The price of natural gas, especially in the eastern part of the PJM Interconnection region, increased in January but then decreased to the levels of December 2012, higher than in the first six months of 2012, and coal prices were mixed but relatively unchanged in the first six months of 2013 compared to the first six months of 2012.
Those are among the points in a quarterly report, for the period April-June 2013, from PJM’s Independent Market Monitor, Monitoring Analytics LLC, that was filed Aug 15 at the Federal Energy Regulatory Commission.
As a result of the relative changes in fuel costs, coal-fired units were more competitive with gas-fired units, coal output increased in the first half of this year and gas output decreased, reversing the trend towards reduced coal output. Existing coal units were competitive with new combined cycle gas units on the basis of fuel-only marginal cost.
“The results of the energy market dynamics in the first six months of 2013 were generally positive for new coal units,” the report said. “In a continuation from the fourth quarter of 2012, new coal units ran at a lower fuel-only marginal cost than new combined cycle units. The combination of higher energy prices and gas prices increasing relative to coal prices resulted in significantly higher energy market net revenues for the new entrant coal plant in the first six months of 2013. In the first six months of 2013, energy market net revenues for a coal plant in nine zones exceeded 2012 annual energy market net revenues.”
During the first six months of 2013, coal units provided 44.3%, nuclear units 35.1% and gas units 15.7% of total generation in PJM. Compared to the first six months of 2012, generation from coal units increased 11.3%, generation from nuclear units increased 0.8%, and generation from gas units decreased 17.9%. This represents a reversal of the recent trend of decreasing coal-fired output and increasing gas-fired output. The change is primarily a result of increased natural gas prices in the first six months of 2013, particularly in eastern zones, and lower or constant coal prices.
Comparing prices in the first six months of 2013 to prices in the first six months of 2012, the price of Northern Appalachian coal was 4.2% lower; the price of Central Appalachian coal was 3.8% higher; the price of Powder River Basin coal was 20.3% higher; the price of eastern natural gas was 73.4% higher; and the price of western natural gas was 57.3% higher. Natural gas prices were above coal prices in the first six months of 2013, with prices above $10/MMBtu for some days. Coal prices increased during the first six months of 2013 but remained relatively flat in comparison to 2012,
New gas-fired combined cycles are competing with older coal plants. Most coal plants in PJM are 20 years or older, with heat rates greater than a new coal plant. Using average heat rates for existing sub-critical coal units, as well as delivery adders and variable operations and maintenance adders, the average cost of a sub-critical coal unit in PJM in the first six months of 2013 was $31.45/MWh, compared to $36.63 for a new entrant combined cycle in the eastern zones. In June, due to lower natural gas prices and slightly higher coal prices, the cost of a new entrant combined cycle unit was $30.99, or below that of a sub-critical coal unit in PJM, at $32.21.
Most new capacity is gas, while most capacity to be shut is coal
As of June 30, 2013, 72,537 MW of capacity were in generation request queues for construction through 2024 in the PJM region, compared to an average installed capacity of 195,000 MW in the first six months of 2013. Wind projects account for 18,612 MW of nameplate capacity or 25.7% of the capacity in the queues and combined-cycle projects account for 42,925 MW of capacity or 59.2% of the capacity in the queues.
In PJM, operators of 13,768.2 MW of capacity are planning to deactivate by the end of calendar year 2019. A total of 7,195.7 MW of generation capacity retired from January 2012 through June 30, 2013, and it is expected that a total of 22,160.4 MW will have retired from 2011 through 2019, with most of this capacity retiring by the end of 2015. Retirements from January 2011 through June 30, 2013, account for 8,392.2 MW, or 37.9% of retirements during this period. Units planning to retire in 2013 account for 2,402.6 MW, or 10.8% of retirements during this period. Overall, 3,508.1 MW, or 28.7% of all MW planned for deactivation from 2013 through 2019, are expected in the AEP (American Electric Power) zone.
The report has a list of planned unit deactivations on the PJM region out to 2019. The coal unit deactivations over the next year are:
- Sept. 1, Titus, Pennsylvania, 243 MW;
- Oct. 9, Hatfield’s Ferry, Pennsylvania, 1,590 MW;
- Oct. 9, Mitchell, Pennsylvania, 359 MW;
- Dec. 31, Indian River Unit 3, Delaware, 169.7 MW;
- May 2014, BL England Unit 1, New Jersey, 113 MW; and
- June 2014, Portland, Pennsylvania, 401 MW.
PJM operates a centrally dispatched, competitive wholesale electric power market that, as of June 30, 2013, had installed generating capacity of 185,560 MW and about 850 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.