In little more than two weeks, the CME/NYMEX prompt natural gas futures contract is up $0.76 to close at $2.945/MMbtu on Thursday (see graph below). That’s getting dangerously close to $3.00. Yesterday we noted that it was the drop below that $3.00 threshold that kicked off serious coal to gas switching in January. Now that the price is near to crossing the $3.00 mark the other way, we better look carefully at how plant fuel costs drive generation economics for natural gas versus coal. To do so we’ll take a deep dive into the math.
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