Wednesday, September 12, 2012

Cheap Coal Supplanted By Cheaper Shale Natural Gas: Cleaner Air And Lower Electricity Prices Thanks To Fracking

From The Wall Street Journal, "Coal-Fired Plants Mothballed by Gas Glut" by Rebecca Smith:
Coal has been losing ground to natural gas ever since a boost in shale-gas production sent the price of natural gas tumbling four years ago. But now the natural-gas price advantage is beginning to affect the coal units that seemed most protected from the shift. Many of these plants have the latest environmental upgrades and are often close to coal deposits.

The reason: With natural gas priced below $3 per million British thermal units, down from about $8 in 2008, many gas-fueled plants can make electricity for about two cents a kilowatt hour, less than half what it costs to run many coal units, said Julien Demoulin-Smith, director of utilities research at UBS Securities LLC in New York.

"This marks another iteration of the way in which natural gas is displacing coal," said Mr. Demoulin-Smith. He said he expects the trend to become more pronounced in coming months as companies seek ways to cut their operating costs, especially those selling power into deregulated markets in the Northeast, Midwest, California and Texas, where power prices are very low because there is no pricing floor.

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