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Hail Shale
Gas to Surpass Coal in Electricity Production

2016 is going to be a banner year for American natural gas. The Energy Information Administration (EIA) expects that this year, for the very first time, natural gas will produce more electricity than coal, its much dirtier fossil fuel competitor. Last year helped set this up, as surging supplies from shale formations around the country helped boost the amount of power we produce from natural gas 19 percent. A domestic glut of gas has helped drive prices for the hydrocarbon down to levels where it’s been able to out-compete coal on price, which is why we’re seeing that sooty rock knocked off its perch as the single biggest source of power generation in the country. The EIA reports:

Natural gas had long been the second-most prevalent fuel for electricity generation behind coal. Natural gas-fired generation first surpassed coal generation on a monthly basis in April 2015. Natural gas-fired generation has surpassed coal-fired generation in most months since then and is expected to continue to exceed coal generation through the remainder of the year, ultimately providing 34% of the United States’s electricity generated this year. Coal’s share of the 2016 U.S. electricity generating mix is expected to be 30%, nuclear, 19%, and renewables, 15%. […]

Even though natural gas-fired generation has increased in recent years, it is expected to decline slightly in 2017 as natural gas prices increase. Spot prices at the benchmark Henry Hub have increased recently, from a monthly average of $1.92 per million British thermal units (MMBtu) in May to $2.59/MMBtu in June, the highest monthly Henry Hub spot price since September 2015. Based on the latest STEO forecast, EIA expects natural gas spot prices to remain low enough to support record-high natural gas-fired generation in 2016. In 2017, as spot natural gas prices continue to increase, natural gas-fired generation is expected to decrease by about 2%.

Coal is a dirty energy source—there’s no getting around that—so to the extent that another, cleaner energy source can displace it, that’s green progress. Natural gas emits roughly half the greenhouse gas emissions as coal and far fewer local air pollutants, so its ascendancy isn’t just a boon to those concerned about climate change, it’s also a positive development for public health.

And what’s remarkable about this green-ing of the U.S. energy mix is that it hasn’t come about through any complicated and costly subsidization scheme, but rather through market forces. Shale gas is cleaner than coal, true, but that’s not why it’s undercutting its fossil fuel cousin. No, coal is losing on price, a direct result of the shale energy revolution, and in the process the United States is getting to have its cake and eat it, too: our emissions are being kept under control while households and companies are getting access to cheap, domestic sources of energy. Frack, baby, frack!

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  • rheddles

    This most certainly hasn’t come about through market forces alone. It has come about through government threat. Market forces move more slowly when it comes to replacing capital investment.

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