Natural Gas to Overtake Coal in 2016

Peabody Energy coal FBN

Natural gas is on pace to overtake coal as the most popular fuel for electricity generation, another sign of coal’s struggles.

The U.S. Energy Information Administration believes natural gas will provide 33% of generation in 2016, while coal’s share will likely fall to 32%. That would be the first time that natural gas beats coal on an annual basis. The EIA says natural gas and coal each contributed one-third of all electricity generation in 2015.

Coal accounted for half of all U.S. electricity generation between 2000 and 2008. But coal use has declined sharply over the last decade, as the U.S. fracking boom flooded the market with cheap natural gas. As a result, coal companies have come under intense pressure, and the Obama administration’s efforts to implement new regulations on coal-fired power plants have created even more uncertainty for the industry. Some coal plants have shifted generation to natural gas in response.

Peabody Energy (NYSE:BTU), the largest coal miner in the U.S., said this week it doesn’t expect to meet certain financial obligations by March 31, warning that bankruptcy could be the next step. Peabody, which has reported annual losses four years running, noted that “sustained depressed” prices have hurt its bottom line.

Patriot Coal, a spinoff of Peabody, went through bankruptcy last year. Alpha Natural Resources, another major coal miner, filed for Chapter 11 bankruptcy protection in August 2015.


Renewable power sources have increased their share of the electricity market, too. EIA estimates show non-hydroelectric generation, including wind and solar power, will be responsible for 8% for this year’s domestic electricity supply.

Hydroelectric power will have a 6% share, while nuclear power will remain fairly level year-over-year at 19%.