Our Blog

America’s Energy Mix

The Obama administration declared war on the coal industry. In a sustained assault that lasted for eight years, rhetoric, regulation and subsidies for renewables, all took their toll on the fossil fuel.  Donald Trump offered a cessation of hostilities.  This in turn contributed to his winning the coal producing states of Pennsylvania, Ohio, West Virginia and Kentucky, and ultimately, the presidency.  However, coal might have won the political battle, but lost the economic war.

In a recent article in “Oil Voice”, author Mary DeFilippe makes the case for the extent of coal’s casualties and its prospects. According to the U. S. Energy Information Administration (EIA), coal-fired electricity generation declined from 2.0 trillion kilowatt hours (kwh) in 2008 to less than 1.3 kwh in 2016.  Concurrently, gas-fired power generation increased from 0.8 trillion kwh to 1.4 trillion kwh.  Renewables increased over the same period from 0.4 to 0.6.  While relatively small by comparison, this represents a 50% increase.

For the first time in history, natural gas is the primary fuel for power generation in the U. S. It is doubtful that this will change, given the number of coal-fired plants that have been removed from service or converted to natural gas, and the number of gas fired plants being built.

Natural gas enjoys economic, environmental and operational advantages over coal for electricity generation. Gas can be cheaper and burns more cleanly than coal.  It also offers power generators more operational flexibility.  Intermittent generation in response to daily peaks and valleys in consumer demand can be brought on line more quickly and at a lower cost than coal.

Admittedly, there are factors such as increased exports, weather, decreasing production and even the increased use of gas for power generation that could drive up gas prices, and make coal more competitive.

Natural gas exports via pipelines to Mexico, and LNG via tankers, are clearly increasing. In August of 2016 we exported 4.2 billion cubic feet of gas per day (bcfd) to Mexico.  By the end of last year that number had increased to nearly 7.3 bcfd and is expected to reach 11 bcfd by the end of 2017.  Chenerie’s Sabine Pass LNG facility is currently processing 1.4 bcfd per day and is expected to nearly double output by year end.  This is just one of many LNG export facilities expected to come on line between now and 2020.

An extremely hot summer could increase the demand for natural gas, and its price, in the short term. Also, falling natural gas production could be a factor.  However, given our vast shale gas reserves, and recent drilling activity in response to strong and firm prices, this will not have a long term impact.

Finally, the increase in the use of gas for power generation could theoretically exert upward pressure on gas prices, thereby giving coal new life. However, given the aforementioned reserves and drilling activity this is unlikely.

With Donald’s Trump’s appointees at the EPA and Department of the Interior, coal’s prospects, at least on the political front, might have improved. However, in my opinion, this might enable the industry to win a few skirmishes, but not the war.

To read the article in its entirety, please go to https://oilvoice.com/Opinion/2903/Gas-Coal-and-Renewables–the-US-Energy-Mix–?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29 .

Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide.  Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.