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Coal Still Lags Natural Gas in the Electricity Generation Space

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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 May 2016, published on August 26, specified that the electricity output in the United States came in at 317.7 million mWh (megawatt-hours) in May.

In comparison, electricity output hit 293.3 million mWh in April 2016 and about 323.0 million mWh in May 2015.

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Coal’s market share

Coal’s market share in electricity generation has risen moderately since 2Q16. However, the market share for natural gas continued to be higher than coal’s market share for the fourth consecutive month since February 2016.

The market share for natural gas came in at 35.0% for May 2016 against coal’s 25.8%. In comparison, coal’s market share in power generation was 32.4% during the same month in 2015, and natural gas’ share was 31.1%. The fall in coal’s market share was captured by nuclear and renewables.

Coal’s market share remains far below the percentage it held in 2000, which was in the low 50s. Coal’s falling market share has put pressure on American coal (KOL) producers like Peabody Energy (BTUUQ), Cloud Peak Energy (CLD), Alliance Resource Partners (ARLP), and Arch Coal (ACIIQ).

Why it matters

Because thermal coal is used mainly in electricity generation, electricity output is an important indicator in tracking the outlook for thermal coal’s demand. In the next article, we’ll look at how much coal contributes to total electricity output.

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