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Released August 16, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Needless to say, the natural gas market has been volatile over the last decade or two, as factors such as the economy, supply and demand, and technology advancements have defiantly played major roles in the roller coaster price movements.
In late 2008 through early 2009, when the shale gas revolution began, natural gas prices fell considerably, and substantially changed the industrial markets. Over the past decade prices dropped from a high of $13.50 per million British thermal units (MMBtu) to $2.40/MMBtu in some regions. Prices look to stay pretty much the same over the next six to seven years, given shale gas supply projections.
Several industrial sectors have taken advantage of the wave of cheap natural gas feedstock. The Chemical Processing Industry, Industrial Manufacturing sector, and the Oil & Gas sector have all benefited. The one sector where cheap and abundant natural gas has been both a blessing and a detriment has been the Power Industry.
Since 2010, natural gas prices, environmental regulations, economics and aging fleets have caused coal-fired generation losses of roughly 12% in the lower 48 states. At the same time, there has been a 10% increase in natural gas utilization.
The amount of coal burned in the U.S. fell from 800 million tons in 2010 to about 500 million tons in 2016, which is quite the decrease considering that the amount of natural gas burned by power plants increased by about 38% in that same period.
Click on the image at right for a graph showing natural gas-fired plant startups for mid-2010 through mid-2017.
Plant age, economics and environmental regulations have been major factors in this transition as well. Walking out of the Obama Era's "War on Coal," the industry has seen 331 coal-fired units be closed, shuttered or mothballed. That is a loss of 13 gigawatts of generation in just a seven-year period. And not all of this generation capacity was closed because of a single factor. Construction starts and completions of 634 natural gas-fired units will supply about 66 gigawatts of power generation to the grid.
Click on the image at right for a graph showing U.S. coal-fired unit closures for mid-2010 through mid-2017.
Economics is always a major factor in the Power Industry. One example of the impact of economics is featured in a presentation by Energy Ventures Analysis (Arlington, Virginia) at the Energy Information Agency's (EIA) summer business convention in Washington, D.C. The analysis company compared a hypothetical coal unit running at 10,000 British thermal units per kilowatt hour (Btu/kWh) heat rate to a natural gas unit running at 7,000 BTU/kWh heat rate in the PJM Interconnection transmission region. The comparison showed that when natural gas prices were above $3.50/MMBtu, coal-fired generation was more economical, but when prices were below $3.50/MMBtu they were uneconomical. Currently in the PJM market place, natural gas pricing is about $2-$3/MMBtu for a northeastern average.
Even looking ahead to the winter, some of the most gas-hungry regions like the northeastern states will drive natural gas prices up to about $4/MMBtu and above. Depending on the coal supply sources, coal-fired units still come in second in some cases when looking at the economics of operations.
Looking at the bigger picture, coal-fired generation will not fall off the map altogether. On the contrary, we believe that a number of these coal-fired units rated at 500 megawatts (MW) and above will continue operating for quite some time. However, a new coal-fired facility or unit coming online is not foreseen for the next five years. Sunflower Electric Power Corporation's (Hays, Kansas) Holcomb 2 895-MW, coal-fired addition project in Kansas has received approval, but even now the owners of the $3.3 billion project are weighing their options.
The overall situation is such that natural gas-fired generation will increase its footprint in the U.S., with coal following closely behind for the foreseeable future. Because, like the folks at the National Energy Regulatory Commission (NERC), we think it would be extremely ill advised for the U.S. to put all of its eggs in one fuel basket. There must be an energy mix for the national good.
There always are curve balls in any market, and the power sector is no exception. A decline in storage capacity and resulting rise in natural gas prices would benefit coal-fired power generation.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
In late 2008 through early 2009, when the shale gas revolution began, natural gas prices fell considerably, and substantially changed the industrial markets. Over the past decade prices dropped from a high of $13.50 per million British thermal units (MMBtu) to $2.40/MMBtu in some regions. Prices look to stay pretty much the same over the next six to seven years, given shale gas supply projections.
Several industrial sectors have taken advantage of the wave of cheap natural gas feedstock. The Chemical Processing Industry, Industrial Manufacturing sector, and the Oil & Gas sector have all benefited. The one sector where cheap and abundant natural gas has been both a blessing and a detriment has been the Power Industry.
Since 2010, natural gas prices, environmental regulations, economics and aging fleets have caused coal-fired generation losses of roughly 12% in the lower 48 states. At the same time, there has been a 10% increase in natural gas utilization.
The amount of coal burned in the U.S. fell from 800 million tons in 2010 to about 500 million tons in 2016, which is quite the decrease considering that the amount of natural gas burned by power plants increased by about 38% in that same period.
Click on the image at right for a graph showing natural gas-fired plant startups for mid-2010 through mid-2017.Plant age, economics and environmental regulations have been major factors in this transition as well. Walking out of the Obama Era's "War on Coal," the industry has seen 331 coal-fired units be closed, shuttered or mothballed. That is a loss of 13 gigawatts of generation in just a seven-year period. And not all of this generation capacity was closed because of a single factor. Construction starts and completions of 634 natural gas-fired units will supply about 66 gigawatts of power generation to the grid.
Economics is always a major factor in the Power Industry. One example of the impact of economics is featured in a presentation by Energy Ventures Analysis (Arlington, Virginia) at the Energy Information Agency's (EIA) summer business convention in Washington, D.C. The analysis company compared a hypothetical coal unit running at 10,000 British thermal units per kilowatt hour (Btu/kWh) heat rate to a natural gas unit running at 7,000 BTU/kWh heat rate in the PJM Interconnection transmission region. The comparison showed that when natural gas prices were above $3.50/MMBtu, coal-fired generation was more economical, but when prices were below $3.50/MMBtu they were uneconomical. Currently in the PJM market place, natural gas pricing is about $2-$3/MMBtu for a northeastern average.
Even looking ahead to the winter, some of the most gas-hungry regions like the northeastern states will drive natural gas prices up to about $4/MMBtu and above. Depending on the coal supply sources, coal-fired units still come in second in some cases when looking at the economics of operations.
Looking at the bigger picture, coal-fired generation will not fall off the map altogether. On the contrary, we believe that a number of these coal-fired units rated at 500 megawatts (MW) and above will continue operating for quite some time. However, a new coal-fired facility or unit coming online is not foreseen for the next five years. Sunflower Electric Power Corporation's (Hays, Kansas) Holcomb 2 895-MW, coal-fired addition project in Kansas has received approval, but even now the owners of the $3.3 billion project are weighing their options.
The overall situation is such that natural gas-fired generation will increase its footprint in the U.S., with coal following closely behind for the foreseeable future. Because, like the folks at the National Energy Regulatory Commission (NERC), we think it would be extremely ill advised for the U.S. to put all of its eggs in one fuel basket. There must be an energy mix for the national good.
There always are curve balls in any market, and the power sector is no exception. A decline in storage capacity and resulting rise in natural gas prices would benefit coal-fired power generation.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
