The U.S. electricity sector will generate 22 percent more coal-fired generation this year than in 2020, ending six straight years of precipitous declines.
A new report by the federal Energy Information Administration, utilizing recent data, forecasts that coal-fired turbines will pick up the slack amidst higher natural gas prices. Gas-fired generation currently accounts for nearly 40 percent of the U.S. electricity resource mix, while coal was at about 20 percent last year.
Because natural gas-fired power plants convert fuel to electricity more efficiently than coal-fired plants, natural gas-fired generation can have an economic advantage even if natural gas prices are slightly higher than coal prices. Between 2015 and 2020, the cost of natural gas delivered to electric generators remained relatively low and stable.
This year, however, natural gas prices have been much higher than in recent years, according to the EIA. The year-to-date delivered cost of natural gas to U.S. power plants has averaged $4.93 per million British thermal units (MMBtu), more than double last year’s price.
Globally, many nations are in an energy crisis due to gas availability and weather impacts on renewables. Although rising natural gas prices have resulted in more U.S. coal-fired generation than last year, this increase in coal generation will most likely not continue, the EIA report noted.
The electric power sector has retired about 30% of its generating capacity at coal plants since 2010, and no new coal-fired capacity has come online in the United States since 2013.
The EIA expects the Henry Hub spot price for natural gas will average $5.80 per MMBtu in the fourth quarter, nearly 50 percent higher than the federal agency predicted one month earlier. Henry Hub prices may reach a monthly average peak of $5.90/MMBtu in January 2022, according to the EIA forecast.
Coal production should total nearly 600 million short tons for 2021, 53 MMst than in 2020, the EIA report reads. The electric power sector’s demand for coal should rise by 84 million short tons this year compared to 2020, according to the EIA.