With the boom in shale gas production in the US depressing prices, power generators are increasingly switching to natural gas, resulting in many coal fired generation plants being idled.
Though consumption of electricity in the US is up year-on-year, coal is fast losing its market share.
This is aided in no small way by the impending US Environmental Protection Agency regulations, including efforts to curb coal ash for the first time and the installation of cooling towers so that wastewater discharge doesn't dry up.
It is estimated that EPA's water and air quality regulations on coal-fired power plants could result in over 50,000 megawatts of coal plant retirements and require over $US180 billion in investments in retrofitting remaining plants.
Analysts say that all this could reduce coal use by as much as 15% and boost natural gas consumption by 10% in the next 10 years.
If all the displaced coal in the power sector is replaced by gas, it could reduce CO2 emissions by 150 million tons – and these are conservative estimates.
While impacts of environmental regulations are impending, the unfolding shale gas revolution has hastened the process of coal displacement.
Now natural gas has gained ground where coal has lost it.
Gas-fired output was up 4.7% in the first quarter, while coal output was down a little over 5% through May compared to year-ago levels, Barclays Capital said in a research note.
This displacement of coal in power generation is expected to continue and the bank notes that "growing gas production has little choice but to push deeper into power, which remains the only sizeable, price-responsive source of demand in the gas market."
According to the Barclays’ calculations, each 1 billion cubic feet per day of extra gas supply into the power sector claims another 2.3% of coal's market share.
All this raises the question of whether the burgeoning coal seam gas industry in the Australian Eastern seaboard could replace the brown coal burning power plants in the east.
More recently, the Productivity Commission entered the carbon emissions and broader energy debate.
One of the key conclusions the commission posited was the use of natural gas to replace coal, which it said was the most cost-effective.
But this is still fraught with challenges. For one, natural gas prices in the east are artificially low, making it difficult for producers to get competitive returns and since the Pacific Basin markets of Korea and Japan offer better prices, most of the gas projects are export oriented.
This might change over the longer term, as there is netbacking in liquefied natural gas pricing, and domestic prices get linked to international prices and this is when natural gas will most likely replace coal-fired generation.
What might be the bigger issue is how to phase out an industry that churns $50 billion in export income? It would amount to the proverbial killing of the golden goose.