Railroad costs called wildcard for coal generation

A new study by ICF International illustrates how much of a factor transportation costs can play for coal-fired power plants.

A section of the “Current State and Future Direction of Coal-fired Power in the Eastern Interconnection” shows that the cost of moving low-sulfur coal across the country from the Powder River Basin (PRB) of Wyoming and Montana can be significant.

“With a longer haul to end-users in the eastern U.S., PRB coal has higher transportation costs than coal from other basins. In January 2012, a representative power plant in the eastern U.S. paid approximately $36/ton for PRB coal when it was priced at $12.5/ton at the minemouth,” ICF said in the report.

This meant that 65% of the delivered PRB cost was spent on transportation. The power plant was not identified in the study.

By contrast, the Illinois Basin moves more than 30% of its coal traffic via barge shipments, given its proximity to the Great Lakes. This has allowed the Illinois Basin to expand its market share in recent times, ICF reported.

While the cost of delivered coal is expected to decrease slightly through 2016 (according to the Energy Information Administration projections), delivered coal costs beyond 2016 are projected to increase nearly 20% from 2017 to 2035, ICF said.

Between 1995 and 2010, the cost of generation from fossil steam units increased over 60%, from $15/MWh to $24/MWh (in constant 2010$). This was largely due to increased coal prices, ICF said in the white paper.

The 200-page white paper was done for the Eastern Interconnection States’ Planning Council (EISPC) and the National Association of Regulatory Utility Commissioners (NARUC). The research was funded by the Department of Energy (DOE).

The document is available on the NARUC website.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.