Coal hits 42-year low per EIA

Mike Zaccardi, CFA, CMT

Big news in the utility world to kick off the week. But not surprising. U.S. coal-fired electricity generation in 2019 fell to a 42-year low. Natural gas supplanted coal several years ago as the leading fuel-source for power generation as nuclear has held about steady. Wind & solar still have a long way to go to catch-up.

Sure government-induced incentives have helped kick king coal off its pedestal, but free-market forces have also been incredibly powerful. Natural gas prices have fallen steadily in the last 12 years – from near $15 to under $2. While coal prices have fallen as well, natural gas has gotten relatively cheaper.

Cheaper gas, more expensive coal means one thing – coal to gas switching. “C2G” as we industry folks like to say, continues to trend up. That’s what the current speedometer shows and what is in our rear-view mirror. But what is on the road ahead? Wind & Solar.

Renewables (ex-hydro), while still small in the aggregate, is massively on the move. Take a look at the MISO Generation Interconnect Queue. This is a page (which can take a minute to load) that is filled with solar. There is a good amount of wind a well, but not a whole lot of natural gas. And forget about coal.

Still, the generation fuel mix remains heavy-dependent on fossil fuels and nuclear during the coldest winter mornings and hottest summer afternoons. Those times are when either wind is weak and/or when solar sucks. What’s the answer? Battery storage. More development, technology & adoption is still needed there.

Remember when utilities were slow & steady with a reliable business model? It’s a lot more technology-driven today.

Chart source: EIA