By - Jim Vess

Most costly coal-fired plants to run are prime targets for closure, EIA study finds

Energize Weekly, December 11, 2019

The U.S. has seen more than a fifth of its coal-fired generating capacity closed since 2011, and plants with higher operating costs were more vulnerable to closures, according to the federal Energy Information Administration (EIA).

Between 2011 and the end of 2017, the total coal-fired generating capacity in the U.S. dropped to 257 gigwatts (GW) from 318 GW.

“Because of more competitive natural gas prices, more advanced natural gas combined-cycle generators, and the increasing efficiency of the natural gas generator fleet, EIA expects more coal-fired generators to retire, especially within the next decade,” the agency said.

The EIA and Sargent & Lundy, an engineering and energy consultant, reviewed the variable operating and maintenance costs of plants that report to the Federal Energy Regulatory Commission (FERC). In 2008, about 55 percent of the coal fleet reported this data to FERC.

The plants were sorted into three groups by operating costs. A lower cost group was operating at $20 to $26 a megawatt-hour (MWh). A middle group had costs at $26 to $28 a MWh, and a high operating cost group ranged from $28 to $40 a MWh.

Coal units with higher operating and maintenance costs are more likely to retire, the EIA said. Sixty-six percent of the units in the highest operating cost group will retire between 2019 and 2030, compared with 36 percent in the lowest cost group, according to the agency.

These operating costs for coal plants have been challenged by the falling cost of competing forms of electricity generation, particularly natural gas.

“Sustained relatively low natural gas prices has allowed natural gas-fired generators to become more competitive with coal-fired units, leading to a general decline in using coal-fired capacity,” the EIA said. “A decline in use leads to a decline in revenues at a plant, which generally translates to lower operating margins, less ability to cover costs, and in many cases, retiring that capacity.”

The study found that the plants with lower operating costs tended to run more often, resulting in higher capacity factors. The capacity factor is a measure of a plant’s output as a percentage of its total generating capacity.

As both natural gas prices and coal-fired output dropped, capacity factors for plants declined to an average 54 percent in 2017 from 75 percent in 2008. The drop was slightly bigger for the plants with the most expensive operating costs. The group saw a drop to 47 percent in 2017 from 75 percent in 2008.

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