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Coal's Share of Generation to Dwindle, WEFA Says

Coal's Share of Generation to Dwindle, WEFA Says

Tougher environmental regulations could result in the shutdown of about 30% of the existing U.S. coal-fired generation capacity over the next decade, opening the potential for the gas industry to capture an additional 10 Bcf/d of natural gas demand , says a key executive with WEFA Inc.

Coal currently has a 51% share of the generation mix, while natural gas has less than a third of that - 14%. "And yet it's expected to.be the dominant source of growth over the next decade," said Ronald Denhardt, vice president of energy services, at GasMart/Power '99 in Dallas, TX, Monday. He expects natural gas demand in the generation market to grow an average of 5% a year between 2000-2010.

How coal "plays out" will be "critical" to gas obtaining a greater share of generating capacity in the future - much more important than nuclear, which has 17-18% of existing generation capacity, he noted. "I think nuclear generation has really been given a disproportionate amount of attention in terms of its role for gas demand."

If all current coal-fired generating capacity were to be converted to gas units, gas consumption in the generation market would rise by 50% (33 Bcf/d) over its current level of 60 Bcf/d, Denhardt said. "Now I'm not saying that's going to happen, but it just says something about the importance of coal in terms of the role of gas" in the next decade.

Coal is expected to face "some real hurdles" on the environmental front in the near term, substantially increasing the financial attractiveness of natural gas, he noted. The hurdles include Phase II nitrogen oxide and sulfur dioxide compliance regulations by 2000; an 85% reduction in NOx emissions by May 2003 in 22 eastern states; and tougher particulate standards. Denhardt predicts it will cost an additional $12/MWh for coal generators to meet those regulations

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