OREANDA-NEWS. July 17, 2015. All over the news last week, media outlets highlighted a June US Energy Information Administration report that showed that for the first time ever, the US generated more electricity from natural gas than from coal in April. EIA data said the US generated 92.5 TWh from natural gas and 88.8 TWh from coal. This is the first time ever that any fuel source produced more electricity than coal. Although this might be a temporary blip (winter demand will send coal’s numbers past natural gas), it is still a huge deal.

In my time covering natural gas and electricity, it never fails to amaze me how interconnected we are with our neighbors, Canada and Mexico. The number of BTUs and watts that travel between the three countries is staggering.

Since reading about natural gas’ growth and coal’s struggles here at home, I thought it would make sense to see how coal and natural gas are duking it out from a North American perspective.

Platts unit Bentek Energy has put together a very comprehensive North American Power Plant Databank that shows all power plants in North America (US, Mexico and Canada) that are either under construction, in advanced development, or proposed. It also gives a list of power plants set to retire. Of course, not all projects proposed are going to be built (look at the LNG import terminals proposed in the early 2000s, for example, or the outlook for LNG export projects), but it does give an idea of where investors are placing their bets on/for the future.

New natural gas power plants

In terms of new generation builds, the numbers are staggering. Bentek’s North American Power Plant Databank shows natural gas power plants growing at a rate of 11.8 GW of 2015, 18.6 GW in 2016, 35.9 GW in 2017, and 26.3 GW in 2018. To break these numbers down further: 18.5 GW are under construction, 31.6 GW are in advanced development, 29 GW in early development, and 36 GW planned.

Put simply, North America is planning on building over 90 GW of natural gas generation in over the next four years. Although nobody knows how often these plants can be run, let’s choose a number to try to better understand new gas demand. If 90 GW of new gas plants had a 7.5 heat rate and a 70% utilization rate, these plants would burn about 11 Bcf/d of natural gas. (The math breaks down to ((capacity in MW * utilization rate) * 24 * 7.5)/1000, for those who are interested.)

To put that number in perspective, natural gas power plants are currently averaging about 24 Bcf/d in 2015 in the US.

Coal retirements

On the coal side, not much new is being built. Bentek’s database shows just 2 GW of coal being built through 2022.

A look into power plant retirements sheds further light on coal generation going foward. Bentek’s database shows 14.6 GW of coal-fired generation will be retired throughout North America in 2015. In 2016, 7.6 GW of coal will retire, while 6.3 GW will be retired in 2017.

For comparison, just 3 GW of natural gas power is retiring in 2015, 1.4 GW in 2016, and 2.7 GW in 2017.

Possible headwinds for natural gas

As the energy industry has so predictably done in the past, there is a good chance capital is going to be deployed to projects with the highest return on investment. Typically, this is found in the upstream sector. But judging by today’s prices, particularly in some regions, the emphasis on upstream might not be as appealing today, which brings me to my next point: natural gas infrastructure has failed to keep up with production.

Nowhere is this more apparent than in the Marcellus/Utica region, which is why natural gas prices have been so low there — Platts assessed the Tennessee Gas Pipeline Zone 4 300-leg cash price at 99 cents/MMBtu July 15. Infrastructure has not kept up with the number of inventory wells in the region. Luke Jackson, an analyst at Bentek, said in a June presentation that there are roughly 2,300 wells in inventory in the Marcellus/Utica region waiting to hit the market. Jackson’s analysis estimates that up to 14 Bcf/d of production is “trapped” because of the lack of pipeline infrastructure.

What this all means

I have no idea what this all means. If I had to guess, we are at the beginning of a fundamental shift of how electricity will be produced in North America for the next half century. By no means is coal going away, but because of the issues discussed above, along with the idea that natural gas has the ability to complement other forms of electricity generation, I believe that gas only has room to expand its footprint in North America.