Analysis: Wind helps erode PRB coal use for power

Spanish Market: Coal, Electricity
24/03/15

Growing wind generation is lowering power prices and helping cheap natural gas to displace coal use among power generators in the midwest and southwest US.

Cheap natural gas is already displacing coal-fired generation in the Southwest Power Pool and the Electric Reliability Council of Texas (ERCOT), but wind power is also claiming wider market share. Wind generation has set peak records that exceeded 30pc of the generation mix in both power markets.

While coal still accounts for the majority of generation in the Midcontinent Independent Systems Operator (MISO), coal buyers there are watching their coal inventories build up as strengthening wind generation depresses real-time prices on the grid, weakening the economics for coal-fired generation.

This year, power generating companies expect to add more than 9.8GW of wind generation to the nearly 66GW of existing capacity. Meanwhile, 12.9GW of about 300GW of existing US coal-fired generating capacity is expected to retire.

The Plains states will see the majority of the new wind power additions, with nearly 8.4GW, or 85pc of total wind additions, coming to MISO, ERCOT and the Southwest Power Pool. Coal plants within those grid operators consumed about 317mn short tons (287mn metric tonnes) of Powder River basin (PRB) coal last year, constituting the majority of PRB coal production, which was at 418.2mn st in 2014.

Coal burn in Texas's primary grid dropped to a three-year low last month as cheaper gas sent use of that fuel up by 37pc from a year earlier. Coal's share of the fuel mix slid to 27pc last month from 42pc in February 2014, its lowest percentage of ERCOT generation since April 2012.

ERCOT reported wind generation at about 10.5pc of the fuel mix, down slightly from the year-ago period. But ERCOT also set a new wind peak in mid-February, when 11,154MW of wind supplied 34pc of the 44,579MW of demand on the Texas grid. ERCOT has 12,470MW of installed wind capacity, meaning wind farms were producing electricity at nearly 90pc of nameplate capacity. Wind farm output is generally highest in the spring and fall months.

In the Southwest Power Pool, wind exceeded 91pc of capacity, setting a record of 8,412MW on 1 February. Grid officials said wind accounted for nearly 32pc of the generation serving the area at the peak.

The power pool covers all or parts of nine states in the Gulf coast and central US. Another 900MW of wind will be added when utilities in the upper Great Plains join later this year, officials said.

In MISO, wind output has set four records in three months. On 8 January wind generation totaled 11,930MW, up by nearly 8pc from 17 November. MISO has 13,726MW of installed wind capacity, meaning wind output was at nearly 87pc of its capacity.

And still more wind generation is planned.

Xcel Energy, with operations in the southwest pool and MISO, in January filed a resource plan to add 600MW of wind by 2020 and 1,200MW by 2027. The Minnesota Public Utilities Commission is expected to decide on the plan in 2016.

Xcel has already grown its wind generation from 3pc of its fuel mix in 2005 to 15pc in 2013, with plans to reach 22pc by 2020. The utility is reducing coal's share of its fuel mix to 46pc in 2013 from 56pc in 2005, with plans to cut it to 43pc in 2020.

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