July 15, 2012 | 1
Today, power plants in the United States rely primarily on fossil fuels. In 2011, more than 2/3 of the electricity generated domestically came from coal and natural gas. But, the ratio of electricity production from coal to natural gas to petroleum has shifted over time. This month, the U.S. Department of Energy’s Energy Information Administration (EIA) published a report that explores this “elasticity of substitution.”
In the report, the authors discuss coal’s dominant role in power generation over the past 60 years and the impacts of 1970s oil price shocks on coal use. They go on to state that:
“By 1990, changes in the regulatory structure and legislation affecting the electricity industry started providing more opportunities for substitution between petroleum and natural gas as a fuel for peaking generation. During the 1990s and 2000s, the generation costs for plants fueled by natural gas fell dramatically as a result of lower natural gas fuel prices and the increased use of combined cycle technology for power generation. Natural gas production from domestic shale gas formations began to rapidly increase starting in 2005, which has led to a relatively sustained period of low natural gas prices. All of these factors have led to a continuing electric power industry trend of substituting coal-fired generation with natural gas-fired generation.”
Included in this report was an interesting graphic that overlays changes in the price of coal, natural gas, and petroleum with their annual share of fossil fuel-fired electric power generation.