Natural gas looks set to replace coal as the main source of US electricity production this year

Photo by Sean Gallup/Getty Images

There’s a power shift under way in the United States, and not just in political circles.

For the first time on record, natural gas looks set to overtake coal as the main source of electricity generation this year.

Take this chart below as evidence:

Courtesy of the Commonwealth Bank, it breaks down monthly US power generation by source over the past decade.

There’s a clear trend.

While coal’s share of power generation has been steadily declining, that from natural gas has been rising, particularly in recent years.

In recent months, it’s overtaken coal as the main source of US electricity generation, a title it’s likely to retain should the current trend be maintained.

“June marks the fifth consecutive month where natural gas electricity generation accounted for the largest proportion of US electricity output,” says Vivek Dhar, a mining and energy analyst at the Commonwealth Bank.

“In year-on-year terms, the story of declining share of coal power still remains intact reflecting new environmental policies encouraging cleaner energy.

“The US Energy Information Administration (EIA) expects the share of natural gas and coal power generation to average 34.5% and 30.1% respectively in CY16 – the first time that natural gas will generate a greater share of electricity than coal on an annual average basis.”

And Dhar expects that trend to continue, suggesting that lower natural gas prices, along with environmental concerns, could see coal’s share of power generation drop even further.

“The US may have a preference for power generated via gas in the medium term due to lower natural gas prices, prompted primarily by higher shale gas production,” says Dhar.

“The US Environmental Protection Agency’s (EPA’s) policy to cut greenhouse emissions from US power plants adds further downside potential to coal demand in the US, as coal-fired plants emit significantly more greenhouse gases than natural gas-powered plants.”

Currently, the EIA forecasts that US coal demand will fall 8.6% this year.

Aside from natural gas and coal which accounted for 31.5% and 25.8% of electricity generation in June, nuclear accounted for 18.8% while other sources such as hydro, wind and solar continued to trend higher, albeit from low levels.

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