Coal-fired generation regains market share in March

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The rising price spread between coal and natural gas is helping coal take back market share from natural gas in the power generation sector. This is according to Genscape's Generation Fuel Monitoring Service

While March electricity demand increased 2 percent over March last year, natural gas-fired generation plummeted 11 percent below March 2012 levels.

Renewable energy generation also decreased 14 percent in March of 2013 versus last March. Coal-fired generation captured nearly everything lost by renewables and natural gas, surging 21 percent higher in March of 2013 compared to March 2012.

"April 2012 was the first time in history that natural gas-fired electricity generation was as high as coal-fired electricity generation, however as gas prices have recently reached $4.00/MMBtu the economics behind fuel switching are dramatically different than last year," says Genscape analyst Stephen Maestranzi. Genscape estimates that over the past year gas prices have risen more than 60 percent, while coal prices are only up about 2 percent. As a result, in March coal fired generation was 53 percent higher than gas-fired generation. "At this point last year, natural gas was economically competitive with nearly every delivered coal — even low cost Powder River Basin coal. Now only higher heat content coal delivered to the Southeast U.S. remains out of the money," Maestranzi says.

In addition to increased cost competitiveness, coal's surge has also been helped by stronger year-over-year power demand. March 2013 stood in stark contrast to March 2012 as colder than average temperatures developed over the much of the Eastern U.S., extending the winter season. National power demand was up 2 percent compared to a year ago.

Warmer than average temperatures were generally limited to the Western US, which saw warming conditions compared to the previous month. The strongest cold of the month was concentrated across the coal-centric Upper Midwest where winter-like conditions continued well into March.

Renewable generation took the largest year-over-year hit in March, dropping 14 percent (6,370 GWh). A major driver of this was weaker hydro output in the Northwest. Genscape's monitors on hydro facilities in the region saw a 36 percent decrease in 2013 — falling from 10,808 GWh to 6,945 GWh — on significant declines in snow water equivalent.

Year to date trends in 2013 are consistent with the March results. Overall, total year-to-date (through March 31st) power demand is up 2 percent and coal-fired generation is up 12 percent. Natural gas (-8 percent), nuclear (-1 percent), and renewables (-3 percent) all continue to lag their 2012 output levels.

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