Christmas gains for coal bad news for gas
North American coal producers had two early Christmas presents last week. The first, direct from Copenhagen, Santa delivered a fuzzy and inconclusive outcome on limiting carbon emissions. For the coal industry the vague accord that capped the COP 15 conference was a bit like the gift that they already knew was in the box; it just had to be formally unwrapped. But the bigger surprise gift in the stocking was a rapidly rising natural gas price.
In today`s mega-battle for primary energy market share, the biggest threat to coal doesn`t come from cleantech stalwarts like wind and solar. Neither of those two renewables can easily substitute for the cheap and steady `base load` power that coal can offer 24-7, rain-or-shine, night-or-day, cold-or-hot, wind-or-no-wind. On the other hand, a power plant burning natural gas can offer all the same utility attributes as coal. As well, the simple hydrocarbon molecule in "nature`s gas" is much more emissions friendly than its carbon-burdened rival coal.
The primary objections to embracing natural gas more widely in North America have been questions about its long-term domestic availability, and its price volatility. Those doubts – amplified earlier this decade with a series of winter price shocks – had begun to wane over the past two years as abundant new reserves of `unconventional` natural gas were starting to prove to electrical utility executives and government policy makers that natural gas can be a cheap, clean, secure and stable fuel of the future. Indeed, in a world where carbon emissions and energy security still compete for the top spot on the political agenda, natural gas was starting to show itself as the solution that offered the ideal balance.
Natural gas still does offer the superior solution, but price volatility remains the attractive fuel`s worst enemy. Consumers despise price spikes and uncertainty about how much they will have to pay for their energy in future. So, you can be sure that factions battling natural gas in the primary energy market, namely the coal and renewable industries, are cheering the recent run up in natural gas prices.
Cold weather combined with a gentle tightening of the core supply-demand balance are the reasons why North American natural gas prices have come off their lows of around $2.00/MMBtu in August, tripling to almost $6.00/MMBtu last Friday.
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