Both coal and natural gas prices decreased in the first nine months of 2012 in the PJM Interconnection region, although the decline in gas prices was larger than the decline in coal prices.
“The fuel cost to produce a MWh from a new entrant combined cycle unit was below that of a new entrant coal plant in the first nine months of 2012,” said a Nov. 15 statement from Monitoring Analytics LLC, the Independent Market Monitor for PJM. “Despite that, new entrant combined cycle energy market net revenues were lower in the majority of zones in the first nine months of 2012. Energy market net revenues declined for new entrant coal and combustion turbine units in every zone in the first nine months of 2012.”
PJM’s wholesale electric energy and capacity markets produced competitive results during the first nine months of 2012, according to the “2012 Quarterly State of the Market Report for PJM: January through September,” released by Monitoring Analytics. The report is the Independent Market Monitor’s quarterly assessment of the competitiveness of the wholesale electricity markets managed by PJM in 13 states and the District of Columbia.
PJM energy prices were substantially lower. The load-weighted average locational marginal price (LMP) was 29.2% lower in the first nine months of 2012 than in the first nine months of 2011, the lowest nine-month average energy prices since 2002. The hourly average load increased 5.9% in the first nine months of 2012 compared to the first nine months of 2011 as a result of the integration of the American Transmission Systems Inc. (ATSI) control zone on June 1, 2011, and the Duke Energy Ohio/Kentucky (DEOK) control zone on Jan. 1, 2012. But for those additions, load would have decreased by 0.9%.
“The results of the energy market dynamics in January through September of 2012 were positive for new gas fired combined cycle units in some areas,” the report noted. “The result of the changes in gas prices compared to coal prices was that the fuel cost of a new entrant combined cycle unit remained below the fuel cost of a new entrant coal plant in the first six months of 2012, but greater than the fuel cost of a coal plant for the months of July through September. The combination of lower energy prices, lower gas prices and lower coal prices resulted in lower energy net revenues for new entrant CC units in thirteen of seventeen zones and lower energy net revenues for the new entrant CT and CP unit in all zones in 2012.”
The PJM system peak load for the first nine months of 2012 was 154,344 MW, which was 3,672 MW, or 2.3%, lower than the PJM peak load for the first nine months of 2011. The DEOK Transmission Zone accounted for 5,360 MW in the peak hour of the first nine months of 2012. The peak load in 2012 excluding the DEOK Transmission Zone was 148,984 MW, a decrease of 9,032 MW, or 5.7%, from the peak load for the first nine months 2011.
In the first nine months of this year, coal units provided 41.8%, nuclear units 34.1% and gas units 19.6% of total generation. Compared to January-September 2011, generation from coal units decreased 10% and generation from nuclear units increased 5.3%, while generation from natural gas units increased 45.4%, and generation from oil units increased 96.5%.
Most new power projects are wind and gas
At Sept. 30, 75,869 MW of new capacity were in generation request queues to be in service through 2018, compared to an average installed capacity of 185,000 MW in 2012 including the Jan. 1, 2012, DEOK integration. Wind projects account for 26,495 MW, 34.9% of the capacity in the queues, and combined-cycle projects account for 38,806 MW, or 51.1%.
A total of 6,722 MW of generation capacity retired in the first nine months of this year, and it is expected that a total of 19,142.8 MW will have retired from 2011 through 2019, with most of this capacity retiring by the end of 2015. Units that have retired through Oct. 1, 2012, make up 35% of all retirements currently expected to occur from 2012 through 2019.
A potentially significant change in the distribution of unit types within the PJM footprint is likely due to the location of new generation resources in the queue and the location of units likely to retire, the report noted. In both the EMAAC and SWMAAC Locational Deliverability Areas (LDAs), the capacity mix is likely to shift to more natural gas-fired combined cycle (CC) and combustion turbine (CT) capacity. The western part of the PJM footprint is also likely to see a shift to more natural gas-fired capacity due to changes in environmental regulations and natural gas costs, but likely will maintain a larger amount of coal capacity than the eastern zones.
A planned addition of 1,640 MW of nuclear capacity to Calvert Cliffs in SWMAAC was withdrawn from the queue. Without the planned nuclear capability in SWMAAC, new gas-fired capability represents 99.4% of all new capability in the SWMAAC. In 2018, this would mean that CC and CT generators would comprise 55.1% of total capability in SWMAAC, the report said.
A total of 6,722 MW was retired in January through Oct. 1, 2012, including 2,320 MW from FirstEnergy (NYSE: FE), or 34.5% of all retirements. The retirements included 5,718 MW of coal generation, 788 MW of light oil generation, 250 MW of natural gas generation, and 16 MW of wood waste generation. Of retirements in 2012, 1,458.0 MW, or 21.5%, were in the ATSI zone.
Net revenues are significantly affected by fuel prices, energy prices and capacity prices. Average real time LMP decreased by 29.1% in the first nine months of 2012 over the first nine months of 2011. Natural gas prices decreased by more than coal prices in the first nine months of 2012 compared to the first nine months of 2011. The price of Northern Appalachian coal was 15.5% lower; the price of Central Appalachian coal was 19.4% lower; and the price of Powder River Basin coal was 34.1% lower. The price of eastern natural gas was 40.5% lower; and the price of western natural gas was 37.1% lower. The combination of lower energy prices, lower gas prices and lower coal prices resulted in lower energy net revenues for new entrant CC units in thirteen of seventeen zones and lower energy net revenues for the new entrant CT and CP unit in all zones in 2012.
PJM operates a centrally dispatched, competitive wholesale electric power market that, as of Sept. 30, had installed generating capacity of 182,874 MW and about 800 market buyers, sellers and traders of electricity in a region including more than 60 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. In the first nine months of 2012, PJM had total billings of $22.12bn, down from $28.84bn in the first three quarters of 2011, the report said.