Analysis: Coal burn falls by 9pc in central US

OREANDA-NEWS. July 16, 2015. Coal-fired power plants in the Southwest Power Pool in the first half of July generated 9pc less electricity than a year earlier, underscoring challenges for Powder River basin (PRB) producers supplying the region.

Coal-fired generation on 1-14 July averaged 16,879MW in the pool's balancing area that covers all or parts of nine states in the Gulf coast, southwest and plains regions. Coal remained the dominant generating fuel with a 58pc share, but it dropped from 62pc in the same period last year, based on the grid operator's data.

Natural gas' share in the supply mix rose to 22pc from 20pc. Gas generation in absolute terms increased by 12pc. Natural gas edged out coal largely because of dispatch economics. Prompt-quarter delivered PRB prices in the midcontinent and Gulf coast so far this month are 6-7pc lower than in the same period last year. The corresponding decline for spot natural gas prices in the midcontinent is 35pc.

The decline in coal-fired generation in what is typically a top consumption month for the fuel in the central US means the utilities' inventories will be depleted at a lower pace and their buying interest should remain low.

Coal-fired power plants in the central US grid in July 2014 consumed 7.7mn short tons (7mn metric tonnes), Energy Information Administration data show. More than two-thirds of coal receipts in July 2014 came from the Black Thunder, North Antelope Rochelle, Eagle Butte and Antelope mines in Wyoming. The agency has not yet published data for this month.

Total generation in the first half of July was down by 2.2pc. Load fell as well as cooling demand in the region so far this month has not exceeded year-earlier levels.

Coal remains the primary generating fuel in the central US grid and typically is the marginal fuel in the Southwest Power Pool's northern part that includes Kansas, Nebraska and parts of Missouri. Gas sets prices more often in the southern portion of the pool.

Coal last year accounted for 35pc of installed capacity on that grid, or about 22.5GW. The southwest pool will lose 1,458MW of coal-fired capacity in 2015-16, according to Argus' coal plant retirements database.