Natural Gas and Renewable Energy to Continue Leading the Market
Cheap natural gas and social pressure to reduce carbon emissions give gas-fired power plants and renewable energy resources a competitive advantage over traditional coal and nuclear generation. Energy storage continues to gain traction as costs decrease and technology evolves.
The more things change, the more they stay the same—at least that’s how it’s been for the U.S. power industry in recent years. Coal-fired generation has been decreasing while natural gas-fired generation and renewable energy continue to gain market share (Figure 1). The news is not likely to surprise anyone who has been following electricity sector trends, but there are some potentially interesting developments that could give folks in the coal sector a little hope in the near-term.
For example, the spot price for natural gas at the Henry Hub—a nexus of interconnections in Erath, Louisiana, which gas insiders consider a benchmark for the market due to the ready access to interstate and intrastate pipelines available at the location—spiked to more than $4.50 per MMBtu in early December, after having spent the majority of 2018 under $3. The price increase could lead to more coal-fired generation being dispatched this winter. Nonetheless, the price would have to increase quite a bit more—with the prospect that it could stay there for a while—before any new coal-fired or nuclear capacity additions would be contemplated in the U.S.
“Gas would need to be at least in the $7 or $8 per MMBtu range before coal and nuclear would even be considered to be economical,” Britt Burt, vice president of research for the power industry with Industrial Info Resources (IIR), told POWER during an exclusive interview in December. “Our oil and gas experts tell me that we’re looking at $3 to $4 natural gas for a very long time.”
IIR is a global market intelligence company that provides clients with project and plant spending analysis and projections. “Any new capacity that we see being built is still going to be dominated by natural gas, as well as renewables—wind and solar, primarily,” Burt said.