Natural gas matched coal as the primary fuel for U.S. power generation this year for the first time since the government started collecting data.
The BGOV Barometer shows natural-gas fired plants provided 32 percent of generation in May, close to coal’s 34 percent share, after the two fuels were in a virtual tie in April, according to the Energy Information Administration. Low prices are benefiting power generators such as Calpine Corp. (CPN), the biggest U.S. producer of electricity from natural gas.
“Natural-gas generation is becoming the preferred generation of choice since it’s cheaper and more efficient, more flexible and environmentally cleaner than coal,” Jack Fusco, chief executive officer of Houston-based Calpine, said during a July 27 conference call with analysts. “Coal-fired generation is in a secular decline, facing pressure from both environmental regulations and lower natural-gas prices.”
The expansion of gas production from shale using technology known as fracking has pushed prices down 69 percent over the past four years. An Environmental Protection Agency mercury and air toxics rule, released in December, will lead to a reduction of 4.7 gigawatts in coal-fired generation, the agency estimated. FBR Capital Markets & Co. in New York estimated the drop might more than 10 times that much.
The cost to use natural gas will “necessarily” skyrocket when we go strictly natural gas as the US does not have the gas pipelines to carry the gas to the power plants. The gas pipelines that exist are at maximum capacity already. Add to that cost the cost of fighting the environmental warriors over fracking and you no longer have an inexpensive energy choice.