By Mark Repsher, PA energy and utilities expert, JAMIE HELLER, CHARLIE MANN, AND TRYGVE GAALAAS OF HELLERWORX
Low natural gas prices were primarily responsible for the decimation of large segments of the US coal producing sector and the resulting decline in coal consumption over the past five years. In response to the decline in natural gas prices, the rail industry largely failed to reduce its rates and coal producers had limited ability to further reduce pricing. Over the next few years, the key for coal burn will be coal producer and transport responses to changing natural gas prices.
This report explores the topic of how an increase in natural gas prices from the recent range of $2.00–$3.00/MMBtu to $4.00 will affect coal burn for power generation. Discussions will center on questions such as: what would the potential impact of an increase be on coal prices? Is an increase in coal consumption and prices even possible given how many coal-fired plants have closed since 2011? How have coal buyers hedged against this risk? How would coal producers and power generators, including those with nuclear power, be potentially affected?
The Future of Coal versus Gas Competition
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