Coal / Energy

Coal’s ‘aging out’ problem: Most US customers operating older power plants

NEW YORK, NY — “U.S. coal production paused a yearslong, sharp decline through most of 2017, but the sector still faces the challenges of a rapidly aging customer base.

Nearly 70% of the coal delivered in the 12-month period that ended Oct. 31, 2017, went to coal-fired power plants that were at least 38 years old, according to an S&P Global Market Intelligence analysis of U.S. Energy Information Administration data. About 55.2% of coal deliveries reported to the EIA were delivered to coal plants that are between 38 and 54 years old.

While coal producers enjoyed a boost from export markets in 2017, coal plant retirements have continued at a steady pace. Meanwhile, the existing fleet has been used less, as low natural gas prices and other competing sources of energy have kept a tight lid on thermal coal demand in the U.S.

Joe Aldina, director of U.S. coal at PIRA Energy Group, an analytics and forecasting unit of S&P Global Platts, called it the sector’s “aging out” problem. A “big chunk” of the coal fleet will only be able to reliably operate for another 10 to 15 years, he said. Meanwhile, operators increasingly cycle equipment on and off in response to demand, which can be tougher on a power plant.

While the average age of the U.S. coal fleet is about 39 years, only 30.2% of U.S. coal deliveries reported to the EIA went to power plants that were 37 years old or younger. There is no “magic date” for when a coal plant must retire due to its age, but a typical assumption is slightly more than 60 years of operation, said Matt Preston, research director for Wood Mackenzie’s North America thermal coal markets.”

—  Taylor Kuykendall, S & P Global 

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