The latest EIA report
The EIA (U.S. Energy Information Administration) published its latest report on capacity factors for power plants on July 27. The report includes data for May 2015. While capacity factors for both coal and natural gas plants rose month-over-month due to higher electricity demand for cooling, coal-based power plants surpassed natural gas-based power plants in utilization. Historically, coal boasted higher utilization. However, in April 2015, natural gas surpassed coal in both the utilization rate and market share.
The capacity factor for coal-fired power plants came in at 49.70% in May 2015—compared to 42.80% in April 2015. This was a 6.90% rise. During the same period, natural gas plants’ utilization rate rose by 1.90% to 49.40%. However, the capacity factor for coal fell YoY (year-over-year) while natural gas-fired power plants have seen an uptick in the utilization rate during the same period.
Impact on coal
Capacity factors for coal-fired plants fell YoY. In contrast, capacity factors for natural gas-fired power plants rose substantially during the same period. This development indicates a shift from coal to natural gas as a fuel for electricity generation. This shift is negative for thermal coal producers (KOL) like Alpha Natural Resources (ANRZ), Arch Coal (ACI), Peabody Energy (BTU), and Cloud Peak Energy (CLD).
Capacity factors are an important indicator when it comes to understanding power plants’ utilization levels. They measure how often a power plant runs in a given period. They also indicate how much maximum capacity a power plant runs at. For example, if a power plant with a capacity of 600 MW (megawatts) operates at a 50% capacity factor on a given day, it generates the electricity equivalent to what a 300 MW power plant would produce if it ran at 100%.
The EIA publishes capacity data for various fuel types every month.
Recently, we covered Walter Energy’s bankruptcy and the possibility of Alpha Natural Resources following the same path. For more interesting analysis, please visit Market Realist’s Coal page. We’ll also cover the 2Q15 earnings for US coal producers soon.