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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Natural gas dethroned King Coal in the electricity business, and the shock waves continue to rattle the coal segment of the Metals & Minerals Industry. For the first time since 1973, when the U.S. Energy Information Administration (EIA) (Washington, D.C.) started collecting data, electricity generated from natural gas-fired plants equaled generation from coal-fired plants. Each fuel provided 32% of total U.S. electric generation in April 2012, said EIA, the statistical and analytic arm of the U.S. Department of Energy (DoE) (Washington, D.C.). For that month, net electric generation from natural gas was 95.9 million megawatt-hours (MWh), essentially even with generation from coal at 96 million MWh.
Click on the icon at the right to see EIA's estimate of coal burn at U.S. generators from 2010 to 2013.
EIA said the data for 2011 and 2012 are preliminary and subject to change. But don't look for big changes when the final numbers for 2011 are reported later this year: EIA said there was only a 0.1% change from preliminary estimates to final data for 2010.
Natural gas prices for delivery to power plants were at 10-year lows in April, EIA said. The mild spring and weak economy combined to reduce overall U.S. demand for electricity. Overall demand is expected to increase for months beyond May as the summer air-conditioning season drives up demand for electricity.
In March 2012, coal's share of total generation was 34% compared to natural gas at 30%, the EIA noted. Between March 2011 and March 2012, coal generation decreased 29 million MWh, while natural gas generation increased 27 million MWh.
U.S. gas prices have firmed somewhat since hitting a low of about $1.90 per million British thermal units (MMBtu) earlier this year. Low-priced gas and tighter environmental regulation of coal-fired generation have fueled an increased reliance on natural gas by the Power Industry. Some utility leaders, including Jim Rogers of Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) and Nick Akins of American Electric Power Company (NYSE:AEP) (Columbus, Ohio) have warned against the danger of over-reliance on a single fuel for electric generation. For more on that issue, see May 2, 2012, article - Duke's Rogers Warns Against Building "All Gas, All the Time," But Dash to Gas Shows No Sign of Slowing, and June 27, 2012, article - AEP's Akins Chills with Drums While Seeking Changes in U.S. Energy Policy.
"The temptation is to build all gas, all the time because it's cheap and it's quick to build," Rogers told a conference held earlier this year by The Wall Street Journal. "But the reality is, what strengthens the electric grid of the U.S. is our mix of generation." Today's low gas prices "make it uneconomic to burn coal at this time. ... The toughest challenge today is to convince regulators and consumers to let us build something other than natural gas (generation)." Rogers and other utility leaders have acknowledged large and growing coal piles at their generation stations.
Utilities are obligated to take coal shipments according to long-term contracts they have signed. For now, it is cheaper to stockpile those coal shipments while other generators burn gas. EIA expects those stockpiles to grow about 25 short million tons this year, to about 200 million short tons from 175 million short tons at year-end 2011. The agency expects overall coal use by generators to fall 14% this year compared to 2011. EIA projects prices paid by generators for coal this year will drop slightly from 2011 levels, but fall more significantly in 2013.
Coal is expected to continue facing a tough competitive market with gas. In another report, EIA's "Short-Term Energy Outlook," which was released last week, the agency estimated natural gas working inventories at 3.1 trillion cubic feet, about 23% higher than a year ago. EIA expects Henry Hub natural gas spot price to average $2.58 per MMBtu this year, down from $4 per MMBtu in 2011. Next year, it sees Henry Hub gas prices rising to an average of $3.22 per MMBtu.
One bright spot for the coal industry was increased exports during April. EIA estimated that exports at 12.5 million short tons that month, the highest monthly total since 1973, when the agency started keeping data. For 2012, EIA sees total coal exports increasing by 4.6% to 112 million tons in 2012. But it expects exports to fall 14%, or 15.5 million short tons, next year.
That bright spot is being overshadowed by declining expectations for the domestic coal business. Last week, Patriot Coal Corporation (NYSE:PCX) (St. Louis, Missouri) filed for bankruptcy to gain time to restructure its business as an alternative to closing its doors. "The coal industry is undergoing a major transformation, and Patriot's existing capital structure prevents it from making the necessary adjustments to achieve long-term success," said Patriot Chairman and CEO Irl F. Engelhardt. "Our objective is to use the reorganization process to address important issues in an orderly way and make the company stronger and more competitive."
"We remain firmly committed to serving our customers and to being a good employer by maintaining safe, productive operations as we undertake this process," added Patriot President and Chief Operating Officer Ben Hatfield. "The skills of our employees and the quality of our service provide an excellent platform for Patriot's future success. We appreciate the ongoing dedication of our employees, whose hard work is critical to our success and the future of our company."
Patriot said its business outlook has been hurt by a number of challenges that are affecting the coal industry, including reductions in U.S. thermal coal demand due to competition from low-priced natural gas; challenging environmental regulations affecting the cost of producing and using coal; and weaker international and domestic economies.
Other coal companies, including Alpha Natural Resources Incorporated (NYSE:ANR) (Bristol, Virginia) and Arch Coal Incorporated (NYSE:ACI) (St. Louis), face the same challenges of declining domestic demand for thermal coal, mine closures, and falling revenue and profits. For more on that issue, see March 8, 2012, article -- U.S. Coal Mines Expand, Contract as Demand Drops for High-Sulfur Thermal Coal. Several mining companies have responded to declining domestic demand for thermal coal by seeking to increase exports. For more on that issue, see February 23, 2012, article -- Facing Soft U.S. Coal Market, Arch Coal Seeks to Boost Exports.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Click on the icon at the right to see EIA's estimate of coal burn at U.S. generators from 2010 to 2013.EIA said the data for 2011 and 2012 are preliminary and subject to change. But don't look for big changes when the final numbers for 2011 are reported later this year: EIA said there was only a 0.1% change from preliminary estimates to final data for 2010.
Natural gas prices for delivery to power plants were at 10-year lows in April, EIA said. The mild spring and weak economy combined to reduce overall U.S. demand for electricity. Overall demand is expected to increase for months beyond May as the summer air-conditioning season drives up demand for electricity.
In March 2012, coal's share of total generation was 34% compared to natural gas at 30%, the EIA noted. Between March 2011 and March 2012, coal generation decreased 29 million MWh, while natural gas generation increased 27 million MWh.
U.S. gas prices have firmed somewhat since hitting a low of about $1.90 per million British thermal units (MMBtu) earlier this year. Low-priced gas and tighter environmental regulation of coal-fired generation have fueled an increased reliance on natural gas by the Power Industry. Some utility leaders, including Jim Rogers of Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) and Nick Akins of American Electric Power Company (NYSE:AEP) (Columbus, Ohio) have warned against the danger of over-reliance on a single fuel for electric generation. For more on that issue, see May 2, 2012, article - Duke's Rogers Warns Against Building "All Gas, All the Time," But Dash to Gas Shows No Sign of Slowing, and June 27, 2012, article - AEP's Akins Chills with Drums While Seeking Changes in U.S. Energy Policy.
"The temptation is to build all gas, all the time because it's cheap and it's quick to build," Rogers told a conference held earlier this year by The Wall Street Journal. "But the reality is, what strengthens the electric grid of the U.S. is our mix of generation." Today's low gas prices "make it uneconomic to burn coal at this time. ... The toughest challenge today is to convince regulators and consumers to let us build something other than natural gas (generation)." Rogers and other utility leaders have acknowledged large and growing coal piles at their generation stations.
Utilities are obligated to take coal shipments according to long-term contracts they have signed. For now, it is cheaper to stockpile those coal shipments while other generators burn gas. EIA expects those stockpiles to grow about 25 short million tons this year, to about 200 million short tons from 175 million short tons at year-end 2011. The agency expects overall coal use by generators to fall 14% this year compared to 2011. EIA projects prices paid by generators for coal this year will drop slightly from 2011 levels, but fall more significantly in 2013.
Coal is expected to continue facing a tough competitive market with gas. In another report, EIA's "Short-Term Energy Outlook," which was released last week, the agency estimated natural gas working inventories at 3.1 trillion cubic feet, about 23% higher than a year ago. EIA expects Henry Hub natural gas spot price to average $2.58 per MMBtu this year, down from $4 per MMBtu in 2011. Next year, it sees Henry Hub gas prices rising to an average of $3.22 per MMBtu.
One bright spot for the coal industry was increased exports during April. EIA estimated that exports at 12.5 million short tons that month, the highest monthly total since 1973, when the agency started keeping data. For 2012, EIA sees total coal exports increasing by 4.6% to 112 million tons in 2012. But it expects exports to fall 14%, or 15.5 million short tons, next year.
That bright spot is being overshadowed by declining expectations for the domestic coal business. Last week, Patriot Coal Corporation (NYSE:PCX) (St. Louis, Missouri) filed for bankruptcy to gain time to restructure its business as an alternative to closing its doors. "The coal industry is undergoing a major transformation, and Patriot's existing capital structure prevents it from making the necessary adjustments to achieve long-term success," said Patriot Chairman and CEO Irl F. Engelhardt. "Our objective is to use the reorganization process to address important issues in an orderly way and make the company stronger and more competitive."
"We remain firmly committed to serving our customers and to being a good employer by maintaining safe, productive operations as we undertake this process," added Patriot President and Chief Operating Officer Ben Hatfield. "The skills of our employees and the quality of our service provide an excellent platform for Patriot's future success. We appreciate the ongoing dedication of our employees, whose hard work is critical to our success and the future of our company."
Patriot said its business outlook has been hurt by a number of challenges that are affecting the coal industry, including reductions in U.S. thermal coal demand due to competition from low-priced natural gas; challenging environmental regulations affecting the cost of producing and using coal; and weaker international and domestic economies.
Other coal companies, including Alpha Natural Resources Incorporated (NYSE:ANR) (Bristol, Virginia) and Arch Coal Incorporated (NYSE:ACI) (St. Louis), face the same challenges of declining domestic demand for thermal coal, mine closures, and falling revenue and profits. For more on that issue, see March 8, 2012, article -- U.S. Coal Mines Expand, Contract as Demand Drops for High-Sulfur Thermal Coal. Several mining companies have responded to declining domestic demand for thermal coal by seeking to increase exports. For more on that issue, see February 23, 2012, article -- Facing Soft U.S. Coal Market, Arch Coal Seeks to Boost Exports.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
