Business News

Natural gas outsells coal as nation's top fuel

by Christiaan Mader

With natural gas prices dropping and emission restrictions tightening, coal is falling out of favor as the fuel of choice for national power grids.

A coal fired power plant
Petr Kratochvil

Natural gas has supplanted coal as the top fuel for generating electricity for the first time in U.S. history this past April. Dipping natural gas prices and the shuttering of outdated coal facilities spurred utilities nationwide to source 31 percent of produced energy from natural gas against 30 percent from coal.

But for Lafayette Utilities System, coal still rules. And it's where we've most recently put our money.

LUS Director Terry Huval says natural gas outpacing coal is not surprising given changes in regulation that resulted in the closure of coal fired plants much older than the 1980’s era Rodemacher II plant operating in LUS’s generation portfolio. Recent upgrades to Rodemacher II, completed on budget at $65 million, have put the unit in compliance with current regulation concerning polluting emissions and increased its production efficiency. According to Huval, Rodemacher II is among the top 12 percent of the nation’s cleanest coal-burning plants.

Lafayette Consolidated Government opted to upgrade Rodemacher II rather than convert it to natural gas or construct a new natural gas facility in 2011. Huval maintains that the cost-saving motives behind upgrading Rodemacher II were sensible, given the instability of natural gas prices at the time and cost involved in conversion or new construction. A new facility would have cost $750 million, says Huval.

“We think that the move that we made several years ago was a prudent move for us, and depending on what rules come from the EPA we may shift [to natural gas] then,” Huval says.

The Financial Times notes that economists are predicting a low and stable price for natural gas in the coming years and expect coal production to drop precipitously.

In 2013 LUS joined Midcontinent Independent System Operator Inc., which manages 83,000 miles of electric grids from Louisiana to Manitoba, Canada, and operates a wholesale energy market for its member utilities.

MISO-managed grids select generated power for distribution according to on-the-hour snapshots of market prices for energy. Accordingly, much of the power supplied via MISO grids (64 percent for the Midwest region as of 2013) comes from plants not using coal.