without a power generating company announcing plans that push Coal to the wayside; typically in favor of Natural Gas.

Natural Gas has the edge in Europe as well.   For example in 2009, far more Natural Gas-burning plants than Coal-burning plants were built in the European Union—24 percent more new capacity versus 8.7 percent respectively.

However in China and India, no such shift is occurring. Both nations rely on coal (an abundant local resource) for most of their electric power source and they lack the sort of unified gas pipeline networks that has made switching to Natural Gas possible in the U.S. and Europe.  It’s worth mentioning that China’s government has pledged to roughly double the percentage of electricity the country gets from non-fossil fuel sources, from 8% to 15%, by 2020; and India has agreed to cut its carbon emissions by 20% below 2005 levels by 2020. But let’s not get our hopes to high because the country (India) doesn’t have enough domestic Natural Gas to support a large-scale shift to that type of fossil fuel.

Historically, when natural gas supplies appeared to be declining and market prices increasing, utilities started building Coal-fired plants.  However in recent years the nations glut of Natural Gas unleashed by hydraulic fracturing coupled with the resulting low prices make it seem like a no-brainer: Ditch Coal-fired electric plants, and all the excess baggage associated with both air pollution & water consumption, and switch to Natural Gas. Trends over the past few years suggest that’s starting to happen nationally, as Natural Gas seems destined to overtake Coal for generating electricity.

Since mid-2010, Natural Gas prices have rarely touched above $4.00 per MMBtu (millions of British thermal units). The exception: During times of crises or during and just after natural disasters such as hurricane Katerina in late August and September of 2005.  Many of us may recall that from 2005 through 2008, natural gas prices were extremely unstable; but mostly high, trading generally ranged from $6 to nearly $16 per MMBtu (million British thermal units).

Natural Gas prices have been depressed over the past few years mostly due to a huge influx of production. This production resulted from the growing use of technologies in the US such as horizontal drilling and hydraulic fracturing, which made areas that were previously unprofitable more economically viable.

In all fairness to the Natural Gas Industry, there are several benefits beyond low prices that we should consider that I’ve borrowed from a National Geographic Quiz:

On average, power plants that run on natural gas emit half as much carbon dioxide, less than a third of the nitrogen oxides, one percent of the sulfur oxides, and much lower levels of mercury than plants that burn coal.

Coal-burning power plants are responsible for more than 50% of human-caused releases of mercury in the U.S.

The top three coal producers are China, the United States, and India. The biggest natural gas producers are the United States, Russia, Canada, and Iran.

The world has an estimated 948 billion short tons (2,000 lbs. = 1 Short Ton) of coal in the ground and 850 trillion cubic meters of recoverable natural gas reserves.

About 100,000 Americans have died in accidents in coal mines over the past hundred years. The deadliest year was 1907, when 3,242 deaths occurred. Thanks to safety improvements, the death toll has dropped steadily, but it remains higher in developing countries.

When you consider that about 40% of the world’s electricity is generated by burning Coal, while about 21% is generated by burning Natural Gas (a number that’s projected to increase dramatically in the immediate future), we can only hope that the past few years of declining prices are a good measure of things to come.  But then Natural Gas prices have already climbed more than 30% in 2014, due largely to depleted inventories and higher demand as bitterly cold temperatures grip much of the nation. Natural Gas hit a five year peak of $6.15 on February 19^th.

And then there’s this: “Rising political tensions in Ukraine spilled over to global energy markets Monday (03/03/14), pushing crude oil prices to their highest levels of 2014”. Do you think this on-going event might affect Natural Gas prices?  Maybe investing in Clean Coal Technology is a good idea after all.

The truth is that nobody’s going to tear down a Half-Billion-Dollar Coal-fired plant to put in a new Natural Gas plant; just because Natural Gas is slightly cheaper, fact is, in a recent analysis, it was predicted that no more than 20 percent of Coal-fired electric power plants nationally will shift to Natural Gas over the next 20 years.  So you might call the coming transition a “slow death” for King Coal.

Sources:

http://online.wsj.com/news/articles/SB20001424052748703579804575441683910246338                                   http://www.chron.com/business/energy/article/Coal-vs-natural-gas-It-s-complicated-3897251.php                                                             http://marketrealist.com/2013/11/introduction-4/ http://marketrealist.com/2013/11/natural-gas-demand-helped-coal-gas-switching/ http://science.nationalgeographic.com/science/coal-vs-natural-gas-quiz/ http://www.usatoday.com/story/money/markets/2014/03/03/crude-oil-spurts-higher-on-escalating-tensions-in-ukraine/5973181/

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