September 1, 2020
Coal-fired electricity generating capacity in the United States is retiring, as tighter air emission standards and decreased cost-competitiveness relative to other power resources make coal-fired power plants less economical. From 2011 to mid-2020, 95 gigawatts (GW) of coal capacity was closed or switched to another fuel and another 25 GW is slated to shut down by 2025, based on information power plant operators reported to the U.S. Energy Information Administration (EIA). The closures will decrease the capacity of the U.S. coal fleet to less than 200 GW, more than one-third lower than its peak of 314 GW in 2011. As the coal-fired fleet is retired and remaining plants are utilized less, plant owners are evaluating new operating models, such as seasonal operation.
Although the U.S. coal-fired power plant fleet is downsizing, coal-fired plants are still an important resource to meet electricity demand, especially during peak periods. This factor was evident during the heat wave that gripped most of the United States during July and August 2020. Data from EIA’s Hourly Electric Grid Monitor show that output from coal-fired generating plants reached an hourly dispatch of 161.5 GW on July 27, 2020. Of the electricity generated on July 27 in the Lower 48 states, 24% was coal-fired. Only natural gas-fired sources held a higher share at 45%.
The coal power plant fleet is used much less during electricity’s shoulder months of spring (March, April, and May) and fall (September, October, and November). During the winter and summer months, the coal fleet operates at an average capacity factor, or utilization rate, of more than 60%. However, in the spring and fall, the average capacity factor has been less than 50%.
Seasonal differences in capacity factor have become more pronounced during the past two years, largely because coal has been displaced by cheaper generation from natural gas and renewable energy during the shoulder months. In April and May 2020, the coal fleet operated less than 30% of the time. As a result, coal plants sometimes assert that they are unable to operate for enough hours to produce enough annual revenue to cover costs.
In an effort to improve the economics of coal plants, owners are evaluating plans to run plants on a seasonal basis, when electricity demand allows for steadier operation. Under these plans, coal plants would only operate during periods of higher electricity demand, from December to February (winter) and from June to August (summer). The expectation is that completely shutting down plants when electricity demand is low will limit financial losses.
So far in 2020, four large coal-fired plants announced plans to operate on a seasonal basis. Two of the plants, totaling 1,193 megawatts (MW), are in Minnesota. The other two are a 793 MW plant in Arizona and a 645 MW plant in Louisiana. The two units in Minnesota will run during the summer and winter. The plants in Arizona and Louisiana will only operate during summer because they are located in warmer climes.
Whether or not seasonal operation sufficiently improves the economics of coal plants remains to be seen. In 2018, owners of a plant in Wisconsin and a plant in Texas switched to seasonal operation. However, the practice lasted for less than a year because both facilities were completely shut down shortly thereafter.