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  • Nice overview of coal & gas in generation

    NEW YORK, Jan 24 (Reuters) - The front line of an intensifying battle between natural gas and coal in U.S. power plants is moving west.

    Gas prices, pummeled by an unyielding shale production boom and one of the mildest winters on record, have plunged this month to their cheapest relative to coal since 2009, when gas prices dipped to a seven-year low. That has tempted even more of the country's utilities into powering up gas-fired turbines rather than maxing out their coal units.

    While East Coast companies have led the way in moving to natural gas since 2009, the recent shift is picking up steam in more traditional coal-burning Midwest states and could portend a major change for power generators such as CMS Energy and AEP in the heartland.

    Low prices for natural gas come at a bad time for power operators that use coal, which is under pressure from pending clean-air regulations.

    Natural gas is now displacing coal at record levels, and even moves by Chesapeake Energy, the second-largest U.S. gas producer, are unlikely to have a fast enough impact on output to raise prices to levels that would curtail coal-to-gas switching in the near term.

    The shift injects a new dynamic into the volatile and seasonal natural gas market, with utilities enjoying a new degree of flexibility to burn the cheapest fuel of the moment. Coal still generates nearly half of U.S. electricity, but natural gas's share has risen to 23 percent from 15 percent in 1998.

    "No one knows exactly how the power market is going to run if we stay at $3 gas," said Michael Zenker, head of power and gas research with Barclays Capital, referring to the price per million British thermal units (mmBtu).

    "It's going to create operating decisions for power operators and grid operators that they have not had to face because it will upend the relation between coal and gas on a sizable basis," he said.

    The numbers are stark: coal-fired power generation in the Midwest fell about 4 percent in the first three quarters of 2011, while gas-fired generation rose roughly 8 percent, according to energy economists at PA Consulting.

    In 2009, U.S. utilities substituted a record 3 billion cubic feet (bcf) per day of natural gas for coal in their plants. That figure held largely steady for two years, but has spiked again since November as warm weather caused gas inventories to bulge.

    The rate of displacement - or the amount of gas-fired generation a utility chooses to run instead of coal - is expected to rise to around 5 bcf a day with prices this low, or about 7.5 percent of the total 67 bcf per day of current demand.


    While the dominance of coal-fired power generation will not end soon, a drop in natural gas prices to around $2.40 per mmBtu has lured more power producers to switch from coal.

    With the possibility of U.S. inventories ending the winter at record highs, producers may even have to pay companies to take gas off their hands if storage caverns fill.

    Power generators are notoriously tight-lipped when it comes to how much power they generate from which energy source, citing market competition on pricing, but the impact over recent years has been noticeable.

    Currently, about 45 percent of U.S. power comes from coal, 23 percent from natural gas, 20 percent from nuclear, 11 percent from renewables and 1 percent from oil. In 2005, coal plants made up 50 percent of the country's power, government data shows.

    AEP, which serves states including Indiana and Michigan and is one of the largest U.S. coal-fired power companies, said it had displaced coal with gas in years when gas prices dropped. An AEP spokesman declined to provide current figures.

    The company has added around 5,000 megawatts of natural-gas-fired generation over the last decade and has more under construction.

    In Michigan, CMS Energy said it ran its 930-MW Zeeland gas-fired plant about three times as much in the first nine months of 2011 compared with 2007 - when it bought the facility - in part because low prices made the unit more competitive.

    CMS said it had canceled a proposed new coal plant last month and was looking to suspend operations at seven smaller coal units owing to cheaper gas and the cost of retrofitting coal plants to meet proposed federal environmental regulations.

    With demand dropping for thermal, or steam coal, used in power plants, coal company shares have been hard hit over the past year.

    Shares of Alpha Natural Resources fell 65 percent last year and Peabody Energy slumped 48 percent, even as producers ramped up their output of metallurgical, or coking coal, to meet growing demand from steelmakers in Asia.


    And as the cost of running a coal plant is set to increase with new regulations, so is the price of coal, as more is exported to India and China and U.S. coal is exposed to global mining concerns as well as price competition.

    "If a customer comes and says, 'My demand is rising and I need to build a new plant', we tell them to build gas," Zenker of Barclays Capital said.

    "You would need to see gas prices rise above $9 for a new coal plant to be competitive over the life cycle of the plant."

    Still, power generators in regions that have already switched over to burn more gas in the U.S. Northeast and Southeast will keep some coal in the mix.

    Coal-fired generation in the first 19 days of January in the Southeast dropped by more than 65,000 gigawatt hours, or 31 percent, versus a year earlier, even after stripping out the effects of weather, according to energy data provider Genscape.

    But natural gas prices, while low now, have historically been volatile and are expected to creep higher in coming years.

    Southern Co, with a portfolio of 42,000 MW of electric generating capacity across the South, has slowly transitioned to using more natural gas.

    Four years ago, 70 percent of its electricity generation came from coal, a spokeswoman said. By the first quarter of 2011, that was down to around 51 percent, with the difference made up by natural gas.

    The company expects its coal use to drop close to 40 percent by 2020, but says because the United States has such abundant coal resources, the fuel will not be kept out of the generation mix.

    It will rely on a new technology that is to generate electricity "from coal with an emission profile comparable to a natural gas plant".


    • The proportion of gas that Dominion Resources electricity generating unit Dominion Generation used for power generation rose from 13.5 percent to 17.7 percent last year compared to 2010, with coal falling by the same amount, CEO David Christian said.


      • I didn't see this posted:
        FirstEnergy closing 6 coal-fired power plants

        They are shutting down 2.7GW of coal fired generation. But it looks like 5 of those plants were already running at 0% capacity. And they are peaker units. Still, for them to give up on these assets is a big deal. We can probably expect more announcements from other utilities in the near future.
        I've noticed that Canada is also shutting in coal plants.


        • Originally posted by muzd View Post
          I didn't see this posted:
          FirstEnergy closing 6 coal-fired power plants

          They are shutting down 2.7GW of coal fired generation. But it looks like 5 of those plants were already running at 0% capacity. And they are peaker units. Still, for them to give up on these assets is a big deal. We can probably expect more announcements from other utilities in the near future.
          I've noticed that Canada is also shutting in coal plants.
          Midstaters increasingly switch from oil to gas, spurred by low prices and fall flooding


          • You mean coal to gas?
            Options - A good way to not get your head ripped off ;-)


            • Barged CAPP coal contracts sell off for third straight session

              Washington (Platts)--2Feb2012/548 am EST/1048 GMT

              Barge-delivered Central Appalachian thermal coal prices fell for the third consecutive session Wednesday, as the NYMEX March natural gas futures contract lost 12.1 cents to $2.382/MMBtu.

              Over the past three sessions, the CAPP barge prompt quarter contract fell 6.3% to $59.50/st, while the March natural gas futures contract fell 13.6% over the same period.

              Gas and coal prices have become increasingly correlated of late as low gas prices have led to the displacement of coal-fired power generation. With gas prices trading near a 10-year low, power plants are favoring natural gas over Central Appalachian coal.

              The CAPP rail (CSX) prompt quarter contract fell 3.9% in the same interval, settling at $58.80/st. Barge contracts accounted for nearly all of the day's trading volume in the CAPP market, including term trades as far out as Q2 2013. Prices settled below their intraday highs, as natural gas prices fell further into negative territory in the afternoon session.

              In CAPP barge, Q2 2012 traded at $59.50/st for five barges and at $59.75/st for five barges three times. Platts assessed the term at $59.50/st, down 75 cents/st.

              Q2 2012 over Q1 2013 traded at a discount of $6.50/st for five barges.

              Q4 2012 traded at $63.75/st for five barges. The Q4 2012 strip traded in better volume on Tuesday, transacting in a range of $64.50-$65.50/st, totaling 30 barges.

              Q4 2012 over Q1 2013 traded at minus $2.20/st for five barges.

              Q1 2013 traded at $66/st for five barges three times, at $66.25/st for five barges and at $65.75/st for five barges.

              The infrequently traded Q2 2013 contract traded at $67.50/st for five barges and at $68/st for five barges twice. The only other time this contract was seen trading was January 20, at $65.50/st for five barges. At that time, the Cal 2013 contract was trading at a near-term low of $66.75/st.

              Cal 2013 traded at $69/st for five barges three times. Platts assessed the package at $69/st, down $1.25/st.

              Separately, CSX physical March 2012 was heard to have traded at $59.25/st for one train. The contract was later offered at $59.50/st, according to a market source. Platts assessed the contract at $59.25/st, unchanged.

              CSX physical over financial Q2 2012 traded at 25 cents/st for one train over 11,000 st. The Q2 2012 physical contract was assessed at $58.80/st, down 45 cents/st.

              CSX financial Q4 2012 traded at $62.50/st for 5,000 st. The Q4 2012 physical price was assessed at $62.90/st, down 65 cents/st.

              The Cal 2013 package was assessed at $69.10/st, down 90 cents/st.

              In the Powder River Basin, 8,800-Btu/lb prices fell, with the biggest losses at the front of the curve. The front month contract was seen trading for a third consecutive day. The session also saw a couple of off-spec spread trades involving lower-sulfur PRB coals.

              PRB 8,800 physical March 2012 traded at $9.90/st for one train. The contract was seen trading at $10.50/st and $10.25/st on Tuesday. Platts assessed the contract at $9.65/st, down 60 cents/st. The front month contract is at its lowest level in at least the past nine months.

              PRB 8,800 physical Cal 2013 traded at $13.05/st for one train. The swap was heard to have traded at $12.60/st for 10,000 st and at $12.75/st for 5,000 st. Platts assessed the physical contract at $12.70/st, down 5 cents/st.

              PRB 8,800 financial back-half 2012 over Cal 2031 traded at minus $2.35/st for 40,000 st over 20,000 st.

              PRB 8,800 ex-Black Thunder March-June over PRB 8,800 financial Q4 2012 traded at a discount of 55 cents/st for one train over 20,000 st.

              PRB 8,800 ex-Black Thunder Q2 2012 over PRB 8,800 financial Q4 2012 traded at a discount of 50 cents/st for one train over 15,000 st.

              On the IntercontinentalExchange, the CAPP barge Q2 2013 futures contract was seen with a bid-ask of $66.50-$70/st, each for five barges. The offer was later lowered to $68.75/st for five barges.

              The contract was framed at $68.50-$70.25/st, each for five barges in the prior session.

              PRB 8,800 March 2012 was seen with a bid-ask of $9.85-$10.50/st, each for 10,000 st. The bid was subsequently lowered to $9.75/st, for 15,000 st.

              PRB 8,800 Q2 2012 was seen with a bid-ask of $9-$10/st, each for 10,000 st.

              PRB 8,800 Q4 2012 was framed at $10-$11.50/st, each for 10,000 st. PRB 8,800 Cal 2014 was seen with a bid-ask $13-$15/st, each for 5,000 st.

              PRB 8,800 Cal 2013 over Cal 2014 was seen offered at minus $2.10/st for 5,000 st. The spread was offered at minus $1.50/st for 5,000 st.

              --Charlie Noh,


              • HDD+CDD vs Gas Consuption 2012

                Is anyone have some data of the correleation between degree days and gas consuption (or weekly gas withdrawal) this winter and 2009, 2010, 2011 winters?


                • Prebuffo - here is HDD vs Power Demand.

                  * generation figures are bcf/week
                  ** HDD are weekly totals


                  • Originally posted by ben2008 View Post
                    Prebuffo - here is HDD vs Power Demand.

                    * generation figures are bcf/week
                    ** HDD are weekly totals
                    many many many thanks!


                    • Salem power plant could be converted to natural gas generation:

                      FirstEnergy to retire three more coal-fired power plants within its fleet:


                      • Deutsche Bank - Coal To Gas Switching = 5.6 bcfd

                        By Liam Denning

                        Cheap natural gas creates winners and losers. Coal miners fall into the latter camp, Liam Denning reports on Markets Hub. (
                        Cheap natural gas creates winners and losers. Coal miners fall into the latter camp.

                        Low-price gas encourages electricity generators to use gas-fired plants more and their coal-fired plants less. In the 12 months through November, 24.4% of U.S. electricity came from gas, against 42.8% from coal. In 2008, the figures were 21.4% and 48.2%. A decade ago, they were 17.9% and 49.8%.
                        This coal-to-gas switching is one of the few things supporting gas prices. Deutsche Bank estimates it is boosting U.S. gas demand by up to 5.6 billion cubic feet a day, equivalent to about 8% of demand. But that eats into coal demand. Friday, Alpha Natural Resources became the latest coal miner to announce cutbacks to cope.

                        Unfortunately for miners, there is ample scope for gas-fired plants to work harder. The legacy of the late 1990s' "dash for gas" remains. Nationwide, 39% of generating capacity is gas-fired, versus 31% for coal, says Morgan Stanley, yet gas-fired stations are used far less than ones burning coal.
                        Coal miners have had a few breaks go their way. The delay to implementation of new pollution rules—which would force some coal-fired plants to shut altogether—provides some breathing room.

                        But just as gas inventories have ballooned, taking prices down, so coal stockpiles are starting to rise. Current inventories equate to about 65 days of demand, 4% above the five-year average, according to UBS. Exports help mitigate that, in an echo of what is happening in the oil market amid weak domestic demand. But about half of U.S. coal exports go to Europe, where demand isn't exactly booming.

                        Consequently, Central Appalachian coal prices have fallen 15.4% so far this year, almost exactly in line with gas's decline. That looks like a race to the bottom to preserve market share. Miners must hope gas producers finally blink and scale back their output.


                        • 2012 new power capacity in the U.S

                          New coal gen: 4,467MW
                          Retiring Coal gen: 1,863MW
                          Total increase in coal capacity this year: 2,604MW

                          New nat gas gen: 4,960MW
                          Retiring nat gas gen: 667MW
                          Total increase in gas capacity this year: 4,293MW


                          • Barclays Capital analysts:
                            Coal to gas switching is limited by a variety of factors (including the number of power plants that can burn gas): thus we believe annual average coal displacement in the eastern power markets will be capped at about 5 Bcf/d on an annual average basis in 2012. The Mid-Atlantic and Midwest regions have the largest installed base of coal-fired units, but idling coal is limited by spare gas-fired capacity. The Midwest and Gulf states could contribute another 3 Bcf/d, followed by the West at 2 Bcf/d.
                            However, the full 10 Bcf/d of coal displacement will not be needed to balance the gas market. Relative to 2008, we estimate coal displacement in 2012 to average 5.9 Bcf/d.


                            • Genscape: U.S. coal consumption fell 6 pct last week from the previous week and was down 13 pct from the same week a year ago.


                              • IT'S DARK DAYS FOR COAL AND POWER SECTORS (Another 14% of coal-fired capacity might be switched off)

                                IT'S DARK DAYS FOR COAL AND POWER SECTORS
                                By SPENCER JAKAB
                                Dow Jones

                                To the uninitiated, "dark spreads" sound unpleasant—like ugly splotches found on mens' shirts on a muggy day. And right now, they aren't even fun for executives in the coal and power industries, especially as unseasonal warmth makes them sweat.

                                In those industries, the bigger the dark spread, the better since these are a measure of the wholesale margin power plants earn by burning coal. These spreads have shrunk or turned negative amid a glut of natural gas and waning electricity demand.

                                Thursday's weekly reports on power generation and rail transport from the Edison Electric Institute and American Association of Railroads, respectively, will likely add to the gloom. Year-to-date, U.S. electricity generation and the volume of coal transported by rail were off by 5.4% and 7%, respectively, compared with a year ago.

                                After a brief golden period, coal-fired power has faced a perfect storm since 2008. Looming environmental rules, sharply lower gas prices and a collapse in electricity prices have made dozens of mostly older coal plants uneconomical or not worth upgrading. Coal's share of power generation is at its lowest since 1979. Another 14% of coal-fired capacity might be switched off in favor of natural-gas turbines this year, according to Barclays Capital. These woes are specific to the U.S. In the next five years, Peabody Energy expects global coal demand to grow by more than a billion tons, mostly from China and India. That is more than the U.S., the largest holder of reserves, produces in total.

                                But U.S. coal producers can't easily tap into that vein. Most extra demand will be satisfied by shipments from places like Australia and Indonesia, even if some excess U.S. thermal coal supply is now entering the global market. New export facilities on the Gulf and West Coasts may help but won't fully replace lost domestic demand.

                                Reflecting this, big U.S. coal producers Peabody and Arch Coal have bought assets abroad or diversified into different varieties of coal, such as that used in steelmaking. Still, if natural-gas prices remain anywhere near current decade lows, it will be hard for domestic mines to recover.

                                With most of America's coal far from the coasts and far more costly to transport than extract, the outlook is growing darker.