January 22, 2018 Read More →

‘A Low- to No-Growth Environment’ for Coal-Fired Electricity

S&P Global Market Intelligence:

“The coal industry has a long-term ‘aging out’ problem,” said Joe Aldina, director of U.S. coal at PIRA Energy Group, an analytics and forecasting unit of S&P Global Platts. “With the average age of coal units around 40 years and no plans to build new capacity, a big chunk of the coal fleet can reliably operate for only another 10 to 15 years, especially with increasing demands for cycling, which is tougher on a plant.”

Coal and older gas plants continue to make up the bulk of plant retirements, while new gas plants, solar and wind have dominated capacity additions.

In June 2017, SSR LLC analysts Eric Selmon and Hugh Wynne warned that flat demand and capacity additions would likely erode gas and coal capacity factors through 2019. The existing fleet of fossil fuel plants will be squeezed by stagnant power demand and rising capacity from wind, solar and more efficient natural gas plants, they said.

Aldina said that while some increased utilization of existing capacity could help some producers serving particular power plants, overall tonnage consumed will likely hold flat or decrease as producers are “staring down a low- to no-growth environment.” He said expects overall coal burn will likely decrease as new gas supply goes to markets and keeps prices below $3/MMBtu on average.

“Renewables and gas-fired plants are being built that often displace coal plants in the dispatch stack based on economics, which is why overall coal demand will be flat to declining,” Aldina said. “Remaining plants may get a bigger share of the pie from higher utilization, but it’s ultimately a smaller pie. Producers will have to prepare for that and keep production in line with demand.”

More: ($) US coal capacity factor gives room to burn, but may not offset customer loss

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