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U.S. utilities seen burning more coal as prices decline
March 5, 2013 / 1:35 PM / in 5 years

U.S. utilities seen burning more coal as prices decline

* Spread between coal and gas prices over $1 mmBtu

* Generators to shut over 40,000 MW of coal plants

By Scott DiSavino

March 5 (Reuters) - 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 Reuters data.

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 .

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