Existing coal power plants to boost production, analyst says

By the OGJ Online Staff

HOUSTON, Nov. 14, 2001 — Confounding the hopes of many environmentalists, US electric plants are expected to boost coal consumption in the future.

Credit ratings agency Fitch predicted US power plants will be burning more than 1 billion tons/year of coal 15 years from now, up from the 925 million tons of coal that was consumed by US electricity generators last year. Rising coal consumption will come at the expense of natural gas and nuclear generation, Fitch said.

“Going forward, coal-fired plants will supply much of the projected increases in electricity demand because they possess excess capacity that can be utilized at low incremental costs,” said Fitch analyst Randall Biang.

He said the big increase won’t come from new coal-fired plants but from existing units. The average coal-fired plant utilization is projected to increase to 83% in 2020 from 68% in 1999. Fitch said the sustainable capacity utilization over time is 85% for a typical coal plant.

As these units increase utilization rates to the 75-80% level, Fitch projected 150-200 million tons of coal will be needed to serve added demand. US coal reserves are more plentiful than oil and gas reserves. With a 250-year supply of coal, meeting the extra demand won’t be a problem.

Fitch said deregulation also is raising coal demand. Competition and market-based pricing in the electric utilities market will lead companies to utilize generating plants with the lowest fuel costs, Biang said. Consequently, utilities will consume more coal because electricity generated from existing coal-fired plants is generally less expensive than electricity generated from alternatives, including natural gas-fired plants.

“Coal prices are lower and more stable than natural gas. Higher prices, volatility, and system growth limitations will continue to make natural gas a less attractive energy source, particularly for base load generation,” Biang said.

A big increase in production from old plants is bound to heighten tensions between the industry and environmentalists who have lobbied the US Congress to pass laws curbing carbon dioxide (CO2) emissions. US Senate Committee on Environment and Public Works Chairman Jim Jeffords (I-Vt.) Jeffords has introduced S. 556, the Clean Power Act, which would cut power plant emissions of four major pollutants, including CO2 nitrogen oxides, sulfur dioxide, and mercury.

Industry complains curbing emissions will raise energy prices. The White House says it supports a “multipollutant” emission strategy but has resisted calls to place caps on the “greenhouse gas” CO2. President George W. Bush says he is worried CO2 caps proposed as part of the United Nations’ Kyoto treaty may be too expensive a burden for US business.

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