Natural gas vis-a-vis coal prices for energy generation in the U.S. 1980-2021

United States' electricity producers paid about 4.98 U.S. dollars per million British thermal unit for natural gas in 2021. Meanwhile, coal power plant operators paid an average of 1.98 U.S. dollars. In the last decade, the price of natural gas used for electricity generation has seen a net decrease, followed by a considerable rise in 2021. Coal, on the other hand, has consistently been among the cheapest fuel types used in the power sector.

Natural gas prices and the influence of oil demand

As it is often produced alongside oil, prices for natural gas are shaped by overall market developments of the oil and gas industry. When an overproduction of oil led to the oil glut between 2015 and 2016, natural gas prices fell notably. The same circumstance could be observed in 2020 when a fall in oil demand brought many benchmarks such as WTI and Brent to historic lows and also resulted in the Henry Hub price falling to a 21-year low. Apart from petroleum, which is an expensive and inefficient means of power production, fossil fuel costs for electricity generation have declined in recent years.

Shift away from conventional energy sources

Although renewable technologies were once thought to be very expensive, greater investments have quickly rendered their levelized cost of energy generation on par with fossil fuels, especially when deployed on a utility-scale. The aging coal fleet is a prime example of the increasing necessity to switch to carbon neutral technologies. Older coal plants are dealing with increasing maintenance costs as well as environmental regulations forcing the installation of pollution controls.