Petroleum Coke in the U.S. Power Generation Sector

1
Petroleum Coke in the U.S. Power Generation Sector

• Stan Kaplan
• Electric Power Division, Energy Information
  Administration
• 202-287-1803 stan.kaplan_at_eia.doe.gov
• McCloskey Group
• 2nd Annual Petroleum Coke Conference
• July 19 20, 2004 Houston, TX

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Key Points

• Petcoke is a small but growing power generation
  fuel.
• Positives
• High heat content, low ash, low price
• Negatives
• 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

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Market Position and Recent Trends
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Petcokes 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.

5
Fuel Mix for Generation Petcoke Benefits from
Coals 50 Share
6
Consumption of Petcoke for Power Generation Has
Been Growing
7
Independent Power Producers (IPPs) Largest Power
Sector Users of Petcoke
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Largest Power Sector Users of Petcoke, 2003
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Petcoke Consumption by Power Generators, 2003
Preliminary
Thousands of Short Tons
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Factors Impacting Market Outlook

• Coal Market Growth
• Cost Minimization
• Coal Quality Trends
• Price Volatility
• Scrubbed Generating Capacity

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Coal Plants are Running Harder
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Near Term Coal Consumption is Growing
(Unsteadily)
Source EIA, Short-Term Energy Outlook, June
2004 Electric Power Monthly, March 2004
13
Long-Term Coal Consumption Grows Assuming
Current Laws and Regulation
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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.

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Cost-Cutting Factors for Recent and Planned Solid
Fuel Units
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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.

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Coal Quality Northern Appalachia
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Coal Quality Central Appalachia
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Coal Quality Powder River Basin
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Petcoke Quality
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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.

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Medium-Term Price Trends for Coal and Petcoke
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Recent Coal Price Trends
CAPP
NAPP
PRB
Source Platts Coal Outlook
24
Petcoke Price Volatility
Source Platts International Coal Report
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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.

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Trends in Scrubbed Capacity
EIA estimates that generators have firm plans to
install scrubbers on another 23,000 MW of
generating capacity.
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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.