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| Fig. 1: A Combined Cycle Gas Turbine (CCGT) diagram. By capturing exhaust heat to power a second turbine, CCGT plants achieve high efficiency. (Source: Wikimedia Commons) |
The composition of the United States electric grid is determined not by environmental policy, but by the ruthless arithmetic of cost. According to the EIA's Electric Power Monthly for July 2025, Natural Gas generated 202,785 GWh of electricity, while Coal generated only 80,249 GWh. [1] This dominancea ratio of roughly 2.52 is the result of a "double economic advantage" driven by the physics of combustion efficiency and the current market price of fuel.
To understand the financial dominance of natural gas, one must look at the "Heat Rate"the amount of fuel energy (Btu) required to generate one kilowatthour (kWh) of electricity. This is the primary metric of capital efficiency for a power plant. Data from the EIA Electric Power Annual provides the definitive thermodynamic comparison.
As shown in Table 1, the U.S. coal fleet requires approximately 10,018 Btu of chemical energy to generate 1 kWh of electricity. [2] In contrast, As illustrated in Fig. 1, Combined Cycle Gas Turbine capture waste heat to drive a secondary steam turbine, achieving heat rates as low as 7,548 Btu/kWh[2].This reveals a stark physical reality: generating electricity from coal requires approximately 32.7% more raw fuel input than generating it from gas.
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| Table 1: Average Tested Heat Rates by Energy Source (2024 Data) [2] |
The argument for gas is supported by the unit cost of fuel, though this requires careful scrutiny. According to Table 7.4 of the EIA's Electric Power Annual, the weighted average cost of fossil fuels delivered to U.S. electric generators in 2024 favored gas: Coal averaged approximately $3.13 per MMBtu, while Natural Gas averaged $2.66 per MMBtu [2].
Using these reported averages, we can estimate the marginal fuel cost of generation:
Coal (Average): 10.018 MMBtu/MWh × $3.13/MMBtu ≈ $31.35 per MWh
Natural Gas (CCGT): 7.548 MMBtu/MWh × $2.66/MMBtu ≈ $20.08 per MWh
However, a cross-check of these numbers is necessary. Coal prices vary largely by region. According to Table 30 of the EIA's Annual Coal Report, coal from Wyoming (the nation's largest producer) sells for as little as $15.24 per ton at the mine. [4] Furthermore, Table 34 of the same report shows that the competitive delivered cost of this coal to the power sector settles around $2.40 per MMBtu.
This shifts the operating cost calculation:
Coal (Competitive): 10.018 MMBtu/MWh × $2.40/MMBtu ≈ $24.04 per MWh
Even in this competitive scenario, gas maintains an operating advantage ($20.08 vs $24.04). Yet, this marginal saving alone does not justify an immediate switch. Building a new CCGT plant involves massive capital expenditure (CapEx). A utility will not abandon a functioning coal plantwhere construction costs are already "sunk" merely to save a few dollars on fuel. Doing so would be economically irrational.
Therefore, the decisive factor is the "End of Life" investment decision. The transition occurs not because gas is slightly cheaper to run today, but because when an aging coal plant faces retirement or prohibitive upkeep costs, investing in a new gas plant is far superior to building a new coal facility.
The utility industry's shift toward natural gas is a rational response to long-term investment economics. While superior thermodynamic efficiency (7,548 Btu/kWh) provides an operating advantage, the primary driver of the transition is the aging of the existing coal fleet. As legacy coal plants reach the end of their operational lives and become too costly to maintain, financial gravity dictates their replacement with efficient natural gas infrastructure. Consequently, the dominance of natural gas will continue to grow as the preferred replacement for retiring assets.
© Amos Sha. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "Electric Power Monthly, September 2025," U.S. Energy Information Administration, September 2025, Table ES1.A.
[2] "Electric Power Annual 2024," U.S. Energy Information Administration, October 2025, Tables 7.4 and 8.2.
[3] "Annual Coal Report 2024," U.S. Energy Information Administration, November 2025, Tables 30 and 34.
