Utilities Shift from Coal to Gas-Based Plants

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"New gas generation capacity will outstrip coal by more than 30%."

A lot of utilities are coming to a similar conclusion. Over the last year and a half, at least 10 power companies have announced plans to close more than three dozen of their oldest, least efficient coal-burning generators by 2019. A few are being replaced by new, more efficient coal plants, but many more are being replaced by gas-fired plants.

"Coal is losing its advantage incrementally to gas," said Michael Zenker, a gas analyst at Barclays Capital, "and as long as gas prices stay as low as they have been, itís going to continue indefinitely." New gas generation capacity will outstrip new coal generation capacity by more than 30% through 2020, according to projections from the Energy Department. Credit Suisse predicts that the replacement of coal plants by gas plants over the next seven years could lower annual demand for steam coal, which is burned for electricity, by 15 to 31% and increase demand for gas by 8 to 16%.

"It has the potential to reshape energy consumption in the United States significantly and permanently," said Dan Eggers, a Credit Suisse energy analyst.

Since burning gas emits a fraction of the greenhouse gas emissions of coal, environmentalists tend to favor the switch. Under court order, the E.P.A. is due to set a national standard for mercury emissions next year to be phased in over the next three years. The E.P.A. is also pressing for efficiency improvements at existing coal plants to lower carbon emissions linked to climate change.

"The biggest challenge we face in this industry is this tsunami of regulatory requirements," said Frank Prager, vice president for environmental policy at Xcel Energy.

"It will be more cost-effective to get off coal and turn toward natural gas than it is to retrofit a lot of these facilities," Mr. Prager said.

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