As U.S. power generators continue to retire coal plants, the existing fleet is running at capacity factors well below the maximum output of the plants.

The annual weighted capacity factor of the U.S. coal fleet — net generation as a percent of operating capacity multiplied by the number of operating hours — has hovered just above 50% since 2015, according to an S&P Global Market Intelligence analysis. The U.S. Energy Information Administration suggests that while unweighted coal capacity factors ticked upward slightly in 2018, the improvement was by less than one percentage point.

Operating a large coal-fired power plant at a lower capacity is generally more expensive and can be trying on the plant itself, particularly for older units. Una Nowling, the service area leader for fuels and reliability planning at engineering firm Black & Veatch Corp. said at a recent coal industry conference that her analysis of past coal plant retirements suggests a lower capacity factor is a strong indicator of a potential retirement.

"They're not actually getting rid of less efficient units," Nowling said. "They are getting rid of units that have low capacity factors. They're operating more in the lower megawatt range than they were designed for."

Coal plants were utilized at a capacity factor of about 57.1% in January of this year, compared to 64.3% in January 2018, according to EIA's data. February utilization, the latest month available, was at 50.7% compared to 49.3% in the prior year.

While some in the coal sector are offsetting part of the lost domestic customer base with exports, seaborne demand can be volatile and there is little sign weakening markets at home will improve. Union Pacific President and CEO Lance Fritz noted the rail provider's coal customers are unlikely to see much improvement after a year in which coal generation made up just 27.4% of U.S. electricity generation.

"We think that, as we look forward, that business is in long-term secular decline, but I don't think it's going to be dramatic," Fritz said.

With the number of coal plants closing, producers are closely watching the capacity factor of the U.S. fleet. While some once suggested utilization rates might present an opportunity, particularly if gas prices rise, others are analyzing the figure for indications about the long-term viability of their customers.

Consol Energy Inc. wrote in one of its recent security filings that it targets multiyear contracts with utilities that are "economically positioned to continue operating for the foreseeable future." In 2018, the coal miner said it delivered less than 1.5% of its coal to domestic power plants that have announced retirement plans.

"Moreover, none of our top twelve customer plants, which accounted for 88% of our domestic coal shipments in 2018, have announced plans to retire in the next five years," Consol's filing states. "These top plants operated at a 12% higher weighted average capacity factor than other [Northern Appalachia coal basin] rail-served plants in January-October 2018, highlighting their economic competitiveness in the challenging power markets. Since 2012, the company has increased its market share at these twelve plants from 10% to 42%."

On a recent Xcel Energy Inc. earnings call, Leslie Glustrom, an environmentalist activist once arrested over a protest of Peabody Energy Corp., said that while she supports coal plant retirements, she would also just like to see existing plants run at a lower utilization rate. That, she urged, would reduce a plant's carbon dioxide emissions and leave the plant in place for reliability/resiliency concerns during extreme weather events.

"Use them less often," Glustrom told executives, who thanked her for prodding them along the path to reducing carbon dioxide emissions. "Keep them around for what I'd call the 5-day blizzard or the bomb cyclone or whatever it is."

The idea may not be far-fetched. Speaking at the Eastern Fuel Buyers Conference earlier this month, Randy Hubbert, Southern Co.'s integrated resource plan manager, said the company is internally considering a step further: putting some coal plants into "inactive reserve" in the event of something like a physical attack or cybersecurity threat.

"While we may have made a decision that is not economical to continue to operate, maybe it is a good decision to not retire it," he said. "We'll place it on active reserve. It will minimize spending at the facility but in the event something of that magnitude is to happen, we can have this facility back up and running to meet the needs of our customers."