Coal Faces Competition from Natural Gas
Pittsburgh Post-Gazette
28 September 2010
By Elwin Green
An abundance of natural gas being extracted from the Marcellus Shale
and other geological formations is giving coal more competition as a
source for the nation's power plants, but the dark rock will remain our
primary fuel for electricity for the foreseeable future.
That was the conclusion shared by panelists in a morning session during
the first day of "Coal Marketing Days," a two-day gathering that drew
about 200 people to the Marriott City Center. The event was hosted by
Platt's, the McGraw-Hill subsidiary that specializes in energy research
and publishing.
L. Gene Alessandrini, senior vice president of Allentown-based PPL
EnergyPlus LLC, a subsidiary of energy conglomerate PPL Corp., began by
highlighting coal's continued supremacy within the market area served
by regional grid manager PJM Interconnect, which includes Pennsylvania.
In PJM's market area, he said, coal provided 41 percent of the
installed capacity for electricity generation in 2009 and 52 percent of
the electricity actually produced.
That put it well in front of its nearest competitors: natural gas,
which provided 29 percent of the installed capacity, and nuclear, which
provided 31 percent of electricity produced.
Many of the new power plants built between the mid-1990s through the
early 2000s were combined cycle power plants, which use gas turbines
and steam turbines together to produce electricity.
Of the coal-fired plants that remain, Mr. Alessandrini said that 15 to
20 percent are "at risk" because they are more than 40 years old.
Factor in the prospect of natural gas prices remaining low in the near
term and "coal plants under this commodity market environment are
stressed," he said.
"I don't see that stress being relieved any time soon."
Also on the panel were Biliana Pehlivanova, vice president for
commodities research at Barclays Capital, and Amir Khaksari, a senior
analyst with Alpha Natural Resources.
Ms. Pehlivanova believes that gas will continue to encroach upon coal's
market share. "Gas will continue to displace coal for the foreseeable
future," she said, because it now offers the lowest cost for generation.
The key to coal being freed from the challenge of natural gas is for
natural gas production to pull back, she said, which she expects to
happen in 2011 as producers exercise restraint in drilling to remain
profitable.
Elwin Green: egreen@post-gazette.com or 412-263-1969.