Lower natural gas prices drive coal-to-gas switching.
Gas supply growth and weaker demand this year have pressured gas prices Gas supply growth and weaker demand over the past months have pressured gas prices down to levels that are competitive with coal for power generation at plants in some areas of the United States. This report focuses on the significant increase in gas demand from generation in the Pennsylvania, New Jersey and Maryland (PJM) region
, which coordinates the movement of wholesale power across 13 northeastern states and the District of Columbia. BENTEK estimates that gas demand for power generation on the PJM grid increased by about 1 Bcf/d. This demand increase occurred despite a drop in PJM power load. Regional gas-fired generation gained a larger share of the power market while reliance on regional coal-fired generation decreased.
In the past, such large gas demand gains might be expected to trigger gas price increases. However, new gas supplies from the Southeast/Gulf region and the Marcellus Shale development in the Appalachian Basin may cap such increases. In addition, the 1.8-Bcf/d Rockies Express (REX) East pipeline now brings new supplies of Rockies gas into the region.