Natural gas matched coal as the primary fuel for U.S. power generation this year for the first time since the government started collecting data, Bloomberg reported.
Natural-gas fired plants provided 32 percent of generation in May, close to coal's 34 percent share, after the two fuels were in a virtual tie in April, according to the Energy Information Administration.
The trend toward natural gas is evident in Iowa. On Thursday, Interstate Power and Light Co. announced it plans to seek regulatory approval to build a new natural gas-powered electricity generation plant in Marshalltown. The 600 megawatt plant, expected to cost between $650 million and $750 million, would go into operation by mid-2017.
Low prices are benefiting power generators such as Calpine Corp., the biggest U.S. producer of electricity from natural gas.
"Natural-gas generation is becoming the preferred generation of choice since it's cheaper and more efficient, more flexible and environmentally cleaner than coal," Jack Fusco, CEO of Houston-based Calpine, said during a July 27 conference call with analysts. "Coal-fired generation is in a secular decline, facing pressure from both environmental regulations and lower natural-gas prices."
The expansion of gas production from shale using technology known as fracking has pushed prices down 69 percent over the past four years. An Environmental Protection Agency mercury and air toxics rule, released in December, will lead to a reduction of 4.7 gigawatts in coal-fired generation, the agency estimated.
FBR Capital Markets & Co. in New York estimated the drop might more than 10 times that much, Bloomberg said.
Coal may regain its lead later this year following a rebound in gas prices, said Brandon Blossman, director of coal and power research at Tudor, Pickering, Holt & Co. in Houston. Natural gas rose 37 percent to $2.92 per million British thermal units Thursday from a 10-year low of $2.126 on March 30.
The Energy Information Administration projects that coal will provide 38 percent of U.S. power generation mix in 2035, compared with 45 percent in 2010. Natural gas will rise to 28 percent from 24 percent, according to a July 30 study by the agency.