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A reminder that prices matter

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In particular, the relative price between coal and natural gas. Today, the U.S. Energy Information Administration (EIA)came out with an update that says electricity generated from natural gas dropped 14 percent in the first seven months of the year compared to the same period in 2012. Electricity from coal, on the other hand, increased by about 7 percent.

Natural gas prices have increased by 40-60 percent in the first half of this year as demand increased faster than supply (somewhat hard to believe with the amount of product being flared). But keep in mind that 2012 also saw the lowest natural gas prices in a decade. Natural gas is now returning to prices seen in 2009 to 2011.

I don’t think this signals an appreciable resurgence for coal in any long-term, sustainable way. Natural gas would have to become way more expensive for a utility to consider building a coal plant with capture tech. I think it does more to highlight the elasticity of substitution in the country’s generation mix, that is, switching from one fuel to another as one becomes more expensive than the other. But as older, less efficient coal plants are retired, there will be less substitution happening.

David Wogan About the Author: An engineer and policy researcher who writes about energy, technology, and policy - and everything in between. Based in Austin, Texas. Comments? Follow on Twitter @davidwogan.

The views expressed are those of the author and are not necessarily those of Scientific American.

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  1. 1. oldfartfox 4:51 pm 09/26/2013

    There is a lignite gassification plant being constructed less than 30 miles from my house as I type this.

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  2. 2. FactsDontMatter 5:54 pm 09/26/2013

    The lignite plant was planned and committed in a different economic environment, prior to 2009. It also has some political backing in that it uses a local resource, and it has some DOE funding. As with the new Vogtle nuclear units in Georgia, Southern might agree that the decision might be different in today’s environment. However, decisions get made and things get locked in.

    As for the generation percentages, the author is correct in observing the swings in dispatch of resources that come with shifts in relative prices, and that they can easily reverse in the short term. This essentially happens automatically through economic dispatch, which optimizes the dispatch of units based on fuel (or bid) prices and transmission constraints. These changes are not uniform across the country, as delivered coal and gas prices differ by location. The coming coal-plant retirements will lock in some of that shift toward more reliance on gas, as the author points out.

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  3. 3. arpit.kumar 8:19 am 11/10/2013

    This is shift is visible throughout the world. The changes in generation pattern by natural gases and coal is based on the international prices of these fuels. As aptly pointed out that coal plants are getting too old for generation this shift will be less visible but new technologies with higher efficiency as CCPP like coal gasification are showing promises for coal as a good competitor for natural gas as fuel.

    Arpit Kumar

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