Natural Gas Beats Coal for the Second Time in History
Electricity output
The monthly electricity output data published by the EIA (U.S. Energy Information Administration) is a key indicator for coal industry investors. The current report for July 2015, published on September 24, specified that electricity output in the United States came in at 399.6 million MWh (megawatt hours) in July 2015. This compares to 321.9 million MWh in May 2015 and 385.5 million MWh in July 2014.
Warmer weather led to higher electricity usage for air conditioning in the month compared to the same month in the previous year.
Market share
While coal held on to its market share, natural gas’s market share surged past coal. Natural gas’s market share came in at 35.0% for July 2015 against coal’s 34.9%. This is only the second time natural gas has surpassed coal’s market share in electricity generation.
Coal’s market share remains far below the percentage it held at the start of the century, which was in the low 50s. Coal’s falling market share has put pressure on American coal (KOL) producers, including like Peabody Energy (BTU), Cloud Peak Energy (CLD), Alliance Resource Partners (ARLP), and Arch Coal (ACI).
Why it matters
Since thermal coal is used mainly in electricity generation, electricity output is an important indicator for tracking the outlook of thermal coal’s demand. For more insight, we might also look at how much coal is contributing to total electricity output.
In the next part of this series, we’ll look at how recent coal inventories have responded to energy trends.
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