Utilities are burning less coal than they previously expected, a survey the US Surface Transportation Board conducted shows.
During a Rail Energy Transportation Advisory Committee hearing Tuesday in Washington, committee member John Carr, the vice president of strategic planning at Dairyland Power Cooperative, presented results of a utilities survey conducted in September with the National Coal Transportation Association.
In it, 71% of surveyed utilities said their coal-fired generation was below forecasted totals. Another 29% of utilities said coal-fired generation was similar to forecasts, while none said their coal-fired generation was above forecasts.
Dennis Rackers, another committee member and director of fuels and materials management at Northern Indiana Public Service, said his utility is expecting a 25% decline in coal consumption this year, with volumes decreasing to 5.1 million st from 6.8 million st. He noted coal consumption would have dropped even more if the Midcontinent Independent System Operator did not dispatch some coal units as "must-run" to test emission controls.
Increased natural gas generation is the main driver for the coal-burn reduction, Carr said, noting that coal is playing less of a "baseload role" for utilities and serving more in an "intermediate dispatch role."
A majority, or 65% of utilities said coal generation was lower than a year ago, with 29% reporting similar coal generation as last year and 6% reporting more.
Less burn has increased coal stockpiles, with 65% of utilities reporting stocks above 2014 levels, 24% reporting similar inventories and only 12% reporting smaller coal stocks.
As of September, 18% of utilities said they had coal stockpiles of more than 70 days of burn and 35% said they had 50-70 days of burn.
The decline in coal burn has made ratable, or consistent, rail delivery "a challenge [for utilities] in this environment," Carr added. "We see the need for a flexible delivery system that can rapidly respond to dynamic demand for coal in gas versus coal economics. This means up or down."
Committee members noted power plants have a limit on how much coal can be stored on-site, with some facilities facing fines if inventories exceed permitted levels.
Rob Hardman, the co-chairman elect of the committee and vice president of coal supply at Dynegy, said the years of steady thermal coal demand have now passed because of other options for utilities including "wind, solar or natural gas that really challenges the underpinning design of the entire supply chain that was put together years ago."
Committee member Donna Cerwonka, assistant vice president of southern utility coal for CSX, said railroads work with utility customers on coal delivery options, but there's only so much the railroads can do.
"This challenge is not just one individual customer," Cerwonka said. "Typically, when one customer is looking to increase their shipments, everybody is because it's a response to market conditions."
