U.S. coal-fired power generation is set to rebound in the winter months as surging natural gas prices prompt utilities to switch from gas to using more coal.
U.S. benchmark natural gas prices at Henry Hub have jumped from $4.23 per million British thermal units (MMBtu) at the start of November to nearly $5 per MMBtu by early December. Early on Wednesday, prices were up by +2.07% at $4.941 per MMBtu.
That’s the highest price in three years, as a polar vortex with freezing temperatures and snowstorms gripped the U.S. Midwest and as U.S. liquefied natural gas (LNG) exports continue to set record highs as new export plants ramp up liquefaction and shipments.
Soaring U.S. natural gas prices make gas-fired power generation more expensive for electric utilities and some of these are set to boost generation from cheaper coal, Reuters columnist Gavin Maguire notes.
The U.S. Energy Information Administration (EIA) expects in its latest Short-Term Energy Outlook that the 2025 annual average price of natural gas paid by electric power plants to jump by 37% and the price paid by industrial sector customers to increase by 21% compared with the 2024 averages.
The Henry Hub natural gas spot price is set to average $4.00 per MMBtu in 2026, the EIA forecasts in the November short-term outlook. The expected average price would be 16% higher than in 2025, primarily due to surging LNG exports amid flat production.
Coal, for its part, saw increased production this year, supported by the Trump Administration and the rising price of natural gas.
The coal production increase in 2025 results from rising demand for coal, the EIA notes. Demand has increased due to higher natural gas prices, delayed coal plant retirements, and strong demand for heating in the earlier winter months this year. In response to higher demand, the EIA expects electric power coal inventories to end the year at 107 million short tons (MMst), which would be 17% lower than at the end of 2024.
By Tsvetana Paraskova for Oilprice.com
