Coal-to-gas switching seen rising in West, Texas and Louisiana: Barclays
Houston (Platts)--22Feb2012/620 pm EST/2320 GMT
Low natural gas prices will "for the first time" lead generators in
Texas, Louisiana and the western US to begin switching from coal,
Barclays Capital analysts are predicting.
While power generators in the Southeast, Northeast and parts of the
Central Industrial region have been moving for some time to gas from
coal because of the attractive economics, those in the other regions
have been slower to make the change.
Michael Zenker, who co-wrote the report "Digging into the Coal Pile,"
with market analyst Shiyang Wang, said in an email Wednesday that while
the bulk of coal-to-gas switching continues to found be in the
Southeast, the latest drop in gas prices mean it should begin to grow in
the PJM Interconnection and in some parts of the Midwest Independent
Transmission System Opertor.
"We are also seeing displacement in [the Electric Reliability Council
of Texas and the Western Electricity Coordinating Council], but not huge
in those two."
Zenker and Wang predicted that given depressed gas prices the Central
Industrial Region, made up of the states of Wisconsin, Illinois,
Indiana, Michigan, Ohio and Pennsylvania, the West and the
Texas/Louisiana region, will have "substantially more displacement in
2012 and 2013."
Further, they said the Northeast and Southeast will continue to see gas
displace coal, though they said it would not be enough to "completely
balance" the oversupplied gas market in those regions.
Still, they mainted Barclays' earlier estimate that there would be
enough switching this year to boost demand by 5.9 Bcf/d.
Expectations of even more widespread coal-to-gas switching on price
factors along are unlikely to be realized, Barclays said because it is
not always "the most efficient gas-fired unit standing ready to displace
the least efficient coal-burning plant."
Further, the coal capacity is needed in certain areas depending demand
and the overall amount of available capacity.
--Jeffrey Ryser,
jeffrey_ryser@platts.com
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