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Amid soaring natural gas prices, a boost for coal | Energy Journal

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Power lines surround the Dave Johnston coal-fired power station on June 30 in Glenrock. Higher prices for natural gas have made coal a more competitive commodity in the short run.


Cayla Nimmo, Star-Tribune


Electric utilities are required by law to provide electricity as cheaply as possible.

Over the past decade, market forces and climate policies have pushed utilities away from coal. But high natural gas prices are pushing more coal into the power mix.

Utility fuel choices are primarily determined by the price of natural gas, said Tyler Hodge, senior economist in the Energy Information Administration’s office of energy analysis.

“In the short term, this can have an effect on what specific power plants send to meet the demand for electricity,” Hodge said. “But in the long run, this price of natural gas can also affect investment decisions about what new types of power plants to build, and vice versa, what types of power plants – that is, usually coal-fired – should be withdrawn. “

Until the mid-2010s, coal was the primary source of electricity generation in the United States. But as concern grew over the climate impacts of coal, a series of breakthroughs in drilling technology, including the boom in hydraulic fracturing, transformed natural gas from an auxiliary fuel source into the largest competitor of coal.

Natural gas prices fell slowly for the rest of the decade. In January 2020, the market was saturated. Gas prices were so low that drilling in Wyoming had all but ceased.

“This same legislative session, we were talking about trying to find ways to trigger a small tax incentive to help stimulate natural gas production,” said Pete Obermueller, president of the Petroleum Association of Wyoming.