June 12, 2012

A Big Shift from Coal to Natural Gas Because of Cheap Natural Gas

The share of U.S. electricity that comes from coal is forecast to fall below 40 percent for the year — the lowest level since the government began collecting this data in 1949. Four years ago, it was 50 percent. By the end of this decade, it is likely to be near 30 percent.

Utilities are aggressively ditching coal in favor of natural gas, which has become cheaper as supplies grow. Natural gas has other advantages over coal: It produces far fewer emissions of toxic chemicals and gases that contribute to climate change, key attributes as tougher environmental rules go into effect.

Natural gas will be used to produce 29 percent of the country's electricity this year, up from 20 percent in 2008.

The shift is because shale gas has increased supplies and made natural gas cheap. It is not because of concerns over health effects. Coal is more harmful for health.



Coal is being beaten at its own game. Natural gas has become a cheap and abundant domestic resource, too. And it is more environmentally friendly.

Power plants that burn coal produce more than 90 times as much sulfur dioxide, five times as much nitrogen oxide and twice as much carbon dioxide as those that run on natural gas, according to the Government Accountability Office, the regulatory arm of Congress. Sulfur dioxide causes acid rain; nitrogen oxides cause smog; and carbon dioxide is a so-called greenhouse gas that traps heat in the atmosphere.

A pair of clean air rules enacted by the Environmental Protection Agency over the past year tightens limits on power-plant emissions of sulfur dioxide and nitrogen dioxide, and place new limits on mercury, a poison found in coal. This will force between 32 and 68 of the dirtiest and oldest coal plants in the country to close over the next three years as the rules go into effect.

Coal was hit with a potentially bigger environmental blow in March when the EPA issued guidelines that could limit greenhouse gas emissions from new power plants as early as 2013. Once the guidelines go into effect, no coal plants will be built unless utilities can develop a cost-effective way to capture carbon dioxide, analysts say. That technology has been slow to develop and is very expensive.

"Even without the EPA rules, coal is not really competitive," Wang says.

Nick DeIuliis, President of Consol Energy, a coal and natural gas producer based in Canonsburg, Pa., doubts the EPA's restrictions on greenhouse gases will survive long term because of the economic harm he says they will inflict.

Consol and other U.S. coal companies hope to be able to keep mines active by exporting more of the country's huge reserves. Last year U.S. coal exports hit a record 107 million short tons. High grade coal that is used to make steel is in particular demand in developing countries such as China, India and Brazil.

DeIuliis says the price of natural gas will rebound over time and that coal will once again account for half the nation's electricity. "This is a cycle," he says.

The futures price of natural gas hit a 10-year low of $1.91 per thousand cubic feet in April. It closed Tuesday at $2.23 but would have to more than double from there to convince utilities that have a choice of fuels to return to coal whenever possible.

Utilities are forecast to burn 808 million tons of coal this year, a 13 percent decline from last year and the fewest tons since 1992, according to Energy Department data.


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