Gas-fired power isn’t having a great summer.
Electricity generation from natural gas is down so far this year due to higher prices, increasing the possibility that gas will give up its dominance over coal, at least for 2017.
Wyoming coal depends on robust demand from power plants across the Midwest, down in Texas and along the western slope of the east coast’s Appalachian mountain range. The state’s two largest mines alone provide about one-quarter of the country’s coal.
But as natural gas prices have fallen in recent years, coal’s dominance in the electricity market has faltered, impacting the state’s economy and its outlook for future revenue. New gas-fired power plants have eaten away at coal’s share.
Ironically, Wyoming is also one of the top five producers of natural gas in the U.S.
Gas-fired power consumption surpassed coal power for the first time last year, but this year it may not, according to the Energy Information Administration.
The biggest indicator appears to be price. While coal remains relatively stable, natural gas prices have risen from an average of $2.27 per British thermal unit between April and July last year, to a $3.03 average for that period in 2017, according to the EIA.
The price difference was reflected in what power companies have used to feed the nation’s electricity demands. Natural gas generated 34 percent of the country’s power last year, and coal fell to 30 percent.
With the price bump for gas, the margins will be much closer in 2017. A few weeks ago, the EIA forecast showed natural gas and coal each taking about 31 percent of the electricity mix for the full year.
Coal has been hobbled in other ways, as too-big-to-fail companies struggled through bankruptcy cases shedding debt made on financial bets. Production floundered and miners were told they would be laid off.
This year production at Wyoming mines is up, increasing 20 percent year over year in the first quarter. Though production and consumption do not always go hand in hand, they eventually fall in line. Whatever gets produced gets burned.
Natural gas peaks in the summer months, usually late July or early august. This year’s highest power day so far was on July 20.
Renewables have also shaken up the traditional power mix, passing a milestone this spring by exceeding 10 percent of the electricity supply. It was the first time renewables surpassed nuclear power in electricity generation since the early ‘80s.
Though much focus has been on wind and solar increases, this year’s story is also about water. For the first time since 2011, California’s drought has weakened. The wet weather increased the amount of runoff from snowpack and streams. Hydropower, at least in the West, is expected to rise significantly from previous years.
The EIA is also predicting that overall electricity use will be marginally down in 2017.
In short, renewables, coal and gas are each competing for a piece of a pie that’s slightly smaller than last year.
With its higher prices, gas is likely to see the biggest reduction in its share.