Natural Gas: The New King Of Electric Power [View article]
Hi Carl,
I assumed 6% (slightly higher than historical periods) because of increasing regulatory fears and the lower natural gas pricing environment described in the analysis. Other assumptions include a 1.8% annual increase in total electricity generated (which is the 15-year average excluding 2008 and 2009) and a 11.1% annual increase in electricity generated by non-hydroelectric renewables (the 5-year average for that segment). The 1% decline in coal demand is a consequence of those other assumptions, for coal demand would have to decline to support the growth in natural gas and renewables under the assumption of 1.8% increase in total electricity generated. One slice of the pie has to get smaller to support the other growing slices, in other words.
Natural Gas: The New King Of Electric Power [View article]
Good question, jarco. The average heat rate (the amount of energy to generate a given amount of electricity) for natural gas-fired power plants in 2009 was about 7,714btu/KWh, while that for coal was somewhere north of 10,000btu/KWh. But that is an average; individual plants vary all across the spectrum. In fact, the average NG-fired power plant heat rate rose to nearly 8,000 during the summer months as less efficient plants were dispatched to meet demand.
Because of the variability in plant efficiency, the cost of generating power from NG versus coal is not a single price, but a spectrum of prices. The highest cost coal, which is generally Appalachian coal, is trading around $65/ton currently ($2.65/mmbtu). While much cheaper on an energy basis than natural gas near $4.35mmbtu, after factoring in heat rates, the difference is not so much; the average cost to generate a MWh of electricity is $33.55 for natural gas and $27.30 for CAPP coal. Again, these are averages. A relatively inefficienct coal plant with a heat rate of 13,000btu/KWh would cost $34.45/MWh to run, more than the average of natural gas-fired power plants that were run in 2009.
We saw a substantial amount of coal-to-gas switching in 2009 as the economics described above favored natural gas-fired power versus inefficient coal. This year we are seeing a little less as natural gas prices have generally been higher than last year.
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David Wilson: Gold and Palladium Most Compelling, Not Silver [View article]
Natural Gas: The New King Of Electric Power [View article]
I assumed 6% (slightly higher than historical periods) because of increasing regulatory fears and the lower natural gas pricing environment described in the analysis. Other assumptions include a 1.8% annual increase in total electricity generated (which is the 15-year average excluding 2008 and 2009) and a 11.1% annual increase in electricity generated by non-hydroelectric renewables (the 5-year average for that segment). The 1% decline in coal demand is a consequence of those other assumptions, for coal demand would have to decline to support the growth in natural gas and renewables under the assumption of 1.8% increase in total electricity generated. One slice of the pie has to get smaller to support the other growing slices, in other words.
Thank you for your comments.
Regards,
Sumit
Natural Gas: The New King Of Electric Power [View article]
Because of the variability in plant efficiency, the cost of generating power from NG versus coal is not a single price, but a spectrum of prices. The highest cost coal, which is generally Appalachian coal, is trading around $65/ton currently ($2.65/mmbtu). While much cheaper on an energy basis than natural gas near $4.35mmbtu, after factoring in heat rates, the difference is not so much; the average cost to generate a MWh of electricity is $33.55 for natural gas and $27.30 for CAPP coal. Again, these are averages. A relatively inefficienct coal plant with a heat rate of 13,000btu/KWh would cost $34.45/MWh to run, more than the average of natural gas-fired power plants that were run in 2009.
We saw a substantial amount of coal-to-gas switching in 2009 as the economics described above favored natural gas-fired power versus inefficient coal. This year we are seeing a little less as natural gas prices have generally been higher than last year.
Thank you for the comments.
Regards,
Sumit