* Spread between coal and gas prices over $1 mmBtu
* Generators to shut over 40,000 MW of coal plants
By Scott DiSavino
March 5 A recent increase in U.S. natural gas
prices and a decline in coal is set to dent demand for gas as
utilities use more coal to generate power, electricity traders
said on Tuesday.
Prices of Central Appalachian coal have slipped to the
lowest levels since the middle of February.
Meanwhile, cold weather has sent natural gas prices climbing
to the highest levels since early December.
The relative price difference between NYMEX Central
Appalachian coal and NYMEX Henry Hub gas has
widened to more than $1 per million British thermal units
(mmBtu) for the first time since early February, according to
Natural gas traded at $3.57 per mmBtu Tuesday morning, while
Eastern coal was selling at $2.46 per mmBtu.
Energy traders however noted many coal plants remain more
expensive than gas units by about 25 to 50 cents per mmBtu
because gas plants are about 25 percent more efficient than coal
plants, and it costs about $1 per mmBtu to transport coal from
the mine to the plant by rail, but just a few cents to transport
gas by pipeline.
In 2012, the price of gas, which has historically been more
expensive than coal, dropped to a more than 10-year low due
primarily to record shale gas production.
Those weak gas prices depressed power prices to at least
decade lows in most regions and in part caused generators to
switch from coal to gas plants in record numbers.
Since 2009, generators have announced plans to shut more
than 40,000 megawatts (MW) of coal-fired capacity over the next
several years as the weak power prices make it uneconomic for
them to invest in emission control equipment needed to keep the
older coal plants compliant with stricter environmental rules.
See Factbox on coal units to retire
The biggest U.S. coal-fired power companies include units of
American Electric Power Co Inc, Duke Energy Corp
, Tennessee Valley Authority, Southern Co, Xcel
Energy Inc, NRG Energy Inc and FirstEnergy Corp