Thursday, February 20, 2014

Key Fact: Coal Plants Average A 56% Capacity Factor And That Surprising Fact Has Major Implications

A common misperception is that coal plants operate around the clock at maximum output and so have high capacity factors of 90% or more.  While the perception that coal plants have high capacity factors is common, the facts are quite different.

Coal plants across the United States had an average capacity factor of just 56% in 2012.

Why is the average capacity factor of coal plants well below 90%?  Forced or unplanned outages, scheduled maintenance outages, and economics. Coal plants often do not run, because their operating or production costs are more expensive than alternative sources of generation--wind, solar, nuclear, geothermal, and natural gas in 2012, when spot natural gas prices averaged an incredibly low $2.77 per thousand cubic feet.

As EIA reports, the capacity factor of the 10,214 megawatts of coal plants that were retired in 2012 averaged just 35%. The coal plants that run least are the ones that are the oldest, smallest, and highest production cost.

As the least competitive plants retire, the average capacity factor of the remaining coal fleet will marginally improve.  Rising natural gas prices almost certainly lead to higher coal plant capacity factors in 2013 and 2014, as coal plants displaced natural gas generation to a degree.

Paradoxically, even though about 20% of the coal fleet will retire in the next few years, coal consumption may well not fall and could even increase, as the capacity factors of the remaining coal plants could rise.  Simply put, in the next 5 years, America will have fewer coal plants, but the remaining plants may well run more.

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