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Competition from record-low natural gas prices and reduced power demand in the lockdown in the spring sent coal consumption in the U.S. power sector down by 30 percent in the first half of 2020 compared to the same period last year, the U.S. Energy Information Administration (EIA) said on Friday.
The spot price of the U.S. natural gas benchmark Henry Hub hit record lows in the first half of 2020 due to mild winter early in the year and depressed demand later on with the pandemic. Monthly prices reached as low as $1.63 per million British thermal units (MMBtu) in June, the lowest monthly inflation-adjusted price since at least 1989, according to EIA estimates.
Other factors contributing to the lower coal consumption this year included the continuously falling coal-fired electricity generation capacity in the United States as natural gas has been replacing coal capacity because of the cheap and abundant source of shale gas and stricter emissions regulations. Milder winter in early 2020 with lower demand also led to lower use of coal in the U.S. electricity sector, the EIA said.
The administration expects coal consumption for electricity to rise in the second half of this year compared to the first half, but consumption levels are not expected to return to those seen in the latter half of last year. If this latest assessment in EIA’s October Short-Term Energy Outlook (STEO) holds, the annual coal consumption in the power sector in the United States would be the lowest consumption level since 1975.
Coal consumption in the retail and other industrial sector, which includes industries such as cement production and primary metal manufacturing, also dropped in the first half, as many manufacturing and business facilities shut down. Coke plant coal consumption from January to July 2020 fell by 14 percent compared with the same period in 2019, the EIA said.
