Low gas prices continue to dent coal plant economics
- Historically low gas prices continue to impact power prices and generator economics, with switching away from more-expensive coal now expected to continue this year, Platts reports.
- Platts reports from the Gulf Coast Power Association Houston conference this week, where some analysts predict gas prices could rise into the $3-range in 2017 but will likely remained mired well below that for the remainder of the year.
- Moody's Investor Services last week said consistently low natural gas prices have "devastated" the merchant power sector, threatening widespread closures of coal and even some nuclear units.
Somewhere around $2 or $2.50/MMBtu is typically where fuel switching, from coal to gas, typically occurs. But prices have below below that point for some time now, and the impact is showing up in the value of combined-cycle gas plants.
Platts reports Neel Mitra, Tudor Pickering Holt director for power and utilities, said while it may cost $1,000/kW to construct a new plant, they could sell as low as $300/kW in the Texas market. Mitra also said the United States has shuttered about 50 GW of coal capacity in recent years, and may lose another 10 GW by 2017, with the largest impacts in Pennsylvania.
Analysts, when asked to predict the prompt-month NYMEX contract a year from now, said around $3 to $3.50/MMBtu was expected.
The conference comments followed a report from Moody's last week, finding that while cheap has has been pressuring coal and nuclear generators for months now the end result could wind up being a wave of plant shutdowns, including plants in deregulated markets.
"Low natural gas prices have devastated most of the US merchant power sector because gas-fired power plants often serve as the marginal plant during times of peak power demand," the report read. "Lower natural gas prices have effectively driven down wholesale power prices for all generators, regardless of whether they are using natural gas, coal, nuclear power or renewable resources to generate their electricity."
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