Analysis: Retiring units take 3pc of US coal burn

OREANDA-NEWS. June 03, 2015. Coal units that retired in April-June to comply with federal regulations were dispatched often in winter and their demand accounted for about 3pc of US power sector's first quarter coal consumption.

More than 11GW of capacity in 50 coal units scheduled for retirement generated electricity in January-March, based on the comparison of Energy Information Administration's electricity output data and Argus' coal plant retirements database. A total of 115 units with 19.6GW will retire this year as a result of the federal mercury and air toxics rule. Most units retired between 16 April and 1 June.

Fuel burn by the retiring coal units totaled 1.62mn short tons in January, 1.93mn st in February and 1.53mn st in March. Those units accounted for 2.6pc of US coal demand for electricity generation over the period. That share rose to 2.9pc in February.

Electricity generated by the plants scheduled to retire this year totaled 368,471 GWh in January-March, or 3.2pc of total electricity produced by coal-fired generators in the US.

The PJM Interconnection — the largest US wholesale power market — dispatched 5,863MW at units slated for retirement and they generated 5,958 GWh over that period. Southern Co dispatched 2,542MW of the retiring units and the Tennessee Valley Authority dispatched 1,230MW.

Coal capacity retirements have boosted demand for natural gas in generation. But the amount of displacement varies from month to month because it depends on relative fuel prices and dispatch economics. Grid operators in deregulated markets like PJM dispatch units that burn the least-costly fuel, subject to transmission and other constraints.

Replacing the electricity generated by all the retiring coal units in January-March with natural gas exclusively will boost consumption of gas by 1.21 Bcf/d (34mn m?/d) on average, based on the heat content and fuel burn reported by the Energy Information Administration.

Spark spread assessments for the third quarter indicate higher marginal profitability for gas units compared with coal in the mid-Atlantic, Great Lakes and southwest US.