Natural Gas Surpasses Coal as Primary Generation Fuel in MISO According to EIA

U.S. Energy Information Administration's (EIA) Natural Gas Weekly Update spotlights the rise of natural gas to surpass coal as the primary generation fuel for electricity dispatched by the Midcontinent Independent System Operator (MISO).

Since March 20, 2020, EIA’s Hourly Electric Grid Monitor has shown that natural gas-fired generation has surpassed coal-fired generation as the primary source of electricity dispatched by (MISO), the regional transmission organization responsible for managing wholesale electricity generation and transmission across all or parts of 15 central U.S. states and the Canadian province of Manitoba. This is mainly a result of low natural gas prices; the start-up of three major high-efficiency, natural gas-fired combined-cycle power plants since mid-2019; and the increased share of wind-powered generation.

Since March 20, natural gas-fired generation provided approximately 32% of electricity within MISO, whereas coal-fired generation provided about 25% of the region’s electricity. In the three months preceding March 20, natural gas- and coal-fired generation were at parity, each providing approximately 31% of total generation in MISO. Before late December 2019, coal-fired generation almost always provided the greatest share of electricity within MISO.

Relatively low prices have driven the increased use of natural gas for power generation. Since March 20, the spot price of natural gas at the benchmark Henry Hub has averaged $1.70 per million British thermal units (MMBtu), according to Natural Gas Intelligence. However, much of MISO covers the Midwestern states (though not the Chicago area), so the price seen by generators in these states may be closer to the Midwest regional average price, which has been lower than the Henry Hub, averaging $1.60/MMBtu during this period. From December 20, 2019, through March 19, 2020, the Henry Hub price averaged $1.92/MMBtu, and the Midwest regional average averaged $1.79/MMBtu.

Since mid-2019, 2.3 gigawatts (GW) of new high-efficiency, natural gas-fired combined-cycle capacity has opened in MISO. These plants, including the brand new Lake Charles Power Station (a 1.0 GW natural gas combined-cycle plant in Louisiana) that opened on March 28, have very low heat rates, allowing them to be dispatched first and run at high levels.

The capacity of electricity generated by natural gas is expected to continue increasing in MISO, while coal-fired capacity is expected to fall. Through 2022, another 4.3 GW of net natural gas-fired generation capacity is planned to begin operation while 5.1 GW of net coal-fired generation capacity is scheduled to retire in MISO, according to the February 2020 EIA-860M data.

Additionally, wind-powered generation has also increased in MISO, evidenced by the addition of 3.2 GW of new wind turbine capacity since the beginning of 2019, including 660 MW of capacity added in 2020. Increased wind turbine capacity can affect natural gas-powered generation, since natural gas-fired power plants are often used in conjunction with wind power to serve as back-up power.

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