Natural Gas Is America's Real Green Energy

There are many niche renewable fuel sources, but natural gas is the one fuel that will really make America greener.

Feb 18, 2014 at 9:16AM

Renewables may be hot, but natural gas is becoming the biggest provider of America's electricity generation needs. The U.S. Energy Information Agency (EIA) expects that from 2012 to 2040 natural gas will grow from 30% to 35% of total U.S. generation. In the same time frame renewables are only expected to grow to 16% of total U.S. electricity generation. If we really want to dethrone coal and make America greener, natural gas is a very effective tool.

What about solar?
Electricity demand peaks from noon to 7 PM. Peak demand happens when the sun is shining, helping companies like First Solar (NASDAQ:FSLR) compete with expensive natural gas peakers.

Its strong utility sales give the company a healthy profit margin of 12.2%. First Solar's expanding sales operations and proven experience have helped it drum up a good sized 7.7 GW DC project pipeline, but the majority of the pipeline is still early stage.

First Solar's biggest challenge will come once North American utilities have already replaced the majority of their natural gas peakers with solar. Non-peaker natural gas plants have levelized costs of energy (LCOE) as low as $67.1 per MWh, far below solar's LCOE.

So where is natural gas' growth coming from?
At first it sounds nonsensical that natural gas is expected to grow more than renewables and yet solar is currently growing by replacing natural gas. What you need to remember is that utilities only have a few peaker plants and they are not used that often. In a 2012 regulatory submission Southern California Edison expected that five of its peaker plants would only run for an average of 282 hours in the year, a little less than 12 days of continual use.

Natural gas is growing by replacing baseload or seasonal baseload generation. The EIA expects that almost 50 GW of coal generational capacity will be taken offline between 2012 and 2020. This change will not happen instantaneously, but utilities are slowly shutting down many of their old coal plants. 

CONSOL Energy (NYSE:CNX) has seen the difficulties facing high-cost coal miners. Back in October of 2013 it sold five longwall mines and a number of related assets that had produced 28.5 million tons of thermal coal in 2012. By reinvesting the $3.5 billion from the mine sale into its Marcellus shale assets CONSOL is taking a very proactive approach. It expects that it will be able to grow its gas production 30% annually from 2014 to 2016, aligning CONSOL with utilities' interests. 

The last thing CONSOL wants to do is end up like Arch Coal. Arch has a number of unprofitable mines in the Appalachia region. Until it is willing to eject or permanently shut down these assets there is a good chance it will continue bleeding cash.

In 2013 it lost $663 million from operations and its adjusted EBITDA fell from $689 million in 2012 to $426 million in 2013. In 2013 its bituminous thermal segment had positive operating margins, but its falling per ton operating margin and falling sales decreased the segment's ability to subsidize Appalachian losses.

Look at America's number one natural gas producer
As the decade passes natural gas producers will have a bigger market and a wider customer base to work with.

ExxonMobil (NYSE:XOM) is one of the most powerful energy companies in the world and according to recent data from Q1 to Q3 2013 it is also America's biggest natural gas producer. It is trying to shift more of its production toward higher margin liquids-rich assets, but in Q4 2014 ExxonMobil still managed to produce 3.46 billion cubic feet per day of natural gas in the United States.

It remains to be seen if solar manufacturers like First Solar can break into the baseload generation market without subsidies, but natural gas is already picking up steam. As the U.S. slowly replaces coal with natural gas ExxonMobil and CONSOL Energy will be ready to benefit from higher demand. Investing in an integrated firm like ExxonMobil gives you the stability and security that is hard to find in smaller E&Ps, but CONSOL Energy offers big upside potential as well.

Getting in on the ground floor
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980's, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in late 1990's, when they were nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play", and then watch as it grows in EXPLOSIVE lock-step with it's industry. Our expert team of equity analysts has identified 1 stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers