Drop expected in coal use to make electric power
Natural gas could become a competitive replacement
By Tom Stundza -- Purchasing, 6/17/2009 9:25:00 AM
The Energy Information Administration forecasts that utilities in the electric power sector will use 4.6% fewer tons of coal this year at 994 million short tons than were consumed last year. Reason: A decline in overall electricity generation, combined with projected increases from natural gas, nuclear, and renewable (hydroelectric and wind) generation sources. This will cause coal inventories to rise and coal production to drop 7%.
The EIA says the annual average contract coal price is projected to increase 4% due to a pricing lag between mine-mouth costs and delivered prices. On the other hand, spot sales of low-sulfur bituminous steam coal from Central Appalachia are 66% lower at $47/ton this month that they were at the peak last summer. That’s why “there basically is no spot market for coal right now,” says the Coal and Energy Price Report. “Coal companies are living off their utility contracts,” which are long-term, not part of the spot market. Historical coal price data can be found at Business Intelligence Center - Energy Price Transaction Report at www.purchasingdata.com, Purchasing’s subscription website for commodities prices, leadtimes and business conditions.
For more than a century, the U.S. has relied on coal to produce the biggest share of its electricity. Coal now accounts for about half of the nation's electricity, compared with about 21% from natural gas. But natural gas-fired plants can be built more quickly and inexpensively than coal plants, and they release about half as much carbon dioxide as coal to produce similar amounts of electricity.
Abundant new supplies of natural gas, combined with reduced demand for electricity, have sent prices tumbling to less than $4 per million British thermal units from more than $13 last July. That drop could prompt power companies to invest billions of dollars in natural-gas fired plants. And there is the prospect that utilities will start burning more gas and less coal, especially if Congress passes a climate-change bill to curb greenhouse gases and cap carbon emissions.
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