Why capacity limits coal-to-gas switching for power generators
It’s not just price—capacity matters too
Though prices are a major determinant of the amount of coal used versus natural gas for power generation, power companies’ ability to switch from coal to natural gas isn’t solely price-based. Rather, there’s a maximum theoretical amount of switching that can occur given current infrastructure.
Interested in UNG? Don't miss the next report.
Receive e-mail alerts for new research on UNG
According to a report from the International Energy Agency (the IEA), in 2011, the maximum possible switching potential from coal to natural gas for power generation in the US was 613 TWh (terawatt hours). The agency came to this conclusion through the following:
- Total gas-generated power capacity: In 2011, the US had 415 GW (gigawatts) of gas-generated power capacity, which at 100% utilization represents 3,637 TWh of output.
- Proportion of CCGT capacity: Of the total 415 GW of capacity, about 198 GW represents open-cycle plants, which are a type of power plant that are less efficient than their counterparts, the combined-cycle gas turbine (or CCGT) plant. The IEA concludes that the open-cycle capacity is generally not likely to be used over coal—even at natural gas prices of $2.50 to $4.00 per MMBtu (million British thermal units), resulting in 1,734 TWh of potential switchable capacity.
- Maintenance factor: Because power plants may have downtime and maintenance, the IEA estimates that 85% capacity is a more realistic assumption than 100% capacity for the portfolio of natural gas power plants in the US. This further reduces the potential switchable capacity by 285 TWh.
- Current utilization of capacity: In 2011, 833 TWh of gas-powered generation capacity was already being used, so this is necessarily excluded when calculating incremental gas-powered capacity that can be used from coal-to-gas switching.
- Local factors: Also, in Arizona, a combination of relatively more expensive gas, longer-than-average coal contracts, and less efficient plants caused the IEA to determine that coal-to-gas switching was unlikely. Lastly, California has a large amount of underused gas capacity but no coal capacity to displace. Taking Arizona and California out of the equation (assuming 85% capacity utilization) takes out 171 TWh, leaving the total theoretical maximum coal-to-gas switching capacity at 613 TWh.
Another consideration is existing coal capacity that can actually switch over. There was 315 GW of coal-fired capacity in the US in 2011. The IEA estimated that of the 315 GW, 16 GW would be unlikely to shut down in favor of natural gas power generation (as it was fueled by very cheap lignite coal located close to the mine) even at gas prices of $2.50 to $4.00 per MMBtu.