The latest EIA short-term energy outlook predicts a 12% decrease in coal consumption this month compared to September, which saw a 22% drop from August. This trend is typical during the shoulder season of September and October, when electricity generation tends to decrease.
However, the EIA anticipates a rebound in coal consumption starting in November. They project a 32% increase as winter approaches, driven by higher power demand and natural gas prices forecasted to reach $3.20 per MMBtu while coal prices remain relatively low.
According to the EIA, coal continues to be an important fuel source for electricity generation in the Mid-Atlantic and Midwest regions. Over the past decade, natural gas has become more cost-competitive due to the improved thermal efficiency of combined-cycle natural gas turbine plants.
The EIA explains, “The higher energy yield that comes with lower heat rates means that the effective price of natural gas relative to coal is even lower than the nominal price indicates.” Despite this, the EIA predicts an overall increase in coal consumption in the electric power sector this year, even as coal production is expected to decline in 2025.
As coal consumption rises and production decreases, the inventories held by electric power plants are projected to drop from 130 million short tons (MMst) at the end of 2024 to about 100 MMst by December 2025.
By the end of 2025, solar-generating capacity is expected to approach the current capacity of U.S. coal-fired plants. However, coal power plants are likely to operate at higher utilization rates over time, according to the EIA.
The EIA forecasts that coal will account for approximately 16% of total U.S. generation in 2024 and 2025, down from 17% in the previous year.
Increased solar generation is anticipated to most significantly impact natural gas generation. The EIA predicts that natural gas generation will decrease from 42% of U.S. power generation in 2024 to 39% in 2025. This decline is attributed to rising natural gas prices and a lack of new generating capacity being added.
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