Between 2018 and 2020, natural gas is expected to continue to eat away steadily at coal’s share of the US energy mix, barring any regulatory intervention from the federal government.
The competition between natural gas and coal is especially fierce this summer: the former could set a record in terms of its contribution to overall US energy generation.
Another interesting prediction about fossil fuels: in 2018, the average price of a gallon of gasoline has been significantly higher than the year before, but that may not be great news for the oil industry, because drivers are already responding to higher prices. The amount of gas drivers will purchase in 2018 is expected to fall year over year for the first time since 2012. The contraction amounts to 10,000 barrels of oil per day not sold—a small change for the US economy but potentially a harbinger of things to come.
These market estimates come from the US federal government’s energy statistics office, the Energy Information Agency (EIA), which releases a monthly report called the Short Term Energy Outlook (STEO). The predictions aren’t perfect—the EIA obviously can’t know the future. The predictions also don’t take into account political decisions that haven’t been made yet, like the Trump administration’s signal that it will force grid managers to buy uneconomic coal. But regulatory moves can often take months or years to come into full effect, so a short-term prediction need not account for every possibility.
King Coal’s regicide?
For many regions of the US, summer is the period of highest demand for electricity. People come home and blast their air conditioners and fans, creating significant electricity demand on hot afternoons. That forces grid operators to add extra short-term electricity to the grid, because demand generally falls quickly after sundown. Usually this extra generation falls to natural gas “peaker” plants, which can start up quickly to meet peak demand and can be shut down in a few hours after demand drops off again.
Because of this, natural gas usage for electricity generation is usually much higher in the summer than during spring or fall. (During the winter, natural gas is also in high demand but primarily for home heating.)
The EIA reports that, this summer, natural gas will constitute 37 percent of US electricity generation. Coal, which has declined significantly from the market-dominant position it once had, will make up 30 percent of electricity generation this summer.
Numbers are not expected to get better for coal absent the Trump administration playing deus ex machina with the Defense Production Act, which would allow the government to artificially keep coal plants open despite unprofitability. Without regulatory help, the EIA predicts that electricity from natural gas plants will “rise from 32 percent in 2017 to 34 percent in 2018 and to 35 percent in 2019.” That natural gas boom will cut into coal’s share of the electricity generation pie. “In this outlook, coal’s forecast share of electricity generation falls from 30 percent in 2017 to 28 percent in 2018 and to 27 percent in 2019.”
The driver of this change is primarily extraordinarily cheap natural gas. Between 2006 and 2008, the EIA says, fuel costs averaged $7.69 per million British thermal units (MMBtu, a measure of energy content in gas) for natural gas plants. Between 2015 and 2017, the EIA says, those costs fell to $3.16 per MMBtu, less than half what it was nearly a decade earlier. The EIA added that it expected natural gas producers to “establish a new record” for natural gas production this year and set another record in 2019. That bodes ill for the coal industry.
Who’s leading the switch from coal to natural gas these days? The Midwest. The EIA writes that natural gas will make 20 percent of the Midwest’s electricity this summer, compared to 15 percent last summer. Coal’s share of electricity supply will fall from 53 percent last summer to 49 percent this summer.
Although natural gas burns more cleanly than coal, it’s important to note that it’s not a solution to our climate change troubles. A recent report showed that natural gas production facilities are leaking significant amounts of methane, an extremely potent greenhouse gas, such that the switch from coal to natural gas may not be as good for the environment as we had hoped. Also, burning more natural gas doesn’t do anything to stop putting carbon dioxide into the air.
Unfortunately, the EIA predicts that the US will get nowhere on reducing energy-related CO2 emissions this year. “After declining by 0.9 percent in 2017, EIA forecasts that energy-related carbon dioxide (CO2) emissions will increase by 1.8 percent in 2018 and decrease by 0.5 percent in 2019.”
More on gas (for cars)
The EIA also makes some predictions in its short-term report about the prices of oil and gasoline, which have significant impacts on the car-centric US economy. The EIA predicts that gasoline retail prices will average $2.76 per gallon in 2018 and $2.77 per gallon in 2019, a dramatic increase from the $2.41 per gallon that we saw in 2017.
US oil production is expected to increase on those strong prices, but domestic drivers are recoiling. The EIA predicts that gas purchases will decrease in 2018 for the first time since 2012. Bloombergnotes that, back in 2012, gas prices were nearly $4 per gallon. We’re not there yet, but higher gas prices could mean the US falls by up to 10,000 barrels of oil per day in 2018.
While that may be bad news for the general economy, it’s better news for climate change: driving is about the most energy-intensive activity an average American can do during the day.