The US Energy Information Administration expects 22 % more US coal-fired generation in 2021 than in 2020, according to its latest ‘Short Term Energy Outlook’, STEO. The US electric power sector has been generating more electricity from coal-fired power plants this year, as a result of significantly higher natural gas prices and relatively stable coal prices. 2021 will yield the first year-over-year increase in coal generation in the United States since 2014.
Coal and natural gas have been the two largest sources of electricity generation in the United States. In many areas of the country, these two fuels compete to supply electricity based on their relative costs. US natural gas prices have been more volatile than coal prices, so the cost of natural gas often determines the relative share of generation provided by natural gas and coal.
Because natural gas-fired power plants are more thermally efficiently than coal-fired plants, natural gas-fired generation can have an economic advantage even if natural gas prices are slightly higher than coal prices. Between 2015 and 2020, the cost of natural gas delivered to electric generators remained relatively low and stable. This year, however, natural gas prices have risen. The year-to-date delivered cost of natural gas to power plants has averaged $4.93 per million Btu, more than double last year’s price.
The overall decline in US electricity demand in 2020 and record-low natural gas prices also led coal plants to reduce significantly the percentage of time that they generated power. In 2020, the utilisation rate (aka capacity factor) of the country’s coal-fired generators averaged 40%. Before 2010, coal capacity factors routinely averaged 70% or more. This year’s higher natural gas prices have increased the average coal capacity factor to about 51%, which is almost the 2018 average.
However, says EIA, the increase in coal generation will most likely not continue. The sector has retired about 30 % of its generating capacity at coal plants since 2010, and no new coal-fired capacity has come online in the United States since 2013. In addition, coal stocks at power plants are relatively low, and production at operating coal mines has not been increasing as rapidly as the recent increase in coal demand. For 2022, EIA forecasts that US coal-fired generation will decline about 5% in response to continuing retirements of generating capacity at coal power plants and slightly lower natural gas prices.
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