In 2012, power generators fired up low-priced natural gas, increasing use of methane by 22% from 2011. But 2013 sticker shock is bringing coal back to the furnace.

Gas use for electric generation fell 10% in March 2013 from March 2012, the U.S. Energy Information Administration (EIA) reported.

Natural gas prices, coming off a solidly typical winter, have jumped 75% from last year, averaging $3.79 million Btu (MMBtu) in March compared with $2.16 in March 2012, said David Tameron, senior analyst for Wells Fargo Securities.

However, shale plays may clean up in the end. The Haynesville, Marcellus and Barnett could benefit in the near future from federal clean air requirements. That would give a boost to natural gas production.

Through March 2013, coal has taken a swing back at natural gas, generating 40% or more of the nation’s electricity each month since November 2012, EIA preliminary data shows. Natural gas fueled about 25% of generation during the same period.

However, coal generation is still far below its 2009 share. Between 2001 and 2008, the coal share ranged from 48% to 51%. In 2013, coal is expected to make up 40% of share. EIA expects an 8.7% increase in coal use during 2013.

From now until 2015, demand for natural gas could benefit shale gas plays as utilities reduce emissions. Federal carbon dioxide regulations could require plants to use an additional 8 billion cubic feet per day (Bcf/d) in supply to cut 10% of emissions, said Hugh Wynne, senior analyst for Bernstein Research.

Such production is historically feasible. The Barnett, Haynesville and Marcellus shales have all achieved production increases of 6 Bcf/d. In 24 months, the Haynesville added 6 Bcf/d from 2009 to 2011.

Wynne said that in the short term gas demand lost about 2.2 billion cubic feet per day (Bcf/d), which he said is “basically a wash” with lost gas supply of 2 Bcf/d.

“In the short term, utility demand for gas is driven by the relative cost of operating the existing fleet of coal- and gas-fired power plants to meet prevailing power demand,” Wynne said. “Given the recovery in the price of natural gas so far this year, and the prevailing trajectory of forward prices for the remainder of the year, we expect a material price-induced shift from gas to coal fired generation in 2013.”

Through 2015, coal plants will retire due to new environmental standards. After that, supply available at less than $5 per thousand cubic feet (Mcf) represents the “best hope” for significant gas demand growth, followed by exports of liquefied natural gas, Wynne said.

But when the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) kick in, coal plants in areas such as the Appalachians and Illinois would have to refit their plants with additional chemical-scrubbing equipment.

“Many utilities will find it cheaper to retire their older, smaller coal fired units than to retrofit them with the required controls,” Wynne said.

Long term, EPA regulation of carbon dioxide will encourage a further switch from coal fired generation to gas, Wynne said. “We expect the EPA to finalize its New Source Performance Standards for CO2 emissions from new fossil fueled power plants later this year.”

The implications for utility consumption of coal and gas are enormous, Wynne said.

“Every 10% cut in the CO2 emissions of the fossil fuel fleet, relative to a 2012 base, would require a reduction in utility coal burn of about175 million tons, or the equivalent of 17% of U.S. coal production,” Wynne said.

That’s equals about 12% of U.S. natural gas production, he said.

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