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Hail Shale
An Important American Green Milestone

For the first time in our history, this April the U.S. supplied more of its electricity burning natural gas than coal. The FT reports that a combination of cheap gas and increased regulations on coal meant that gas edged out coal as 31 percent of our electricity against coal’s 30 percent.

This is, of course, unwelcome news for the coal industry, which is already facing a grim outlook as federal regulations force older plants to install expensive scrubbers to cut down on emissions. Those new rules, along with fierce competition from the new kid on the block—shale gas—have knocked Old King Coal off his throne, and the way things are going he may never return to it.

For U.S. emissions and our country’s air quality, though, this is a positive development. Natural gas emits roughly half of the greenhouse gases as coal, making it a much cleaner and greener energy source. We’ve said it before, but given coal’s recent displacement it’s worth saying again: shale gas is fracking green.

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  • Proud Skeptic

    No worries, Mate. The coal will be there in the ground and we can go get it anytime.

    • Andrew Allison

      And I wouldn’t be at all surprised if the economic pressure which has resulted in dramatic increases in shale production and decreased cost resulted in something similar for coal, of which as I recall we have a 400 year supply.

  • SLEcoman

    This is April 2012 redux, when natural gas fired power generation equaled coal’s market share (32% each), and media widely proclaimed that coal fired generation was no longer economic. Of course virtually nobody seemed to notice that a natural gas price (Henry Hub) of $1.99/MMBtu (~$12/bbl oil equivalent) might not be sustainable, even though the CEO of Exxon Mobil said that natural gas prices were too low to sustain continued drilling and production.

    It didn’t take long for those of us who realized April 2012 did not represent the future to be proven prescient. By November 2012, the Henry Hub natural gas price had increased 78% to $3.55/MMBtu (~$21.30/boe). Moreover, media pundits forget that it costs money to transport natural gas from the Henry Hub to power plants. When natural gas transportation costs were included, the average delivered cost of natural gas was $4.23/MMBtu ($25.38/boe). The average delivered cost of coal was $2.38/MMBtu ($14.28/boe). Not exactly surprisingly, coal fired power generation’s market share had risen to 41% and natural gas fired market share had fallen to 26%.

    I guess it would be too much to ask for media pundits to realize that natural gas demand in April is much less than in the winter, and there might be a problem with natural gas deliverability in the winter when natural gas demand for residential and commercial space heating peaks. In February 2014, Henry Hub natural gas prices spiked to $6.00/MMBtu ($36.00/boe) and pipeline transmission charges also increased dramatically, yielding an average delivered cost to power plants of $7.39/MMBtu ($44.34/boe). Meanwhile the average delivered cost of coal had actually fallen slightly to $2.33/MMBtu ($13.98/boe). Coal’s market share increased to 44% while natural gas’s market share dropped to 23%.

    But the problem of natural gas deliverability was even more severe than the prices indicated. In some locations natural gas pipeline operators put power plants on allocation to ensure there was sufficient natural gas for residential and commercial space heating. Desperate for fuel, power generators used #2 fuel oil even though it cost an average of $131/bbl ($21.75/MMBtu). This experience illustrated that there is real value in having power generation (hydroelectric, coal, and nuclear) that stores their fuel on-site. And where were the media headlines “Coal saves US citizens from freezing in the dark”? Its just another example of the media not covering stories that are not PC.

    In April 2015 the Henry Hub natural gas price averaged $2.61/MMBtu. Does anyone think that a natural gas price at $15.66/boe is sustainable?

    data source: EIA Electric Power Monthly

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