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EIA: Shale Gives Low-Priced Gas a Leg Up in Generation Market

Due to the expanding shale gas development that has lowered prices, gas-fired generation has become increasingly competitive with coal-fired generation in some eastern U.S. markets, the Energy Information Administration (EIA) said Tuesday.

"Gas use for power generation has been growing in markets traditionally dependent mainly on coal and nuclear generating capacity for baseload power needs," EIA said.

This wasn't the case following the boom in the construction of natural gas combined-cycle plants between 2000 and 2004, which created excess generating capacity and led to low utilization rates (34%), the agency noted. "Modest growth in overall electricity demand over the past decade [following the construction boom] and the significant rise in natural gas prices from 2003 through 2008 contributed to the low utilization rates. Improving capacity factors at coal-fired facilities and uprates at nuclear facilities also played a role in limiting the use of gas-fired plants," EIA said.

Natural gas combined-cycle plants accounted for about 68% of the total gas-fired capacity added between 1999 and 2010. The EIA said the "big increase" was due to relatively low capital costs, favorable emission attributes, reliance on a prolific gas resource base, access to an expanding gas pipeline network, short construction lead times and the relative ease of siting.

In "combined-cycle" units, there is both a gas turbine and a steam unit. The gas turbine operates in much the same way as a normal turbine, using the hot gases released from burning natural gas to turn a turbine and generate electricity. The waste heat from the gas turbine process is directed toward generating steam, which is then used to produce electricity much like a steam unit.

According to the EIA, gas-fired generation accounted for 80% of the new capacity added over the past 15 years. In 2001 gas accounted for nearly 40 gigawatts (GW) of the generation capacity added that year; nearly 60 GW of the capacity added in 2002; and about 50 GW of capacity added in 2003, far exceeding the capacity additions of other fuels (nuclear, wind, and coal), the agency said. But "recently [2008, 2009 and 2010] the mix of electric generating capacity additions has become somewhat more diverse, reflecting a combination of natural gas, wind and some coal-fired capacity," it noted.

The EIA said construction of generation facilities has been scaled back. Since 2005 the annual electric generating capacity additions have ranged between 12 and 21 GW, significantly below the rate of capacity additions between the boom years between 2000 and 2004.

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