Natural Gas Is Beating Coal – for Now. Will It Last?

natural gas coal

In 2016, according to the Energy Information Administration, something significant happened in the domestic energy industry: for most of last year, natural gas became the number one source for electricity generation in the U.S. – ahead of coal.

This was not unforeseen; experts have been predicting that natural gas would replace coal as the leading source of electrical power in the U.S. for years now, thanks to falling natural gas prices brought about by increased supply through ramped-up production. Coal, meanwhile, has suffered from regulations attempting to restrict carbon emissions.

But according to the Annual Energy Outlook 2017 released by the EIA, this trend isn’t permanent for a variety of reasons.

An increase in coal production in the near term predicted by the EIA is one of the main reasons the agency suggests coal will rebound. Natural gas prices are predicted to rise through 2020, giving coal a short window to regain its footing.

Whether or not this trend continues, though, is subject to a few factors, most notably the fate of the Clean Power Plan. Should the CPP survive the Trump administration in whole or in part, coal production is expected to fall to below 620 million short tons per year by 2040. Should the CPP go away – and stay away even if Democrats regain power in 2018 and 2020 – production could go above 850 million short tons by that year.

In either case, though, the EIA predicts a newer and different challenge to coal’s historical dominance: renewable energy.

According to the EIA, if current trends more or less hold steady, renewable electrical generation will exceed coal generation by 2030. If the CPP is scrapped, that could be postponed by over a decade – but the eventual end result is the same.

There’s always a chance that a coal-friendly government could forestall this decline through favorable regulations (or deregulation) and tax credits and incentives, but consumers are becoming more favorable to renewables and less favorable to coal. If the cost of renewable energy continues to decline, it’ll become more competitive.

Natural gas could permanently replace coal as the nation’s leading source of electricity generation. Or, coal could regain its footing and prolong its plurality for a few more decades. But perhaps the biggest threat to the two pillars of electricity isn’t each other, but renewable energy.

How the industry will adapt is an intriguing premise. Since 2008, dollars invested in solar and wind have been more than twice the amount invested in fossil fuels. Even Tom Fanning, the CEO of utility giant Southern Company, is “bullish” on renewable energy and thinks it’ll be a “dominant” solution.

Natural gas and coal will go back and forth, but as long as investors are dumping capital into renewables rather than fossil fuels – especially coal – then it’s possible that the most growth will be in solar and wind rather than the nation’s current standbys.