With the newfound availability of natural gas due to the shale gas revolution in the United States, cheap gas now threatens coal’s longstanding position as the least costly fuel for generating electricity. But other factors besides cost come into play when deciding to switch from coal to gas. Electricity and gas transmission grid constraints, regulatory and contractual issues, as well as other factors determine the relative share of coal and gas in power generation.
This paper analyzes competition between coal and gas for generating power in the United States and the factors explaining this dynamic. It also projects coal-to-gas switching in power generation for 18 states representing 75% of the surplus gas potential in the United States up to 2017, taking into consideration the impact of environmental legislation on retirement of coal-fired power plants.