Power Producers Accelerate
by Daniel Cusick
Coal remained the No. 1 fuel for electric power generation in the United States last year, but it lost substantial ground to both natural gas and renewables as measured by growth in each of the major generation sectors, according to newly published government data.
According to the Energy Information Administration's full-year data for 2012, coal consumption by both utilities and independent power producers declined 12.5 percent over the previous year. Total coal-fired generation for the 12 months ending in December was estimated at 1.52 billion megawatt-hours, compared with 1.73 billion MWh of total generation in 2011.
Only petroleum liquids and petroleum coke saw greater declines in use for fossil fuel electricity generation, dropping 17.9 percent and 31.2 percent, respectively.
Natural-gas-fired electricity production surged 21.4 percent over the same period, from 1.01 billion MWh of generation in 2011 to 1.23 billion MWh in 2012, according to EIA. Generation from renewable fuels also saw large percentage increases, but net power produced from wind, solar, geothermal and biomass remained small relative to coal and gas.
The coal-to-gas fuel switching was driven by a variety of factors, according to agency experts, including a glut of natural gas production from shale formations undergoing hydraulic fracturing and a commensurate drop in wellhead prices for gas.
According to EIA, utilities and independent power producers paid on average $3.48 per thousand cubic feet of gas in 2012, compared with an average of $4.83 per tcf in 2011.
Coal prices also slightly declined over the same period, but not enough to slow the surge of gas, which analysts now say accounts for 30.3 percent of all U.S. electricity generation, compared with 37.4 percent for coal. Both government and private-sector analysts expect those figures to shift in natural gas's favor over the coming decades, though a moderation in gas prices should help coal retain a larger share of electricity production in some regions.
EIA has projected that U.S. natural gas consumption will see a slight downward shift in 2014 due to rising prices, giving coal at least a brief reprieve from its downward trajectory. Experts differ on the price point at which natural gas begins shedding its competitive edge over coal, ranging from $4.50 to $6 per tcf.
Solar jumps 139%
A recent analysis by engineering and consulting firm Black & Veatch predicted that the U.S. electricity generation mix 25 years out will see natural gas account for 52 percent of total generation, while coal will decline to roughly 20 percent. Renewable energy, meanwhile, will grow from 6 percent to 10 percent of total domestic power generation, according to the firm.
"It should be noted that coal is not going away for a long time -- it will just become a smaller part of the portfolio," B&V analysts said in the firm's latest Energy Strategies Report. And as attractive as cheap shale gas has become for electric power producers, B&V experts cautioned that "disciplined resource planning is required" to reduce risks associated with price volatility.
"Depending on where you are in the country, you can have some access to wind, some access to solar, but in areas where it's not all that windy, and where coal plants are being retired and nuclear approvals are not forthcoming, then the trend [toward heavier reliance on gas] is going to create risk," the group said.
While gas-fired generators saw the largest gains in megawatts produced in 2012, two renewable energy sectors also witnessed signficiant growth, according to EIA.
Wind energy netted a 16.6 percent increase in year-over-year production, from 120 million MWh in 2011 to 140 million MWh in 2012. Solar, meanwhile, saw its output go from 1.8 million MWh to 4.3 million MWh, a 138.9 percent increase.
Nuclear energy output dropped 2.6 percent in 2012 over the previous year, a decline EIA attributes to a number of large reactors in the Southeast being taken out of service for maintenance.
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