The U.S. Energy Information Administration (EIA) reported Thursday that coal has regained some of the market share for power generation it had lost to natural gas.

According to the EIA, preliminary data shows that coal was the source fuel for at least 40% of the nation’s electricity every month from November 2012 to March 2013, the most recent month with figures available. Natural gas accounted for about 25% of power generation during the same five-month period.

“Since May 2012, a combination of higher prices for natural gas and increased demand for electricity during the summer months led electric systems across much of the country to increase their use of coal-fired units,” EIA said. “In March 2013, coal-fired units generated a little over 130,000 MWh of electricity, while natural gas units produced nearly 85,000 MWh.”

The EIA said that heading into the spring shoulder season, when electricity demand is typically lower, higher prices for natural gas had eroded its market share for power generation from April 2012 levels (see Daily GPI, June 28, 2012). At that time, natural gas and coal each accounted for 32% of power generation, but average spot prices were $17.80/MWh for Henry Hub natural gas-fired power and $30.76/MWh for Central Appalachian coal power.

During a recent conference call, analysts with Credit Suisse appeared to concur with the EIA’s assessment, stating that natural gas demand for power generation in the U.S. was “likely” to be lower in 2013, and would face “more headwinds” because of competition from other energy sources.

“Relative to what appears to be a positive demand growth bias on the Street…we think wind, nuclear and reserve switching are most overlooked,” the Credit Suisse analysts said.

Despite this, the EIA said coal’s market share for power generation in the U.S. was well below what it recorded before 2009. The agency said coal accounted for 48-51% of annual power generation from 2001 to 2008, and last achieved a 50% share in 2005.

In its Short Term Energy Outlook for May, the EIA predicted that coal would account for 40.1% of power generation in 2013, up from 37.4% in 2012 but still below the 42.3% share coal had in 2011. Meanwhile, natural gas is expected to account for 27.8% of electricity production in 2013, down from 30.4% in 2012, yet higher than its 24.7% share in 2011.

The Credit Suisse analysts added that domestic natural gas demand in 2013 would get a boost from at least 0.7 Bcf/d in additional processing capacity, 0.6 Bcf/d in power demand growth, and coal plant retirements that equated to 0.4 Bcf/d. Conversely, 2.1 Bcf/d in gas-to-coal switching “on current forwards” would be working against natural gas, as would wind and nuclear power.

“We forecast 2014 usage growth for natural gas from power at 0.5 Bcf/d with a more significant step-up at plus-1.0-1.5 Bcf/d in 2015 and 2016, driven largely by potential coal closures and power demand growth,” the analysts said. “The drivers are fluid, but they do provide a well reasoned outlook for where gas demand from power is heading.”

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