How super low natural gas prices are reshaping how we get our power – the washington post world j gastrointestinal oncol impact factor

#####

This week, U.S. natural gas prices plunged briefly below $ 2 per million Btu (British thermal units), lower than they have been since early 2012. It’s part of a long term price drop that is closely tied to the fracking and shale gas boom, but also more immediately to high levels of natural gas storage and warm weather.

The two overlapping stories hint at one of the most important consequences of the natural gas glut — it’s already changing not only what we pay to heat our homes in winter but also how we get electricity across the board. Natural gas displaced coal as the largest source of electricity generation in the U.S. for two months so far this year — a landmark development that has been long forecast — and if prices like these continue, that could become a much more frequent occurrence.

Indeed, a Duke spokesman says frankly that gas-fired electricity is the better deal right now. “Thirty percent of our coal plants’ cost is in transportation,” says Duke’s Thomas Williams. “It’s rail to bring the coal from the mines to the plants. With gas at two and a half bucks or two bucks, incredibly low, it’s way in the money compared to coal.”

“That’s not unique to Duke, that’s an industry trend, and that’s why people are building all these combined cycle plants” to get electricity from gas, Williams continues. He says that while the company used to generate about half of its electricity from coal and half from nuclear, the ratio now is getting closer to one third coal, one third gas, and one third nuclear.

The reason for such changes, across the country, is both the construction of more gas plants but also more “switching” from coal to gas plants as gas prices get lower, says Sam Andrus, a senior director with the North American natural gas practice at IHS. “Switching really is a real time decision, the replacement of gas capacity for coal capacity is a long term permanent decision. Both are happening right now,” Andrus says.

Indeed, Bechtel Corp today announced plans for what it termed “one of the largest coal-to-natural gas power site conversion projects in the United States” on behalf of Panda Power Funds. It will transition a retired Pennsylvania coal plant into a combined cycle natural gas plant that will have over a thousand megawatts (or one gigawatt) capacity and will have the ability to power more than a million homes, according to the company.

The reasons for the current plunge are myriad, says IHS’s Andrus. “We have underground natural gas storage poised to set a new inventory record over the next two weeks. We have incremental gas supply slated to come on in November-December out of the Marcellus, with another wave of infrastructure expansions,” he says. And furthermore, there’s the notion that El Nino could trigger a quite warm winter (although this is far from certain).

Cheap natural gas may be good for less fossil-fuel intensive electricity generation, but it also causes hurt in other places. Oil majors like Royal Dutch Shell, Chevron and ExxonMobil are scheduled to report third quarter earnings this week, and the combination of low oil and low gas prices could lead to pretty dismaying reports. BP has already reported disappointing earnings due to these factors.

In what may be a sign of the times, Charles Patton, the president of the West Virginia, Virginia and Tennessee utility Appalachian Power, said Tuesday that coal use would decline no matter what happens with the contested, federal Clean Power Plan, according to a report in West Virginia’s Charleston Gazette-Mail. Patton spoke at West Virginia’s state Energy Summit, and reportedly said that “You just can’t go with new coal [plants] at this point in time. It is just not economically feasible to do so.”