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Electricity Monthly Update

With Data for May 2017  |  Release Date: July 25, 2017  |  Next Release Date: August 24, 2017

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Highlights: May 2017

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Coal and natural gas operating heat rates to generate electricity diverge from 2006-15

A heat rate is the ratio of chemical energy in a fuel, measured in British thermal units (Btu), to the electric energy that is generated from that fuel, measured in kilowatthours (kWh). As shown below, the average operating heat rate of coal-fired power generation rose slightly from 2006 to 2015, while the average operating heat rate of natural gas-fired electric power decreased slightly. The underlying causes in this divergence reflect a fundamental shift in the mix of fuels used to generate electricity.

Source: U.S. Energy Information Administration, Form EIA-923, Power Plant Operations Report

The slight rise in the average operating heat rate in coal-fired generation is attributable to the net result of competing factors. Emissions-control investments, which often create significant station loads, were made to almost 205,000 MW of coal capacity from 2006 to 2015. These emissions-control measures increased the operating heat rates for coal-fired generation.

Mitigating this heat rate increase for coal-fired generation was the net effect of adding 19,451 MW of new coal generating capacity while retiring 43,078 MW of existing coal capacity. Coal units installed between 2006 and 2015 had a weighted-average design heat rate of 9,665 Btu/kWh, which is much more efficient than the 10,192 Btu/kWh weighted average design heat rate of existing coal units. In contrast, coal units that retired over this period had a weighted average design heat rate of 10,343 Btu/kWh, which is less efficient than average. However, on balance, the factors that drove heat rates up for coal units outweighed the factors that drove them down.

In contrast, natural gas-fired generation saw a slight decrease in its average operating heat rate. This efficiency gain was driven by several important factors, some of which acted to increase operating heat rate, while others served to lower it. Unlike coal, natural gas has two distinct, significant types of electricity-generating technologies: combined cycle and simple cycle. Combined-cycle systems are significantly more efficient than simple-cycle systems. In 2015, natural gas-fired combined-cycle technology operated on average at an operating heat rate of 7,340 Btu/kWh. In contrast, simple-cycle natural gas-fired generators operated at heat rates of 9,788 Btu/kWh. In 2006, combined-cycle systems accounted for 75% of total natural gas-fired generation. By 2015, this share had increased to 85%. The increased use of a more efficient technology resulted in a much lower overall average operating heat rate for natural gas-fired units.

Another factor that lowered the operating heat rates of natural gas-fired units is similar to one that affected the coal heat rates: the addition of new units, which, on average, have significantly lower heat rates than existing units, and the retirement of older, less-efficient units. In 2006, the average combined- cycle operating heat rate was 7,492 Btu/kWh. By 2015, the average operating heat rate of these systems was 7,340 Btu/kWh. More than 57,944 MW of combined-cycle capacity, with a weighted average design heat rate of 7,029 Btu/kWh, was added between 2006 and 2015. In addition, 33,961 MW of natural gas capacity, with a weighted average design heat rate of 11,218 Btu/kWh, retired during that period. This exchange resulted in a lower average natural gas-fired heat rate.

Unlike the coal sector, emissions investments in natural gas-fired units were made only about 8.5%, (37,488 MW) of the sector. As a result, the influence of emissions investments on operating efficiency was less significant for natural gas-fired units than for coal-fired units.

Principal Contributor:

Glenn McGrath

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