Cheap natural gas crowding out coal on Texas grid
- Coal power is being crowded out of the Texas generation mix by cheap natural gas and wind power, Argus Media reports. Whereas coal provided 39% of power to ERCOT's grid in the first three months of last year, it provided only 26% this year.
- Natural gas prices at the west Texas Waha hub fell to an average in April of $2.41 per mmBtu, a 46% decrease from the year before, according to Argus. $3 per mmBtu is generally accepted as the price where gas can edge out coal generation.
- In March, Texas coal generators produced 5.6 GWh of electricity, the least in a decade. During the same period a year earlier, utilities in the state produced 9.3 GWh of coal-fired electricity.
In March, up to 16 of the state's 32 coal power plants were offline "during a good portion of the month due to planned outages or forced outages, or presumably economics," ERCOT's independent market monitor said.
The trend of lower utilization of coal plants continued for the rest of the quarter, driven by low prices for wind and natural gas power. A state regulator told Argus that the changing economics of the generation landscape are relegating coal to a seasonal role.
"Coal plants increasingly are becoming more seasonal, with more gas being dispatched and more renewables on the system," said Texas Public Utility Commissioner Ken Anderson. "All those things are driving coal off except in summer when we need it."
The trend of lower coal burn is expected to continue into the second quarter, Calpine CEO Thad Hill told investors on a call. EPA mercury and carbon emissions are also expected to play a role, with between 3 and 8.5 GW of coal retirements expected in the next decade in the state.
Last year, wind generation provided 10.6% of the electricity used by ERCOT. Natural gas plants topped the Texas generation mix in 2014, generating 41% of the state's electricity. Coal was second at 36%, and nuclear was third at 12%.
Follow Gavin Bade on Twitter