US coal-fired generation gains back ground on gas

• 12 years ago (2012-07-21)
• Junior Isles

North America 1021

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Rises in US natural gas prices are expected to push back natural gas gains against coal as some utilities return to using coal for power generation.

Record-high natural gas production had previously pushed prices in April to 10-year lows, prompting companies substitute coal-fired generation with gas.

This week, the difference between NYMEX Central Appalachian coal prices and Henry Hub natural gas futures reached its narrowest since June 2011 as gas prices rebounded.

The coal-gas spread peaked at $2.196 per mmBtu on April 19 when gas hit a 10-year low of $1.902, due to oversupply, while coal was fetching $4.10.

Since then, gas prices have made a comeback to $3.04 per mmBtu, but coal, which is typically priced per ton, dipped to about $4.03 per mmBtu.

There had been a 10 per cent boost in US natural gas demand, year on year, in recent months due to its shale-backed cost advantage over coal. It is impossible to predict if this demand is destined to be short lived or indicative of a new trend.

If the spread continues to narrow, as energy analysts predict, generating companies could again start burning much more coal and less gas in their power plants.