Soaring U.S. Natural Gas Prices Could Spark a Coal Power Renaissance
The U.S. coal industry is poised for a resurgence as natural gas prices soar, prompting a shift from gas to coal power generation. This shift is driven by the surge in natural gas prices, which have skyrocketed from $4.23 per million British thermal units (MMBtu) at the start of November to nearly $5 per MMBtu by early December, with prices reaching a three-year high. This surge is attributed to a polar vortex bringing freezing temperatures and snowstorms to the U.S. Midwest, as well as record-high liquefied natural gas (LNG) exports.
The rising natural gas prices make gas-fired power generation more expensive for electric utilities, prompting some to switch to coal, which is cheaper. Gavin Maguire, a Reuters columnist, notes that this trend is likely to continue, with the U.S. Energy Information Administration (EIA) predicting a 37% jump in the 2025 annual average price of natural gas paid by electric power plants and a 21% increase in the price paid by industrial sector customers compared to 2024 averages.
The EIA's November short-term outlook forecasts that the Henry Hub natural gas spot price will average $4.00 per MMBtu in 2026, a 16% increase from 2025. This surge in natural gas prices is expected to boost coal production, which has already seen a rise this year, supported by the Trump Administration and the rising price of natural gas. The EIA attributes the increase in 2025 to rising demand for coal, driven by higher natural gas prices, delayed coal plant retirements, and strong demand for heating in the earlier winter months.
As a result, electric power coal inventories are expected to end the year at 107 million short tons (MMst), 17% lower than at the end of 2024. This shift from natural gas to coal power generation highlights the dynamic nature of the energy market and the potential for coal to play a significant role in the U.S. energy mix, despite the rise of renewable energy sources.
