"Recession Speeds Coal's Long-Term Decline"

"HOUSTON - Declining industrial electricity demand and an abundance of cheap natural gas will threaten coal's status as the dominant U.S. fuel to generate electric power, even after the economic recession ends.

Power companies are reducing use of coal plants because of declining demand from heavy industry, the economic sector hardest hit by the recession. The loss of industrial 'baseload' looks long term, analysts and executives say.

Natural gas-fired plants, easier to stop and start, have remained busy serving commercial and household power demand, which varies hour by hour and has been less affected by the recession. ...

Meanwhile, generators' reasons for preferring coal for baseload -- lower cost and more reliable supply -- weaken with every shale gas discovery, which drives gas prices down and suggests gas will be plentiful for years to come.

'We may be in a situation where we are redefining how much coal-fired generation we need,' added Nick Akins, executive vice president of American Electric Power Co, one of the country's biggest coal burners.

Coal's share of U.S. power generation has fallen from 49 percent in 2007 to 45 percent this year, said Luther Lu of FBR Capital Markets."

Bruce Nichols and Eileen O'Grady write a news analysis for Reuters August 28.

Friday, August 28, 2009