Is that all over for...

Is that all over for coal?


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Coal no longer king of the power industry



an amazing little factoid out there this week that went largely unnoticed: In April, for the first time ever, natural gas-fired power plants put as much electricity on the U.S. power grid as coal-fired power plants.

A decade ago, natural gas accounted for about a quarter of U.S. power generation while coal accounted for more than half. In April they converged at 32% of overall generation each. Natural gas proponents could not have envisioned in their wildest dreams their “clean, cheap, abundant” fuel of choice would catch up with coal as quickly as it did.

Getting to this point beat all sorts of odds, forging an oddball alliance of environmentalists, drill rig owners, energy companies, property owners, lawyers, speculators and lawmakers. Their goals typically varied but they also overlapped.

Many were fighting for cleaner air. Gas still has a hydrocarbon footprint, but it isn’t nearly as big as coal’s.

Others, such as T. Boone Pickens, argued domestic gas would free the nation from foreign oil. Maybe, but this has little relevance in the power industry since there are so few oil-fired power plants left.

The rest of the change can be pinned to money and technology.

The boom in gas production stems mainly from “fracking” shale deposits. In just a few years, drill rigs sprouted in regions of the country rarely associated with energy production.

The subsequent flood of cheap, abundant gas is crushing gas prices — which hit a 10-year low in April — and profit margins. It’s also crushing demand for coal. Power plants that can switch to gas are doing so, driving down the cost of power generation.

The flip side, of course, is hard times in the mines.

Patriot Coal is the latest casualty of the gas glut, tossing itself into bankruptcy Monday. Even coal’s big boys are hurting. Peabody Energy /quotes/zigman/282895/quotes/nls/btu BTU +0.31% shares are down 32% this year, Arch Coal /quotes/zigman/184548/quotes/nls/aci ACI -0.16% shares are down 57% and Alpha natural Resources /quotes/zigman/362718/quotes/nls/anr ANR -0.67% are down 63%, to name a few.

In addition to tough competition from gas, the coal industry likes to blame their problems on tougher regulation. Economically, if not environmentally, they have a point.

But coal’s biggest foe right now is the marketplace. Power companies can now generate a megawatt of electricity just as cheaply using gas as they can using coal. If using gas avoids a few regulatory roadblocks, then the decision is going to go its way every time.

The United States has always been a wreck when it comes to crafting a comprehensive energy policy, lurching from crisis to crisis through a minefield of industry lobbying and political battles. What’s happening to the coal industry and its jobs is just another example of why it’s so hard.

On the other hand, the gas boom is driving down energy costs at a time when the economy needs every break it can get, and even most environmentalists would agree the planet is getting a little break as well.
http://www.marketwatch.com/story/coal-no-longer-king-of-the-power-industry-2012-07-12?mod=theaustraliantopstoriesnews&reflink=theaustralian