Coal Will Make A Comeback In 2013

One of the big trends in U.S. energy has been the transition from coal to gas (CTG) as natural gas prices tumbled.

However, this period of superlow natural gas prices turned after production temporarily peaked earlier this year.

Now electricity markets are finally reckoning with the rebound in gas prices and are switching back to coal, according to Morgan Stanley’s Hussein Allidina:

With gas trading above $3/mmBtu, price- sensitive gas demand in the power sector is likely already being curtailed. Until CTG switching is completely shut off (which is unlikely at prices below $4.20/mmBtu), natural gas demand will remain price elastic.

Here are his charts. With natgas prices above $3.50, switching should have already begun:

coal to gas switching morgan stanley

Photo: Morgan Stanley

Just a month ago, prices had hit $3.90.  This chart shows how CTG decelerates rapidly with the rise in gas prices.

coal to gas switching morgan stanley

Photo: Morgan Stanley

SEE MORE: Stunning Photos Of The Energy Of The Future >

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