Increasing Use of Renewable Energies May Dent Share of Natural Gas, Coal

Coal as well as natural gas have collectively made a significant percentage of the total energy used worldwide for decades. Natural gas made up about 32% of total energy use in America while coal accounted for around 11% in 2011, bringing the share of natural gas and coal to nearly 50%.

Like oil, these resources are relatively abundant and easy to use, especially for electricity generation and home heating. But, as green-energy generation and use in the country picks up over the next couple of years, power generation from coal and natural gas-fired power plants may take a decent dent.

According to the Environmental Impact Assessment’s (EIA) recent Short-Term Energy Outlook, an increase in power generation from mostly solar and wind could threaten natural gas and coal’s position in the energy mix in 2023 and 2024. The outlook predicted that as new wind and solar projects come online this year, these two renewables will account for 16% of power generation over the year, increasing from 14% in 2022 and 8% in 2018.

With the United States adopting an increasingly green stance to address pollution and climate change over the past two decades, there has been a rapid expansion of renewable energy sources such as wind and solar. The EIA forecasts an 84% increase in solar capacity by the end of 2024 and a corresponding rise of solar power generation of 5% in 2023 and 6% in 2024, up from 3% in 2022. Wind power, on the other hand, will remain at around 11% this year before increasing to 12% in 2024, representing a more modest projection compared to solar.

Most of the growth in solar capacity will happen in California and Texas, states that have primarily used natural gas as the main source of electricity.

Thanks to this increase in solar and wind-power generation, the EIA predicts that the share of natural gas will fall from 39% in 2022 to 38% in 2023 and 37% next year. Coal-generated electricity is expected to reduce to 18% this year, thanks to lower natural gas prices that make it a more attractive source of energy compared to coal.

Although America is keen on increasing the share of renewables in its energy mix, it did not join the 40 countries that pledged to phase out coal over the next few decades at COP26.

A 2022 analysis by the Center for Global Sustainability revealed that the U.S. could potentially phase out coal-fired electricity and make great strides to achieve 100% clean electricity by 2030.

In the meantime, coal producers such as Alliance Resource Partners L.P. (NASDAQ: ARLP) will continue to meet the energy needs of their clients that are still relying on coal.

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