OREANDA-NEWS. The imminent retirements of coal-fired capacity in the PJM Interconnection will permanently increase natural gas demand in the largest US wholesale power market, with a 1 Bcf/d (28mn m?/d) increase if all retiring coal is replaced by combined cycle plants.

PJM's market monitor expects 7,901MW of coal capacity to retire in January-June, mostly to comply with mercury and air toxics rule. About 75pc of the retiring capacity is in the AEP zone, which covers parts of Indiana, Michigan, Ohio, Virginia and West Virginia.

Electricity output from those plants could have totaled 34,744 GWh last year, based on average coal plant capacity factors provided in the market monitor's most recent State of the Markets report.

Natural gas will not necessarily replace all retiring capacity, as PJM dispatches resources based on economic merit. But replacing all the retiring capacity with gas will require dispatching 7,225MW of combined cycle plants on average, based on comparative capacity factors. PJM estimates average heat rates for gas-fired plants in the mid-Atlantic region at 10 mmBtu/MWh. The potential increase in gas burn is 1 Bcf/d across PJM, including 624mn cf/d in the AEP zone.

Coal plant retirements also will change the fuel mix for the regional transmission organization. Coal last year accounted for 44pc of PJM generation, nuclear plants contributed another 34pc while natural gas' share was 17pc.

Forward markets so far show little movement in response to the changing fuel mix. Round-the-clock assessments are flat between 2016 and 2019 at PJM West hub while the AEP-Dayton hub adds 3pc in the same period.

The share of natural gas in PJM's installed capacity will increase from 31pc at the end of 2014, with as much as 42GW bidding to be built.