Cheap natural gas has become very popular in America.
Especially among power generators, speakers told the Marcellus Shale Coalition's Insight 2013 conference in Philadelphia last week.
The conference's presenters said that demand for gas-fired power generation in the U.S. is going to increase even beyond current rosy projections. There just aren't a lot of other options.
NERA Economic Consulting Vice President Scott Bloomberg told attendees that cheap gas has effectively priced coal-fired power out of the market. Power prices just aren't high enough to justify building new coal plants. Leaving America's coal-powered fleet to slowly shut down as it ages.
Stephen Boyle, policy manager for Mid-Atlantic grid operator PJM Interconnection, gave some projections on what this might mean. Boyle expects PJM's gas-fired capacity to rise to 65,000 MW by 2016-17, from 50,000 MW right now. At the same time, he sees the company's coal-fired capacity dropping to 50,000 MW, from a current 55,000 MW.
Thus representing a critical "cross-over" point, where gas will become the dominant fuel for the company.
This is good news for power buyers, and environmental interests. But might be less glad for the would-be LNG export industry in America.
With power generators staking their future on gas, there is a growing lobby with a vested interest in keeping U.S. supply cheap.
The rationale behind LNG exports is exactly the opposite: access markets with high-value international pricing. Helping to bring U.S. prices back in line with the global average.
Current events in the power sector suggest LNG exporters need to consider this variable. Domestic gas users will push back hard against anything that could raise prices and jeopardize their investments in new gas-fired capacity.
A fight is brewing here. With billions of dollars in profits at stake. Who gets them will depend on who puts forward the more compelling argument for keeping gas in America or sending it overseas.
Here's to should I stay or should I go,
By. Dave Forest