February 10, 2015 / 2:25 PM / 4 years ago

U.S. burns record natgas to generate power in January

Feb 10 (Reuters) - U.S. electric companies in the lower 48 states gobbled up record amounts of natural gas to generate power in January 2015 as low prices made it more economic to burn gas instead of coal.

Power generators used an average 23.1 billion cubic feet per day of gas in January 2015, up 13 percent from the 20.5 bcfd average in January 2014, according to Thomson Reuters Analytics.

That was the most gas consumed by the power sector during the month of January on record, according to federal data going back to 1973.

“Low prices, particularly in the U.S. Northeast, have provided gas-fired plants with a significant advantage over coal despite warmer temperatures and lower demand for heating this winter,” said Kyle Cooper at IAF Advisors, a consultancy in Houston.

Gas prices at the Henry Hub benchmark in Louisiana and New York City averaged $2.97 and $8.35 per million British thermal units in January 2015, respectively, well below averages of $4.59 at the Henry Hub and $30.51 in New York in January 2014.

Power firms shut about 4,300 megawatts (MW) of coal-fired generation in 2014 as record production of gas from shale plays cut power prices, making it uneconomic for generators to upgrade older coal plants to meet increasingly strict federal environmental regulations.

“We expect coal-to-gas switching to drive an increase in utility gas burn in 2015 of about 1.8 bcfd,” said Hugh Wynne, managing director at Bernstein, a research and brokerage firm, in New York.

In 2015, the capacity of coal plants to shut is expected to mushroom to over 22,000 MW from 4,100 MW in 2014 due primarily to federal rules to reduce mercury emissions, forcing generators to burn even more gas to make up for the lost generation.

The share of power generated by gas in 2015 was expected to climb to 27.8 percent from 27.3 percent in 2014, according to federal data.

The share of power generated by coal meanwhile was expected to ease to 38.7 percent in 2015, the least since 2012, from 39.0 percent in 2014.

To make up for the power missing from coal, and to a lesser extent nuclear and oil plants, generators added more than 7,000 MW of gas units in 2014 and plan to build nearly 11,000 MW in 2015, according to Reuters data. (Reporting by Scott DiSavino; Editing by Meredith Mazzilli)

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