The EEI (Edison Electric Institute) publishes electricity generation data weekly. The current report is for the week ended July 31. Electricity generation in the United States increased to 93.1 million mWh (megawatt hours) for the week ended July 31 compared to 90.6 million mWh the week before. This implies a 2.8% increase in electricity generation week-over-week.
Last week’s electricity generation was also higher than the 84.2 million mWh generated during the same week in 2014. The rise in generation marks the fourth consecutive weekly increase in electricity generation.
Why is this indicator important?
More than 90% of the coal produced in the United States is used for electricity generation. The power utility segment is coal’s largest end user. As a result, coal and utility investors should watch electricity generation trends. Electricity storage is expensive, so most produced electricity is consumed right away. Electricity generation thus mirrors consumption.
What does this mean for coal producers?
Thermal coal is used mainly for electricity generation. A rise in electricity generation is positive for coal producers (KOL) like Peabody Energy (BTU) and Cloud Peak Energy (CLD), everything else being equal.
You should note that weekly generation levels are subject to seasonal deviations. The impact on utilities (XLU) such as NextEra Energy (NEE) and Southern Company (SO) depends on the regional breakdown of electricity generation. We’ll take a look at this in the next part of this series.