Coal vs natural gas: the fight for North America’s power market isn’t over yet

After falling below natural gas-fired electric generation for the first time in 2016, coal-fired electric generation will briefly retake first place in 2017 and 2018 before passing the baton for good in 2019. However, the natural gas markets have displayed rather large short-term price volatility, and that will likely continue well into the future. In this Insight, we examine the dynamics between coal and natural gas in the domestic power market. The range in coal demand resulting from a +/- US$0.50/mmbtu change to Wood Mackenzie’s 2017 natural gas price forecast from our recent long-term outlook is 101 Mst (4.5 bcfde) in 2017. This range increases to 150 Mst (6.8 bcfde) by 2019 as uncertainty grows in the future. The Powder River Basin, as the largest domestic coal-producing basin, will be most affected by natural gas price volatility. If the productive capacity of the PRB turns out to be less than we forecast, the demand for natural gas could increase by 1 bcfd in 2017.