NEW YORK – Demand for U.S. coal is projected to recover slightly in 2017 after years of decline, but it will not reclaim the crown it held for more than a century as the leading fuel behind U.S. power generation, analysts said.
An expected rise in natural gas prices, thanks to overseas demand, should boost use of cheaper coal by power generators.
Gas prices are expected to rise from an estimated $2.36 per million British thermal units (mmBtu) in 2016 to $3.06 next year due to growing demand for LNG and gas pipeline exports, according to the latest Reuters poll on Tuesday. [NGAS/POLL]
Next-day prices at the Henry Hub benchmark in Louisiana averaged $2.61 in 2015, lowest since 1999. This year, gas prices have fallen even lower after a mild winter.
However, energy companies and analysts said they expected gas to remain the dominant fuel for producing electricity in the United States for years.
“More gas and renewables make sense for our customers. They really are the only fuel choices for new generation. We won’t build any new coal,” Mark McCullough, executive vice president of generation at American Electric Power of Ohio, said in an interview.
Before the U.S. shale boom, coal produced more than half of the nation’s electricity, while gas accounted for less than 20 percent. For 2017, the share is expected to be 31 percent for coal and 33 percent for gas, according to the U.S. Energy Information Administration.
Republican Presidential candidate Donald Trump has said he would roll back regulations that have led to the retirement or conversion of some 50,000 megawatts of coal plants since Barack Obama became president in 2009.
Generators have retired those plants as low gas and power prices made it uneconomic to upgrade to comply with stricter environmental rules.
“I don’t think any president will turn the coal industry around. They can certainly make environmental restrictions and costs associated with them less onerous, but no one is going to build a new coal plant now,” said James Williams, president of energy consultant WTRG Economics in Arkansas.
AEP’s McCullough said the average age of its remaining coal fleet will be about 62 years in 2040, near the end of their productive life cycle.
EIA projected coal production would drop to 732 million short tons (mmst) in 2016, the lowest since 1978. It peaked at 1,172 mmst in 2008.
(Reporting by Scott DiSavino; Editing by Richard Chang)
http://www.reuters.com/article/us-usa-natgas-coal-idUSKCN10N27F