Coal May Be Key to Absorbing Natural Gas Price Shock

Analysts from Wood Mackenzie and Bloomberg New Energy Finance have released studies indicating that the era of cheap natural gas is coming to an end. Natural gas prices have been low for a decade, but forecasts predict they will rise significantly in the next decade.

Wood Mackenzie estimates Henry Hub natural gas prices, which fell as low as $2 per million British Thermal Units over the past decade, will reach around $5 per million BTU by 2030. This increase is attributed to the depletion of 'tail winds' that drove low prices in the past, such as rapid production growth and year-on-year productivity gains.

The rising natural gas prices come at an inconvenient time for AI data centers, which are expected to see a substantial increase in electricity demand over the next decade. Bloomberg forecasts that demand will reach 118 gigawatts by 2030, a 52% increase from their previous forecast.

Fortunately, there is an affordable source of energy that can help mitigate the effects of rising gas prices: coal. The Interior Department has reported that there is enough coal in federally managed public lands to last at least 600 years. This means the coal fleet can serve as a 'price shock absorber' to keep energy costs low.