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Coal Lost to Natural Gas for Second Consecutive Month

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Oct. 30 2015, Published 2:14 p.m. ET

Electricity output

The monthly electricity output data published by the EIA (U.S. Energy Information Administration) is a key indicator for coal industry investors. The current report for August 2015, published on October 27, specified that electricity output in the United States came in at 392.2 million MWh (megawatt hours) in August 2015. This compares to 399.6 million MWh in July 2015 and 383.5 million MWh in August 2014.

Warmer weather led to higher electricity usage for air conditioning in the month compared to the same month in the previous year.

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Coal’s market share

Coal’s market share in electricity generation fell for the first time since April 2015. On the other hand, natural gas’s market share came in higher than coal’s for the second consecutive month and only the third time in history. Natural gas’s market share came in at 35.2% for August 2015 against coal’s 34.5%.

Coal’s market share remains far below the percentage it held at the start of the century, which was in the low 50s. Coal’s falling market share has put pressure on American coal (KOL) producers like Peabody Energy (BTU), Cloud Peak Energy (CLD), Alliance Resource Partners (ARLP), and Arch Coal (ACI).

Why it matters

Since thermal coal is used mainly in electricity generation, electricity output is an important indicator for tracking the outlook of thermal coal’s demand. For more insight, we might also look at how much coal is contributing to total electricity output.

In the next part of this series, we’ll look at how recent coal inventories have responded to energy trends.

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