Thermal Warfare

Correlation of natural gas and coal generation

Thermal Warfare
Photo by Brendan O'Donnell / Unsplash
Just a few months ago, the world was facing a natural gas shortage, with prices in the U.S. briefly hitting $9/MMBtu

Warm weather, reduced demand in Europe, continued production increases and LNG export hiccups (Freeport) have joined forces to create a spectacular reversal in natural gas prices and alter the supply-demand outlook for 2023 and 2024 in the U.S.

Natural gas prices could remain under pressure, depending on the remaining surprises from Mother Nature following what appears to be one of the warmest winters on record

Low gas prices have historically pressured coal generation and nuclear profitability

We take a look at recent correlation of natural gas and coal power generation in the U.S.

Fossil Fight

With renewable growth, coal and natural gas generation are fighting for overall market share and thermal market share at the same time.  Coal has generally flatlined in recent years, with coal economics helped by rising natural gas prices.

Daily thermal share has stayed relatively constant since 2020 despite fluctuating gas prices.

Despite renewable growth, natural gas generation appears to be ticking higher.

2021 and 2022 may be the last parade for coal generation growth in the U.S.

Interestingly, the correlation of natural gas and coal generation to natural gas prices appears to have changed in recent years.

There may be a minimum capacity factor for coal that isn't breached; additional reductions will require retirements.

Inflation Reduction Act-related renewable generation growth will be substantial beginning in 2024.  Before then 2023 will be a year of thermal generation warfare.