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Natural gas-fired US power generation to surpass coal in 2016: EIA

The US Energy Information Administration expects lower natural gas prices will result in natural gas fueling 33.4% of US electricity generation in 2016 compared with 32% for coal, according to the agency's monthly Short Term Energy Outlook released Tuesday.

It marks the first time the agency has projected natural gas generation to surpass coal on an annual basis. In the report's February edition, the agency forecast gas would fuel 32.3% of US generation in 2016 compared with 33.3% for coal.

As a result of decreasing demand, US coal production is projected to total just 784 million st in 2016, which would be a 12.4% decline from 2015 production, according to the agency.

The 2016 estimate, were it to hold, would be the lowest annual production total since 1983. Furthermore, the drop in production in 2016 would represent a larger year-over-year decline than the 10.2% decline between 2015 and 2014.

Considering coal production in 2014 totaled 997 million st, 2016's figure would represent a 21.4% decline in the past two years. 

The decline comes as low natural gas prices continue to destroy coal demand. For 2016, the EIA projects the Henry Hub spot price for natural gas will average $2.25/MMBtu compared with $2.63/MMBtu in 2015 and $4.26/MMBtu in 2014.

For 2017, the agency projects the Henry Hub spot price will average $3.02/MMBtu, largely due to an increase in power and industrial demand. 

The downtrend in natural gas prices has been affected by increasing dry gas production, which the EIA expects will average 74.7 Bcf/d in 2016 compared with 74.2 Bcf/d in 2015 and 70.5 Bcf/d in 2014.

For 2017, the agency projects dry gas production will average 76.3 Bcf/d.

Due to lower demand for coal-fired generation, electricity sector coal consumption is projected to fall in 2016 to 710.7 million st, a 3.8% decline from 2015 and the lowest annual total since 1986.

In 2017, rising natural gas prices are projected to lead to an increase in coal demand, resulting in electricity sector coal consumption of 721 million st.

In 2016, the agency projects total coal consumption of 770.2 million st, down 3.9% from 2015. Total coal consumption in 2017 is projected to reach 779.3 million st.

Coal's expected 32% share of total US electricity output this year compares with 33.2% in 2015. Coal's share of generation in 2017 is projected to edge up to 32.2%, as a result of higher natural gas prices.

Source: platts.com