Bentek: Coal Makes a Comeback
US coal is poised to retain its majority share of the US power market, based on winter 2014 consumption and inventories data released by Bentek Energy. US coal consumption in winter 2013–2014 increased 17 percent from winter 2012–2013 to 74.1 million short tons per month. Similarly, coal-fired generation accounted for an estimated 44 percent of the total US power stack, compared to 41 percent during the previous two winters.
Meanwhile, natural gas held steady at 24 percent of power generation compared to last winter and declined 2 percent compared to the winter prior, according to Bentek’s report, “Back in the Black: Coal Makes Comeback.” The report examines how record winter cold pushed US electricity load to levels traditionally seen during the peak of summer and increased demand for all power-generating sources, particularly coal.
Despite increased environmental regulations and competition from shale natural gas, coal is expected to remain a viable fuel source in the United States, Bentek added. This is in contrast to the past decade during which coal’s market share dropped by 12 percent.
Natural gas prices were a major driver of heightened winter coal consumption. According to the report, prices hit $7 per MMBtu several days this winter and averaged $4.60 per MMBtu at Henry Hub, the standard delivery point for the New York Mercantile Exchange natural gas futures contract in the United States. This compares with $3.46 per MMBtu during the previous winter and $2.75 per MMBtu in winter 2011–2012.
As a result, coal stockpiles at US power facilities fell to the lowest levels since 2006. Stockpiles peaked in mid-June 2012, but plunged to 113 million short tons in March, compared to a five-year average of 177.9 million short tons. Reserves since have rebounded to 141.5 million.
Based on historical trends, stockpiles are unlikely to stretch beyond 136 million short tons by the end of June, or about 18 million short tons less than the five-year minimum. Coal stockpiles typically peak in mid- to late-June just before the height of the summer cooling season, and then experience a slight decline, followed by another build in the fall.
Image credit: Chart courtesy of Bentek Energy.
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