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Gas-Fired Generation Gained on Coal Again Last Month

For the second month in a row, gas-fired power generation gained ground on coal-fired plants compared to the previous year by not falling off nearly as sharply, according to Genscape Inc.'s "Generation Fuel Monitor Report."

With total power demand up 1% from November 2012, gas-fired generation decreased by 2% while coal fell by 9%. Year to date, however, gas-fired generation continues to lag 2012 by 12% as coal still holds onto a narrowing 4% increase, according to Genscape.

Meanwhile, the Energy Information Administration (EIA) estimates that power sector gas consumption is, on average, down by 13% so far in 2013 (through November), relative to the same period in 2012. By contrast, industrial sector natural gas consumption in 2013 is up 3% compared with 2012.

Changes in electric power sector consumption of gas are primarily attributable to commodity prices, EIA said. For the first 11 months of 2012, the benchmark spot price at Henry Hub averaged $2.70/MMBtu. For the same months in 2013, the average was $3.68/MMBtu, somewhat higher than the previous year, lowering electric-sector demand for gas. Accordingly, gas has lost some of its electric sector market share to coal in 2013, but it is still being consumed at rates generally above the 2007-2011 range, EIA said.

Nuclear generation and renewables continued to show strength, pushing higher-priced fuels from the stack, Genscape said its latest data showed.

"On the coal front, I know that prices seem to be climbing back up a bit as stockpiles continue to shrink and production continues to lag last year," Genscape's Stephen Maestranzi, director of publications, told NGI. "Are we going to get back to April-May 2012? Highly unlikely; gas prices are too high at about $4 to compete with the cheaper coals like they did then. But things should move a bit more back towards normal.

"Early in the year, coal was significantly higher, but recently weaker overall power demand and stronger renewables have helped eat away at this (and very recently that increased nuclear performance has as well).”

During "the much longer term, obviously coal retirements need to be watched," he said. "...I personally feel these coal retirements will happen slower than most expect. We've seen recently in PJM [Interconnection] that a few First Energy [Corp.] plants that were supposed to retire were asked to stay online by the ISO [independent system operator], and I wouldn't be surprised if that happens more than a few times down the road."

According to Genscape, nuclear generation was up 13% versus November 2012 after Hurricane Sandy helped drive increased unplanned outages last year. That, combined with many late refueling outages, drove 2012's nuclear output to the lowest November since before 2001. Seven plants in the nuclear fleet were at 100% this year versus being offline in 2012, according to Genscape. Overall, 31 nuclear units ran at least 15% stronger in November while only 15 were at least 15% weaker.

"I believe the strong nuclear performance [this year] is partly a function of just an incredibly weak 2012 (and maybe even 2011) for nukes," Maestranzi said. "Going back to 2001...November 2012 was the weakest ever for Nuclear output. We had [Hurricane] Sandy bring down some units and a lot of late-season refuelings. I also recall that for the year or so following Fukushima there was more of an eye on the nuclear fleet in the U.S. Outages seemed to last a bit longer as companies took more time and were scrutinized a bit more before coming back online."

Renewables continued their strong 2013 and were up 20% in November compared to a year ago and are 7% stronger year-to-date.

Genscape has seen "tremendous growth" in installed wind generation capacity. "In areas like MISO [Midcontinent Independent System Operator] it might not be that interesting, but in, say, ERCOT [Electric Reliability Council of Texas], or CAISO [California ISO] where wind will and does compete directly with natural gas, I do think things could get interesting," Maestranzi said.

"The transmission capacity has to be there to effectively get the power from these wind farms to load areas, and I think this is something that needs to be worked on. That said, we've seen wind up quite significantly this year and I don't believe this is a trend that is going to slow in the near future."

Industrial consumption of gas has been increasing in recent years, EIA said. Continuing the trend from earlier this year, industrial gas consumption was up by 0.6 Bcf/d, or 3%, through November compared with the same months in 2012. Nearly all facilities with the ability to switch from oil to natural gas as a fuel or feedstock made this change before 2011, given the large cost advantage of natural gas.

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