Coal burn up at power plants, eating into bloated coal stockpiles

Coal inventories at power plants dropped below the monthly five-year average in April, the first time this has happened since December 2011, said the U.S. Energy Information Administration in the July 18 version of its “Today in Energy” feature.

The decline in stockpiles occurred as coal burn increased across much of the nation during a winter that was colder than the previous winter. Also, rising natural gas prices prompted some power plants to burn more coal and less gas.

Total coal consumption was up 11% in the first-quarter of 2013, compared to the same period in 2012, EIA noted. However, the increase in coal consumption did not translate into increased sales by coal producers. Receipts of coal at electric power plants actually decreased 5% between first quarter 2012 and first quarter 2013 as plant operators met rising demand by drawing down the historically high stockpile levels.

Last spring, when natural gas prices were near ten-year lows, at one point less than $2/mmBtu, coal consumption for electricity production declined and stockpiles increased. Coal consumption has since taken an upturn, but most power plants are burning down the record stockpile levels rather than buy more coal. Because power plants appear set to burn down the record coal stocks rather than buy new supply, the weak domestic market for coal producers is expected to continue throughout 2013, EIA said.

The strong 2012 market for exports of U.S. steam and metallurgical coal has cooled off in 2013. Consequently, U.S. coal production is expected to remain flat in 2013. EIA’s most recent Short-Term Energy Outlook does not forecast U.S. coal production to increase until 2014, when EIA expects it to rise by about 3% over 2013.

Coal has continued to fuel about 40% of total generation over the past five months. This is up from a low of 32% in April 2012, when natural gas prices were near 10-year lows. As recently as November 2008, coal accounted for 50% of total generation. “The favorable supply and price picture for natural gas, and to some extent the increased penetration of renewable power, appears to have created a new, lower normal for the coal share of the power market,” EIA said.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.