The Commodities Corner article in this past week’s Barron’s (see here) discussed the increase in coal usage for electricity generation. As mentioned in our latest Utility Stats Monthly, the Barron’s article brought up the EIA’s expectations that coal will be the biggest source of electricity generation in 2017. This is after 2016 was the first year for natural gas as the top generation source. Here is a chart of Henry Hub natural gas prices since 2016. Prices are obviously significantly higher than last year.
You can see in the charts below how natural gas generation increased the past few years while this year it is a little bit below the 2016 pace. In the spring coal generation increased significantly over 2016 levels, with only a slight YoY decline in the summer months.
One thing the Barron’s article didn’t mention is the role that increased hydro generation is having in the generation mix. The large winter snows out west have allowed a great resurgence of hydro power. Since the west has substantially more gas generation than coal generation the increased hydro is having a greater impact on gas generation.
With the reduced electricity generation from gas, it is interesting to see that gas in storage is basically at the 5-year average level. You might think that the lower generation would lead to higher inventories, but this does not seem to be the case.