Wind, gas displace coal on central US grid

OREANDA-NEWS. Wind and natural gas this month have displaced coal in the Southwest Power Pool's generating fuel mix compared with 2014, as load remains stagnant in the shoulder season and gas prices have dropped sharply.

Coal remains the primary generating fuel in the pool's balancing area that covers part of nine states in the Gulf coast, southwest and plains regions. But coal's share in generation fell to 52pc on 1-20 May from 58pc a year earlier. Power output by coal-fired power plants fell by 15pc in absolute terms.

The change in the generating fuel mix is similar in the primary power grids in Texas and the midcontinent, as well as in the PJM. The full impact of coal plant retirements as a result of the mercury and air toxics rule will be pronounced after 1 June. The southwest pool will lose 1,458MW of coal-fired capacity in 2015-16, according to Argus' coal plant retirements database.

Coal last year accounted for 35pc of installed capacity on that grid, with gas at 47pc and wind at 11.5pc.

Wind output in the southwest pool so far this month increased by 14pc year over year and its share in total generation rose by three percentage points to 18pc. Gas' share rose to 22pc from 20pc in May 2014.

Midcontinent natural gas prices this month are about 40pc lower than a year earlier. By contrast, second quarter Powder River Basin 8,800 Btu/lb coal prices for deliveries into Texas and midcontinent fell only marginally from last year, while third quarter deliveries are down by 10pc on the year.

Delivered coal prices in the region on average were 14pc lower than midcontinent natural gas prices in April-May. That discount narrowed from 51pc a year earlier.

For the year to date, coal generation in the southwest pool has fallen by 7pc in absolute terms and its share decreased by two percentage points to 57pc, from the same period last year. Natural gas accounted for 21pc and wind for 15pc of generation, up from 19pc and 14pc, respectively.

The pool's balancing area will expand to the north and west in October, with the addition of Western Area Power Administration's upper Great Plains region, Basin Electric Power Cooperative and Heartland Consumers Power District in eastern Montana and North and South Dakota. The expansion should add 13pc to the pool's load. The new areas add significant hydropower and wind capacity to the pool's generation mix.