Transcript Outlook for Coal Demamd

Petroleum Coke in the U.S. Power
Generation Sector
Stan Kaplan
Electric Power Division, Energy Information
Administration
202-287-1803
[email protected]
McCloskey Group
2nd Annual Petroleum Coke Conference
July 19 & 20, 2004 Houston, TX
1
Key Points

Petcoke is a small but growing power generation fuel.

Positives:


Negatives


High heat content, low ash, low price
High sulfur content, price volatility
Power industry trends working in favor of petcoke:

Increased use of flue gas desulfurization (scrubbers).

Cost minimization, especially at new solid fuel plants.

Quality trends for some US coal types
2
Market Position and Recent
Trends
3
Petcoke’s Role in the Power
Market



Because of its combustion properties and (often) its
grind characteristics, petcoke is typically burned in a
blend with coal in conventional pulverized coal
boilers. The blending percentage may be about 10%
to 20%.
The larger and more geographically diverse the coal
market, the larger the opportunities for petcoke.
Special-design pulverized fuel boilers, fluidized bed
boilers, or gasifiers can be designed to use a much
higher percentage of petcoke, or 100% petcoke.
4
Fuel Mix for Generation – Petcoke Benefits from
Coal’s 50%+ Share
Power Generation by Fuel Type,
2003 Preliminary
RENEWABLES
9%
OTHER
0.2%
PETCOKE
0.4%
PETRO LIQUIDS
2.6%
NUCLEAR
19.8%
NATURAL GAS
16.4%
COAL
51.2%
5
Consumption of Petcoke for Power
Generation Has Been Growing
CONSUMPTION OF PETCOKE BY POWER GENERATORS
8,000,000
SHORT TONS
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
ELECTRIC POWER SECTOR
INDUSTRIAL/COMMERICAL CHP
6
TOTAL
Independent Power Producers (IPPs):
Largest Power Sector Users of Petcoke
CONSUMPTION OF PETCOKE BY ELECTRIC UTILITIES AND
INDEPENDENT POWER PRODUCERS
4,000,000
SHORT TONS
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
UTILITY
7
IPP
Largest Power Sector Users of Petcoke, 2003
Ten Largest Users of Petcoke, Power Generation
Facilities, 2003 Preliminary
Tons -
200,000
400,000
600,000
800,000
Northside
12%
St Johns River
9%
D B Wilson
9%
Nelson Industrial Steam
8%
Seminole
8%
R D Green
6%
AES Deepwater
3%
Yellowstone Energy LP
Allen S King
Green Bay West Mill
1,000,000
% of National
Total
3%
3%
2%
8
Petcoke Consumption by Power
Generators, 2003 Preliminary
Thousands of
Short Tons
9
Factors Impacting Market Outlook
1.
2.
3.
4.
5.
Coal Market Growth
Cost Minimization
Coal Quality Trends
Price Volatility
Scrubbed Generating Capacity
10
Coal Plants are Running Harder
Coal Plant Capacity Factor, 1989 - 2003
0.75
Capacity Factor
0.7
0.65
0.6
0.55
0.5
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
IPP
Total Electric Power Sector
11
Near Term: Coal Consumption is Growing
(Unsteadily)
ANNUAL GROWTH IN COAL DEMAND, ELECTRIC POWER
SECTOR
30
27
MILLIONS OF TONS
25
22
20
15
10
5
2
0
2003
Source: EIA, Short-Term Energy Outlook, June 2004;
Electric Power Monthly, March 2004
2004
12
2005
Long-Term: Coal Consumption Grows
Assuming Current Laws and Regulation
PROJECTED INCREMENTAL COAL
CONSUMPTION, ELECTRIC POWER SECTOR
PROJECTED COAL CONSUMPTION, ELECTRIC
POWER SECTOR
180
MILLIONS OF SHORT TONS
MILLIONS OF SHORT TONS
1400
1200
1000
800
600
400
200
160
140
120
100
80
60
40
20
0
2002 - 2010
0
2002
2010
2015
2020
2010 - 2015
INCREMENTAL CONSUMPTION
13
2015 - 2020
Cost Minimization


Recent and planned solid fuel plants tend to have
“special characteristics” that reduce capital and/or
operating costs:
 Low cost fuels, including petcoke.
 Fuel flexibility of circulated fluidized bed boilers.
 Brownfield sites or refurbished equipment.
 Minemouth locations.
 Government-contributed funding.
Appears that developers pursuing solid fuel projects
want a cost edge. Petcoke is a low cost fuel.
14
Cost-Cutting Factors for Recent and
Planned Solid Fuel Units
PLANT
MW
PRIMARY
FUEL
Northside
600
Petcoke
Marion
120
BIT and
Waste Coal
Seward
520 Waste Coal
Spurlock Gilbert
268
BIT
Springerville 3
400
SUB
Hardin
109
SUB
Cross 3 & 4
1144
BIT
Thoroughbred 1400
BIT
Prairie State
1400
Indeck-Elwood 618
Prairie Energy
85
WASTE
FUEL
OPTION
BROWNFIELD
OR USED
EQUIPMENT





STATUS
CFB
FEDERAL
OR STATE
FUNDS



OP









BIT
OP
OP IN '04
CONSTR
CONSTR
CONSTR
CONSTR


BIT
BIT and
Petcoke
MINEMOUTH

PLANNED
PLANNED



15
PLANNED

PLANNED
Coal Quality




Utility receipts data shows a possible decline in coal heat
content from northern and central Appalachia, and
increase or no improvement in ash content.
Possible explanations include reserve/production factors,
or quality choices by buyers.
Increase in heat content from Powder River Basin
reflects generator preference for highest-btu coal.
Lower btu coal in the east, and preference for higher btu
coal from the west, may enhance the market for petcoke
as a coal blend “btu booster.”
16
Coal Quality: Northern Appalachia
UTILITY QUALITY TRENDS: NO. APPALACHIA
14,000
16.0
14.0
13,000
12.0
12,000
10.0
BTUS/LB 11,000
8.0
ASH % OR
LBS SO2/MMBTU
6.0
10,000
4.0
9,000
2.0
8,000
1975
1980
AVG BTU
1985
1990
1995
2000
AVG LBS/SO2
17
2003
AVG PCT ASH
Coal Quality: Central Appalachia
UTILITY QUALITY TRENDS: CENTRAL APPALACHIA
13,000
12,500
16.0
14.0
12,000
11,500
11,000
12.0
10.0
BTUS/LB 10,500
10,000
9,500
9,000
8.0
8,500
8,000
2.0
ASH % OR
LBS SO2/MMBTU
6.0
4.0
1975
1980
AVG BTU
1985
1990
1995
2000
AVG LBS/SO2
18
2003
AVG PCT ASH
Coal Quality: Powder River Basin
UTILITY QUALITY TRENDS: WYOMING (PRIMARILY
POWDER RIVER BASIN)
9,200
12.0
9,000
10.0
8,800
8.0
BTUS/LB 8,600
6.0
8,400
4.0
8,200
2.0
8,000
1980
1985
AVG BTU
1990
1995
2000
2003
AVG LBS/SO2
19
ASH % OR
LBS SO2/MMBTU
AVG PCT ASH
Petcoke Quality
UTILITY QUALITY TRENDS: PET COKE
15,000
9.0
14,000
8.0
7.0
13,000
6.0
12,000
5.0
ASH % OR
4.0 LBS SO2/MMBTU
BTUS/LB
11,000
3.0
10,000
2.0
9,000
1.0
8,000
1975
1980
AVG BTU
1985
1990
1995
AVG LBS/SO2
20
2000
2003
AVG PCT ASH
Price Volatility



Over the medium term, petcoke
delivered price movements mirror coal.
However, short-term variations in
petcoke prices can be extreme.
Longer-term agreements with price
stability would probably work to the
advantage of petcoke.
21
Medium-Term Price Trends for
Coal and Petcoke
MEDIUM TERM CHANGES CHANGES IN
DELIVERED PRICES TO UTILITIES
60%
40%
20%
0%
-20%
-40%
-60%
1975 - 1980 1980 - 1985 1985 - 1990 1990 - 1995 1995 - 2000 2000 - 2003
NO. APP.
CENTRAL APP.
22
WYOMING (PRB)
PET COKE
Recent Coal Price Trends
Coal Price Trends, 2001 - 2004
$70.00
$ per Short Ton
$60.00
$50.00
CAPP
$40.00
$30.00
NAPP
$20.00
$10.00
PRB
Northern Appalachia
Central Appalachia
Source: Platts Coal Outlook
23
Powder River Basin
6-2004
4-2004
2-2004
12-2003
10-2003
8-2003
6-2003
4-2003
2-2003
11-2002
9-2002
7-2002
5-2002
3-2002
1-2002
11-2001
9-2001
7-2001
5-2001
3-2001
1-2001
$0.00
Petcoke Price Volatility
SPOT PRICES FOR PETCOKE,
JULY 2002 - JUNE 2004
$30.00
$ PER TONNE
$25.00
$20.00
$15.00
$10.00
$5.00
Ju
l-0
2
Se
p02
N
ov
-0
2
Ja
n03
M
ar
-0
3
M
ay
-0
3
Ju
l-0
3
Se
p03
N
ov
-0
3
Ja
n04
M
ar
-0
4
M
ay
-0
4
$-
US GULF COAST 6 - 6.5% S
Source: Platts International Coal Report
24
VENEZUELA 4% S
Scrubbed Generating Capacity



Scrubbed generating capacity (almost all
coal-fired) has increased by 42 percent since
1991.
EIA estimates another increase of about 20
percent is in the pipeline.
Scrubbed (or fluidized bed) units are, other
factors being equal, especially suitable for
high-sulfur petcoke.
25
Trends in Scrubbed Capacity
MW of Scrubbed Capacity
Installed Scrubber Capacity
120,000
100,000
80,000
60,000
40,000
20,000
0
91 992 993 994 995 996 997 998 999 000 001 002
9
1
1
1
1
1
1
1
1
1
2
2
2
26
EIA estimates
that generators
have firm plans
to install
scrubbers on
another 23,000
MW of
generating
capacity.
Conclusion


Several market factors appear to be working to the
benefit of petcoke growth in the power market:

Growing use of coal.

Generator efforts to cut costs.

Increased use of SO2 scrubbers.

Possible quality issues with some coal types.
Price volatility is likely to be a concern to some
potential users.
27