(EnergyAsia, May 4 2012, Friday) — US power companies will switch to using cheaper natural gas to generate electricity, causing nation’s coal consumption to fall well below 900 million short tons for this and next year, said the Energy Information Administration (EIA).

Henry Hub natural gas prices recently fell to a 10-year low below US$2 million BTU while delivered coal prices are expected to rise 5.8% to US$2.40 million BTU, continuing the rising trend over the last 10 years.

The EIA said it expects US power sector coal consumption to fall by 10% from last year’s 928.6 million short tons, causing coal prices to fall slightly next year and natural gas prices to increase. In 2010, the US consumed 975.1 million short tons to generate electricity.

For 2013, the agency expects US coal consumption for power generation to rebound five percent owing to the fuel’s improved economic competitiveness compared with natural gas.

Power generation accounts for over 90% of US coal consumption.

The EIA expects total US coal demand to fall to 916.9 million short tons in 2012 before recovering to 958.3 million short tons in 2013 compared with just over one billion short tons last year.

US coal production is expected to decline by 7.6% to 1.02 billion short tons in 2012, with most of the shortfall taking place in the three coal‐producing regions of Appalachia, Interior and Western.

As a result of reduced production, the EIA has forecast US coal exports to decline from 107.3 million short tons in 2011 to 100.2 million short tons this year, and to 98.2 million short tons in 2013.

“Several companies have recently announced the curtailment of operations, particularly in Appalachia, where production costs at some older mines are high,” said the EIA.

The agency has forecast the average delivered coal price in 2012 will be about one percent lower than the 2011 average price.