Low natural gas prices will "for the first time" lead generators in Texas, Louisiana and the western US to begin switching from coal, Barclays Capital analysts are predicting.
While power generators in the Southeast, Northeast and parts of the Central Industrial region have been moving for some time to gas from coal because of the attractive economics, those in the other regions have been slower to make the change.
Michael Zenker, who co-wrote the report "Digging into the Coal Pile," with market analyst Shiyang Wang, said in an email Wednesday that while the bulk of coal-to-gas switching continues to found be in the Southeast, the latest drop in gas prices mean it should begin to grow in the PJM Interconnection and in some parts of the Midwest Independent Transmission System Opertor.
"We are also seeing displacement in [the Electric Reliability Council of Texas and the Western Electricity Coordinating Council], but not huge in those two."
Zenker and Wang predicted that given depressed gas prices the Central Industrial Region, made up of the states of Wisconsin, Illinois, Indiana, Michigan, Ohio and Pennsylvania, the West and the Texas/Louisiana region, will have "substantially more displacement in 2012 and 2013."
Further, they said the Northeast and Southeast will continue to see gas displace coal, though they said it would not be enough to "completely balance" the oversupplied gas market in those regions.
Still, they mainted Barclays' earlier estimate that there would be enough switching this year to boost demand by 5.9 Bcf/d.
Expectations of even more widespread coal-to-gas switching on price factors along are unlikely to be realized, Barclays said because it is not always "the most efficient gas-fired unit standing ready to displace the least efficient coal-burning plant."
Further, the coal capacity is needed in certain areas depending demand and the overall amount of available capacity.
