LOS ANGELES, July 16 – Natural gas now has the edge over coal when it comes to electricity generation in the U.S., according to a new report by the Energy Information Administration.
EIA’s study indicates that for the country as a whole, a 10% increase in the ratio of the delivered fuel price of coal to the delivered price of natural gas leads to a 1.4% increase in the use of natural gas relative to coal.
But the study also showed that a 10% increase in the price ratio of natural gas to petroleum leads to a 19% increase in the relative use of petroleum compared with natural gas.
The EIA report analyzes the competition between coal, natural gas and petroleum used for electricity generation by estimating what economists refer to as the “elasticity of substitution” among the fuels.
The elasticity of substitution concept measures how the use of these fuels varies as their relative prices change, the report said.
Fossil fuels—coal, natural gas, and petroleum—supplied 70% of total electric power generation in 1950, with that share rising to 82% in 1970, and falling back to 70% in 2010.
Between 2000 and 2012, natural gas generating capacity grew by 96%. In contrast, additions to coal capacity were relatively minor during that period, and petroleum-fired capacity declined by 12%.
EIA said its elasticity estimates are most robust for the southeastern U.S., while results for the Midwest and Texas are relatively insignificant.
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