K.J. Rodgers
Crownsville, Maryland  

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With the decreasing of natural gas prices, utilities are passing on the savings back to their customers.

In power generation markets, the primary fuel source has always been coal. For about 200 years, coal has been fueling the fire of industry. It has always been plentiful, cheap, and effective. From stoves to power generation, coal has been the primary fuel source the world has depended on, as well as one of the primary sources of greenhouse gas generators.

Today, the market has a variety of options for fuel to generate steam, but for the first time in over 200 years, coal has a strong competitor, natural gas. In July, natural gas beat coal as a primary fuel source of power generation. According to a SNL Energy Report, natural gas fueled 31% of electric power generation compared to 30% coal. While this 1% lead may not seem like much, you only have to go back to 2010 when coal was at 44% compared to natural gas’ 22%. That is a huge 40.9% increase in just 5 years.

While there are several factors that are driving the increase behind natural gas creeping in as the primary fuel source, two things are certain – decreasing costs of natural gas and government regulation. I do not want to insult anyone’s intelligence, but sometimes a simple lesson needs to be repeated. This simple lesson is supply and demand. Note this is all predated information and will completely change if certain elections get a Bern-ing winner (poor pun, forgive me). As of now in our capitalist market, an increase in supply most likely results in lower costs as the demands are easily being met and the increase in demand leads to less supply so prices go up accordingly. Simple enough to realize rare things cost more than abundant things.

The other is the current administration’s plan to reduce carbon emissions over the few decades. While I will not dive too far into this realm as it has been covered in great detail here, here, and here, I will state that more and more coal-fired power plants are either closing or converting over to clean natural gas burners to help meet the regulations on lowering emissions.

Even if the abundance of coal may result in lower coal costs in the future, the likelihood of these power plants converting back to coal is slim. Coal is brought in by barge or rail in most cases while natural gas is funneled in via pipeline. In order to shift generation for demand by turning up or down units, natural gas can be turned on and turned off quickly while coal takes time to reach the correct temperature or to cool off. So in-short, natural gas has already become a superior fuel source to coal.

That’s not all. Part of this wonderful capitalist market place is the shifting of savings to consumers. In the Lehigh Valley area of Pennsylvania, natural gas customers are seeing the costs of their heating bill being drastically reduced. UGI Utilities’ gas rates has decreased 6.7%  as of December 1^st. With this decrease and other decreases over the past seven years, users have seen the average bill decrease from $150 to $70. This is due to the fact UGI now gets 90% of its gas supplies directly from the Marcellus Shale. With the abundance of cheap natural gas being funneled directly from the source, the utilities are saving money and by law, they pass those saving down to the consumer. It is a win-win.

Low natural gas prices seem to be holding steady even though the expectations were they would bottom out in 2013. With the technology advancing and more and more gas being retrieved, that supply chain seems to be holding strong enough to not only fuel our needs, but also become a major U.S. export, which only serves to spread the economic (not to mention the environmental) benefits of natural gas even further. It’s “not just for breakfast anymore” as they used to say about orange juice.