Coal - The Future Of US Electricity Production
Fitch-NY-November 14, 2001: Approximately 925 million tons of coal was consumed by electricity generators in the United States in 2000, generating an estimated 51% of US electricity. Domestic electricity generators are projected to increase coal use to more than 1 billion tons by 2015 bolstering the growing demand and gaining market share at the expense of other power generators such as natural gas and nuclear generation, according to a new report from Fitch, the international rating agency.
`Going forward, coal-fired plants will supply much of the projected increases in electricity demand because they possess excess capacity that can be utilized at low incremental costs,' said Fitch analyst Randall Biang.
According to the Energy Information Administration (EIA), the average coal-fired generation plan utilization is projected to increase to 83% in 2020 from 68% in 1999. The optimal sustainable capacity utilization over time is approximately 85% for a typical coal plant.
Fitch expects that utilities with coal-fired plants will seek to meet the increased demand for electricity by using available capacity rather than by building new plants. As these units increase to the 75% to 80% utilization levels with the increased demand. The end result, an additional 150-200 million tons of coal will be needed.
Deregulation also has created a positive market for coal. Competition and market-based pricing in the electric utilities market will lead companies to utilize generating plants with the lowest fuel costs. Consequently, utilities will consume more coal as electricity generated from existing coal-fired plants is generally less expensive than electricity generated from readily available alternatives, including natural gas-fired plants.
`Coal prices are lower and more stable than natural gas. Higher prices, volatility and system growth limitations will continue to make natural gas a less attractive energy source, particularly for baseload generation,' Biang said.
The preceding comments are from the new Fitch study, `Coal Industry Fundamentals' which is available on the internet at www.fitchratings.com.
Contact: Randall Biang 1-312-606-2342, Chicago.
Media Relations: James Jockle 1-212-908-0547, New York.
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