Understanding the operating costs of coal power: US example
SUMMARY
The operating costs of coal units are complex and depend on many variables. Coal units are complex, long-life assets. The costs associated with operating coal units depend on location, unit type, unit size, environmental regulation and owner strategies.
Fixed costs combined with lower running hours are devastating for coal power economics. The capital and fixed operations and maintenance (FOM) costs associated with keeping units online or compliant with environmental regulation can only be justified if operating hours are maintained. This reality poses a fundamental problem for coal generators: competition from other fuels and out-of-market incentives are reducing utilisation and thus FOM costs are being spread over a smaller number of operating hours.
By the early 2020s it could be cheaper to build new renewables than operate US coal units. While the cost profile of coal increases due to investments to maintain performance and comply with environmental regulations, the levelised cost of renewables (LCOE) is expected to decline. In the context of the US, the operating cost of coal could be higher than building new onshore wind by 2020 and solar PV by 2021.
INTRODUCTION
There are several costs associated with running coal units. These costs include: fuel, variable operations and maintenance (VOM) costs, fixed operations and maintenance (FOM) costs, annual capital additions and costs associated with installing and operating control technologies to meet environmental regulations. In this blog we breakdown the costs associated with running coal units, by using the US as an example.