Natural Gas Rules the Northeast Power Market, Lowering Both Prices and Emissions

Since 2013, the country’s largest wholesale electricity market has doubled its natural gas combined-cycle plant capacity, sharply lowering the country’s emissions and energy costs, according to new data from the Energy Information Administration (EIA).

“Use of the coal fleet in PJM, the country’s largest wholesale electricity market, has fallen over the last decade, driven largely by higher relative fuel costs. Much of the competitive pressure has come from the significant build out of efficient natural gas combined-cycle plants, the capacity of which has doubled in PJM since 2013.” (emphasis added)

The Pennsylvania-New Jersey-Maryland (PJM) Interconnection electricity market is considered the country’s largest energy provider, serving over 65 million people across 13 states, including the District of Columbia.

Since its creation back in 1927, PJM has continued providing affordable energy to consumers. Today, PJM also leads emission reductions in the power sector by leveraging U.S. clean natural gas instead of coal. In fact, coal-fired generation dropped 34 percent by 2023 as a result of a more competitive natural gas industry.

PJM and Coal-to-Gas Transition:

PJM’s energy transition came about through organic market forces as natural gas is proven to be a more affordable, flexible, and reliable option than any other form of energy. EIA’s data underscores how PJM’s adoption of natural gas sharply decreased its reliance on coal as the fuel is more efficient than coal. Since 2013, operators retired about 34 gigawatts (GW) of PJM’s coal capacity and switched about two GW of coal capacity to other energy sources, mainly natural gas.

Similarly, despite having the capacity to generate 18 percent of the electricity in the PJM region, coal-fired plants produced only 14 percent of the electricity in 2023, indicating a utilization rate of 34 percent.

An often-underemphasized quality of natural gas is its efficiency. Natural gas takes less time and is more consistent than coal in igniting a power plant, leading to far lower restart and maintenance costs. Thus, coal-fired plants are facing twice as much pressure, leading to an organic phase down of the technology.

This has proven to be true in the PJM region, as a small number of coal-fired plants account for the vast majority of coal-fired generation in the region. In 2023, EIA data indicates that 11 coal-fired power plants made up more than three-quarters of the coal-fired generation in the region.

Lower prices, emissions, and increased flexibility have made natural gas a cornerstone of the U.S. economy. Natural gas’ position as the leading energy source for PJM – the country’s largest electricity market – is clear evidence of how irreplaceable natural gas is to our electricity market.

Natural Gas is Leading the U.S. Effort to Lower Emissions:

PJM’s transition towards natural gas is indicative of a greater effort to lower emissions across the country. According to the EIA’s 2023 U.S. Energy-Related Carbon Dioxide Emissions report, natural gas is responsible for the majority of reductions in carbon dioxide emissions from the power sector. The data indicates yet again that increased natural gas use is the driving factor in reducing CO2 emissions.

In fact, in the last two decades, no initiative has lowered emissions more than America’s transition towards natural gas. The United States leads all countries (and the entire European Union) in emissions reductions since 2004. The leading contributor to reducing emissions was coal-to-gas switching, accounting for 61 percent of all emissions reductions within the United States.

Natural Gas, an Ally to the Economy and American Workers:

Even still, the transition to natural gas has helped build the American economy and generate revenue. A recent example of the economic benefits the significant buildout of natural gas has had on taxpayer revenue comes from a recent Pennsylvania Public Utility Commission report on distribution of natural gas impact fees that shows the fuel has generated hundreds of millions in tax revenue while almost halving the price of gas.

The report demonstrates that in 2023, the impact tax revenue – revenue collected from the state’s oil and gas activity that supports local economic development, conservation, and environmental projects – reached $179 million, bringing the total tax revenue collected due to Pennsylvania’s natural gas industry since 2012 to over $2.7 billion.

In response to the data, American Petroleum Institute Executive Director Stephanie Catarino Wissman highlighted the importance of natural gas to the Pennsylvania economy and the different use-cases for the billions in tax revenue generated by natural gas, saying:

“Pennsylvania’s natural gas industry pumps hundreds of millions of dollars annually into the state and local economies, boosting small businesses and communities. Every year, dozens of road and bridge repairs, park and conservation projects, public safety and other critical community needs across the state are funded by natural gas impact tax revenues.”

Natural gas does more than just generate revenue for Pennsylvania; the buildout also lowers prices for families, businesses, and consumers. PUC’s report supports this claim as it found that “the average annual price of natural gas for 2023 was $2.74 per MMBtu, a reduction of $3.90 from the prior year.” Wissman noted the importance of those lower gas prices to creating stable jobs in Pennsylvania:

“Natural gas production continues to be a major economic driver for the Keystone State. This energy advantage has served Pennsylvanians well – abundant and affordable natural gas, thousands of good jobs and billions of dollars in impact tax revenues for communities in every corner of the commonwealth – and underscores the importance of having a robust energy sector and commonsense policies and timely, predictable permitting processes to support it.”

According to the PUC’s report, county and municipal governments with drilling operations will receive more than $100 million, while over $15 million will be distributed to state agencies. Finally, nearly $64 million will be transferred to the Marcellus Legacy Fund, which provides financial support for environmental, highway, water and sewer projects, greenways and other projects in every county of Pennsylvania.

Bottom Line: Natural gas is helping the United States transition off coal without bankrupting our economy. The data is clear: natural gas is our most effective tool in lowering emissions while still promoting economic growth, reliability of electricity, and stable low prices.

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