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Coal-fired power generation in PJM could see brief 2021 comeback

Highlights

Higher 2021 gas prices could boost coal power economics

Coal challenged longer term; nuclear plant uncertainty

New York — PJM Interconnection coal-fired power generation could recover from recent low levels in 2021 with an anticipated natural gas price resurgence that would improve coal generation economics, but then coal use could taper off again, S&P Global Platts Analytics said.

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"A resurgence in gas price in 2021 brings coal back into the mix, forecast to grow 22% year over year (bear in mind that year-to-date, coal-fired generation has struggled immensely)," Platts Analytics said in an Aug. 4 research note.

PJM's fuel mix currently consists of about 20% coal and about 43% natural gas, according to ISO data.

Platts Analytics forecasts PJM loads will slightly increase in calendar year 2021, reflecting a recovery from the expected 3% year on year declines seen this year.

However, in 2022 and beyond, analysts forecast electricity demand will be flat-to-declining, as gains in energy efficiency and behind-the-meter solar will offset growth from sources of underlying energy consumption.

Gas prices at major PJM hubs could increase in 2021 and 2022 before tapering off as balances loosen with expected higher dry gas production, Platts Analytics said.

"As such, power prices across the PJM footprint follow this trend, falling from the $35/MWh range in 2021 (on-peak) to around $30/MWh by 2025," according to the research note.

Gas-fired generation is expected to steadily increase in 2022 and 2023, at the expense of coal-fired generation which is expected to decline nearly 10% per year in that time frame, the analysts said.

However, PJM's future power generation picture is clouded by uncertainty surrounding the Perry and Davis-Besse nuclear plants in Ohio that were saved by House Bill 6 in 2019.

That legislation has been swept up in bribery allegations and should the law providing subsidies to the plants be repealed or replaced, the outcome could favor gas-fired generation in the region, Platts Analytics said.