Dive Brief:

• Consistently low natural gas prices have "devastated" the merchant power sector, according to a new report from Moody's Investor Services, threatening widespread closures of coal and even some nuclear units.
• SNL Energy reports coal plants in Texas and Midcontinent markets are most at-risk, with smaller nuclear facilities also feeling pressure.
• With gas prices below $2.50/MMBtu for much of the winter, generators switched away from coal, a strategy which is usually only economical during shoulder seasons.
• Falling gas prices have been one factor leading to coal's falling market share, as well as some nuclear plants struggling. Stronger utilization rates have also played a factor.

Dive Insight:

While cheap has has been pressuring coal and nuclear generators for months now, Moody's reports the end result could wind up being a wave of plant shutdowns, including coal and some nuclear in deregulated markets.

"Low natural gas prices have devastated most of the US merchant power sector because gas-fired power plants often serve as the marginal plant during times of peak power demand," the report reads. "Lower natural gas prices have effectively driven down wholesale power prices for all generators, regardless of whether they are using natural gas, coal, nuclear power or renewable resources to generate their electricity."

SNL reports on the new analysis, and interviewed Moody's Vice President and Senior Credit Officer Toby Shea, who said it is difficult to tell which direction forward prices will move. "It's not clear that the forward prices that we see right now [are] going to still be where [they are] by the time we get there," he said.

The most at-risk plants include coal facilities in the Electric Reliability Council of Texas  and the Illinois portion of Midcontinent Independent System Operator markets.

Late last year, Henry Hub gas was trading almost 50% below year-ago levels, creating an unusual situation where generators began switching to gas. At about $2.50/MMBtu is generally where the switch to gas becomes attractive, and winter Henry Hub bids have consistently traded below that point.

While coal still finished last year as the dominant fuel, low gas prices meant gas-fired power plants generated more energy than coal did in seven months last year. Coal still finished the year ahead, but only by a thin margin — 1,356,057 GWh for coal, and 1,335,068 GWh for gas.