US Midcontinent ISO coal supplies ahead of winter are better than last year: grid officials

Coal supplies for power plants heading into winter are looking better this year than last year in the Midcontinent Independent System Operator, which is good news because coal conservation measures can put added upward pressure on power prices, MISO officials said Dec. 6.

"As of right now, we are not seeing a risk around fuel supply from a coal perspective," said J.T. Smith, executive director of market operations at MISO. "I am not as concerned as I was at this time last year," he told the Markets Committee of the MISO Board of Directors.

Despite better coal supplies, MISO Illinois Hub average on-peak wholesale power prices are still expected to be 48% higher from December to February compared to the same period last year, the US Energy Information Administration said in its December Short-Term Energy Outlook.

Natural gas prices are expected to push up power prices across the US this winter. While natural gas prices are projected to be lower this winter than they were last summer, they are still expected to be higher than they were last winter, according to EIA.

Coal conservation

MISO started out the summer with about 20 GW of coal-fired generators using conservation measures, and by Nov. 15, that number was down to about 8 GW, said David Patton, the president of Potomac Economics, the independent market monitor for MISO.

What tends to happen is when natural gas prices are high, coal-fired plants are more economic and run more often, Patton said. If coal supplies are running low, coal-fired plants can increase their prices to conserve coal, which can change the supply stack and meaningfully increase power prices, he said.

But recent developments, including falling natural gas prices and improvements to the coal supply chain, are leading to less coal conservation, Patton said. "Certainly, the fact that we are apparently going to avoid a rail strike is really good news from the perspective of coal supply," he said.

Nationwide, US power sector coal inventories are projected to be 95 million st in December, up from 92 million st in December 2021, EIA said.

Easing constraints

Coal supply constraints eased this fall, as railroads were able to provide more capacity on routes that serve multiple units in MISO, the IMM said in a presentation. "Several resources eliminated coal conservation measures entirely," the presentation said.

The fact that coal-fired generators are conserving less coal this fall going into winter is an indicator that they are comfortable with their supplies, Smith said.

But while a strike was averted and deliveries have improved, there are still issues in the coal supply chain, Smith said.

"There is still tightness at the mines, there is still tightness along the rails," he said. Chemicals for pollution controls are also a limiting factor because generators only keep several days of chemical supplies on hand, he said.

MISO's reliance on coal-fired power has gone down in recent years. In the winter of 2018-2019, coal accounted for 47% of the fuel mix, and in the winter of 2021-22, coal dropped to 35% of the fuel mix. Over the same period, gas-fired power grew from 25% to 29% and wind grew from 9% to 18%, the presentation said.

The change in the winter resource mix is largely due to retirements of coal-fired plants and the growth of wind power on the system, Smith said.