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Has Natural Gas Taken Coal’s Top Spot away for Good?

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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 September 2015, published on December 1, specified that electricity output in the United States came in at 351.0 million MWh (megawatt-hours) in September 2015. In comparison, electricity output hit 392.3 million MWh in August 2015 and 339.0 million MWh in September 2014.

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Coal’s market share

Coal’s market share in electricity generation came in at its lowest in four months. On the other hand, natural gas’s market share came in higher than coal’s for the third consecutive month, which was only the fourth time in history. Natural gas’s market share came in at 35.1% for September 2015 against coal’s 33.8%.

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 for 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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