Natural gas loses steam for power generation

The rising price of natural gas relative to coal is putting a drag on its attractiveness for power generation.

Natural gas used for electricity in the United States fell by 14 percent during the first seven months of 2013, compared with the same time period in 2012, according to a  report this week from the U.S. Energy Information Administration.

The slowdown has come as U.S. natural gas prices have rebounded from a 2012 low of $2.39 per million British thermal units. Natural gas currently trades at about $3.50 per million British thermal units.

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Even with the price increase, natural gas generation remains higher than before 2012, indicating a longer term, gradual shift away from coal. Coal now accounts for 39 percent of the fuel used to generate the nation’s power needs, down from 42 percent in 2011.

In Texas, the reduction of coal use has not been as dramatic as nationwide, because Texas power plants use a greater proportion of lignite coal, which is cheaper than the Powder River Basin coal used in many East Coast plants. Texas also has lower transportation costs for coal, making its use relatively more attractive than in other parts of the country.

The proposed tightening of emissions regulations also has encouraged power companies to invest in natural gas. The Obama administration recently proposed carbon emission limits on coal plants, which is expected to further raise the cost of investing in coal plants.

Nuclear power has remained stable in the last three years, making up about 10 percent of total power generation. Since 2012, five nuclear reactors at four nuclear power plants have been shut down. However, despite these closures, which have consisted of aging facilities, power generation companies are continuing to invest in diversified power sources, and build additional nuclear facilities, such as the Vogtle plant in Georgia. As a result, nuclear power is expected to grow nine percent by 2035, the EIA said.

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