Tue December 11, 2012
Data Shows Gas is Catching Up to Coal, Even in the Southeast
A new analysis by the federal government shows that coal-fired electricity is losing ground in a former stronghold: the Southeast.
Coal's share of the nation's electricity generation has been slipping over the past few years; in July, preliminary data suggested for the first time, natural gas and coal both provided the same amount (32 percent) of the U.S.'s electricity. But coal usage has typically been higher in the Southeast.
But even that's on the decline. Data from the Energy Information Administration shows that in the summer of 2010, coal provided half of the region’s electricity; natural gas accounted for 26 percent. But in summer 2012, coal’s share fell to 42 percent and natural gas provided 34 percent of the electricity in the Southeast (which includes Kentucky).
Why? Prices. According to the EIA:
In the southeastern United States, EIA estimates that the approximate fuel-related variable cost of natural gas plants in the summer months fell 43% between 2010 and 2012, driven principally by the drop in natural gas prices during the period. The cost of generating electricity from natural gas in the Southeast during the summer of 2010 was close to the cost of dispatching coal units relying on Central Appalachian (CAPP) coal. However, by 2012, the relative cost of generating electricity in the Southeast from natural gas was on average lower than the cost of generating electricity from CAPP coal, and at times natural gas generation was competitive with dispatching electric power plants using lower-cost Powder River Basin coal.
That's a trend that's even being replicated to some extent in Louisville. Louisville Gas and Electric/Kentucky Utilities currently uses coal for 98 percent of its generation. The remaining electricity comes from natural gas (1%) and hydropower (1%). But by 2017, spokesman Brian Phillips estimates the share of electricity the company generates from coal will drop to 80-85 percent. Natural gas will account for 15-20 percent, and hydropower will remain at 1 percent.
"Since we dispatch the generation units on a least-cost basis, the actual split between coal and gas generation will depend upon the price of natural gas and coal," Phillips said in an email.
This is bad news for the coal industry, especially considering that coal-fired power plants are more concentrated in the southeast than any other area of the country. (In 2009, NPR created this cool interactive map showing the distribution of electricity in the United States .)
Most electric utilities have several options to choose from when it comes to supplying power. Obviously, if a company’s generation mix is 90 percent coal and 10 percent gas, there’s only a certain extent to which it can switch some of its generation to natural gas when that fuel’s cheaper. But for companies with extensive natural gas and coal facilities, the companies are choosing to burn more gas because it’s less expensive…and as the EIA shows, it’s even close to pulling even with coal from Wyoming’s Powder River Basin.
If Central Appalachian coal isn’t economical to burn in the Southeast—which is close to the coalfields and well-connected via rivers and rail—then where will it be economical?