The EIA (U.S. Energy Information Administration) publishes projections for the power generation mix for the next few years. The current set of projections was released by the EIA on May 22, 2015. The projections take into account various cases including the one with the first draft of the CPP (Clean Power Plan) released in June 2014.
The reference case
According to the EIA’s reference case, without considering the CPP, the share of renewables in the US electricity generation mix is expected to rise to 18% by 2040 from 13% currently. Natural gas is expected to account for 31% of the total electricity generation in 2040—up from 24% in 2010. It’s important to note that natural gas has already surpassed the 30% mark so far in 2015 due to low natural gas prices. The EIA’s projections are for the ultra long term. The spike in the market share may not last long, especially if natural gas prices rise. However, there’s a consensus that natural gas’ market share will continue to rise, at least in the medium term—unless surprises on shale gas reserves appear.
Coal is expected to lose market share from around 45% in 2010 to 34% in 2040. Coal’s falling market share isn’t good news for US coal producers (KOL) like Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD). CONSOL Energy (CNX) produces both coal and natural gas.
The case with the CPP
However, enter the CPP and the picture changes drastically. According to the base case with the CPP in effect, natural gas is projected to account for a 29% share in electricity generation in 2040, followed by renewables with a 27% share. Coal may fall into third place with a 26% share. Also, the projections are based on the CPP’s first draft. It presented a better picture for natural gas than the final draft. So, renewables (TAN) may see an additional rise in market share. For natural gas, the market share may be lower in the EIA’s next projections under the CPP case.