Coal-to-gas switching won't affect near-term gas demand: Bentek

 

While the large-scale move to natural gas-fired generators from coal-fired ones in 2009 was an indicator of long-term power trends in the US, it will be some time before that change is visible in increased gas demand, Bentek said in a report

Over the next six years, "the magnitude of switching seen [in 2009] is unlikely to return in the near future because of expected higher gas prices, higher power loads, and relatively high coal stockpiles," compared to 2009, the report said, adding that overall gas-fueled power growth over the same period was likely to be low.

"Over the longer term, once the economy recovers and demand grows, stockpiles could drop, leaving room for more coal-to-gas switching. Additionally, an extended period of low and more stable gas prices should prompt utilities to build more gas-fired generation,"

Bentek said.For the near term, however, physical fundamentals will discourage gas-to-coal switching through 2015 compared with 2009 levels.Coal-to-gas switching from January to July 2010 has dwindled from more than 2 Bcf/d in 2009 to less than 1 Bcf/d on average," the report said.

Over the next five years, Bentek expects coal-to-gas switching to average .65 Bcf/d.Despite fundamentals lining up to put coal back on top, the multiple factors which "converged to make natural gas economically competitive with coal," are indicative of power market trends in the long term."

Natural gas-fired generation increased its US power market share by 3.2 percentage points," increasing usage by an additional 1.008 Tcf in 2009, the report said, adding an additional 2.76 Bcf/d of additional gas demand with the abundance of the switching occurring in the East.Coal's abundance and low cost has made it the primary fuel for power generation in the US. In 2007, coal provided 2 million GW, or 51%, of the country's 3.9 million GW of power generation.

Natural gas, by comparison, provided 21% of the market.But despite coal reasserting itself as the power fuel of choice, ample gas generation remains and could easily ramp up to meet new demands. "Gas-fired generation is in a position to grow.

All it would take would be a period of lower and more stable gas prices and the correct build-out of transmission networks to utilize these facilities more," the report said.

 

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