Electricity Prices Falling as Natural Gas Replaces Coal

Electricity prices through June of this year are down 3 percent compared to average electricity prices throughout 2015, U.S. Energy Information Administration data show. The price decline is especially noteworthy as clean-burning natural gas replaces environmentally maligned coal power.

Average electricity prices in 2015 were 10.42 cents per kilowatt hour. Average electricity prices so far in 2016 are 10.07 cents per kilowatt hour.

In 2008, the last year of the George W. Bush presidency, electricity prices averaged 9.81 cents per kilowatt hour. Since the end of 2008, electricity prices have risen a total of 3 percent, or less than a half percent per year. That is lower than the rate of inflation, making electricity less expensive today in inflation-adjusted dollars than was the case in 2008.

money pixabay 2The saving grace for U.S. energy prices has been the fracking revolution. Around 2008, large new discoveries of oil and natural gas deposits in shale rock formations, coupled with dramatic advances in hydraulic fracturing (fracking) and directional drilling technologies, enabled energy producers to produce much more oil and natural gas at much lower cost than had ever been possible.

When President Obama took office, his administration set out to curtail the inexpensive coal power that had powered our economy since the early twentieth century. President Obama famously predicted that his phase-out of coal power would “necessarily” cause electricity prices to “skyrocket.” He justified his anticipated skyrocketing energy prices by claiming the environmental benefits would be worth the cost. The fracking revolution occurred just in time to save the American economy from any higher costs at all.

Coal powered 48 percent of U.S. electricity in 2008. In 2015 coal powered merely 33 percent. So far in 2016 coal has powered just 28 percent. Natural gas powered merely 21 percent of our electricity in 2008, but is powering 34 percent of our electricity in 2016.

Natural gas is a much cleaner-burning energy source than coal, cutting each of carbon monoxide, mercury, particular matter, sulfur dioxide, nitrogen oxides, and carbon monoxide by at least 80 percent compared to coal. Natural gas also addresses global warming fears, cutting carbon dioxide emissions in half. Skyrocketing electricity prices would have been a very steep price to pay for the environmental benefits of reducing coal use, but gaining these environmental benefits with no increase in electricity prices is a cause for celebration.

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