Highlights: March 2022

• Electricity system daily peak demand fell in all regions from February to March.

• Wholesale natural gas prices reached $22/MMBtu in New England.

• The Western region saw a 35.2% increase in hydroelectric electricity generation compared to last March.

Key indicators

Spot deals and shorter duration contracts account for a growing share of generators’ coal purchases

Source: U.S. Energy Information Administration, Form EIA-923, Power Plant Operations Report.
Note: Coal receipts are for plants with 50 megawatts or greater of capacity with coal as the primary fuel. Data for 2010 through 2020 are final; data for 2021 are preliminary.

As coal consumption declined and coal retirements increased, annual power plant purchases of coal fell by 53% from 2010 (963 million short tons) through 2021 (456 million short tons). Coal buyers have increasingly switched to spot market purchases in the face of lower demand. Spot purchases are shipments of fuel purchased for delivery within one year, typically to fulfill short-term energy requirements, meet unanticipated need, or take advantage of low-fuel prices. Between 2010 and 2021, coal purchases declined by more than half, but spot purchases held steady, ranging between a low of 42 million tons in 2020 to a high of 110 million tons in 2014. As a result, spot market purchases as a percentage of all receipts more than doubled between 2010 (7%) and 2021 (14%).

Power plants will often secure a large portion of their coal needs by contract and leave remaining consumption needs to spot purchases. This flexibility allows plants to be able to take advantage of competitive pricing and account for changing generator consumption needs. Our Form EIA-923 data indicate that coal generators appear more willing to fulfill a larger portion of their coal consumption needs through spot contracts than they did a decade ago.

Source: U.S. Energy Information Administration, Form EIA-923, Power Plant Operations Report.
Note: Coal contracts are for plants with 50 megawatts or greater of capacity with coal as the primary fuel. Data for 2010 through 2020 are final; data for 2021 are preliminary.

In addition, as coal consumption has decreased and coal retirements have increased, fewer new coal contracts have been signed by electric power plants. Execution of new contracts hit a low of 65 new contracts in 2018, although it increased slightly to 99 contracts in 2019. New contracts then hit a recent low of 35 contracts in 2021. In addition, the length of a new contract has been decreasing since 2011. The average duration of new coal contracts peaked between 2015 and 2018, ranging from 34 months to 42 months in length. However, the average duration of a new coal contract decreased to 18 to 19 months between 2019 and 2020.

Emblematic of this trend toward shorter duration contracts is the reduced use of long-term contracts greater than three years in duration. The percentage of new contracts signed that were greater than 3 years peaked in 2014 at 22%. Since 2014, however, these longer duration contracts have fallen significantly and represented a low of 1% of new contracts signed in 2019. Various factors that are limiting coal-fired generation, including retirements and decreasing coal demand, are likely contributing to pushing the industry toward shorter duration contracts and increased spot purchases of coal.

• Principal Contributor:

• Name: Kimberly Weihbrecht
  Email: Kimberly.Weihbrecht@eia.gov