POWER February 2017 - 34

FUELS
Coal Fuel Contracts: A Moving
Target
In recent years, coal power generators have faced increasing difficulty predicting
annual fuel requirements due to more cycling and low-load operation.
That presents problems for the people negotiating fuel contracts. Not all
mining companies are amenable to contract changes, but some unique
solutions have been developed.
Aaron Larson
R
emember when coal-fired power
plants supplied baseload power
24/7/365 (when they were not offline
for scheduled maintenance)? It seems like
ages ago. Nowadays, load is as unpredictable
as the weather, which is to say, if the
sun is shining or the wind is blowing, renewable
resources are often putting a crimp in
coal-fired generation.
But renewable energy isn't the only thing
pushing coal plants to the sidelines; low-cost
natural gas has played a role as well. Consequently,
some gas turbines previously used
as peaking units are now being dispatched
for baseload power. That has meant various
coal units have had to run at reduced loads or
even to shut down for " economy " from time
to time.
Changing Roles Mean Changing
Fuel Strategies
Altered operating regimes can make a fuel
manager's job much more difficult. In days
of yore, fuel burn was fairly easy to calculate.
But when load varies as it does today, forecasting
usage can require a crystal ball rather
than a calculator.
Coal Creek Station, North Dakota's largest
power plant, with a total capacity of 1,146
MW, offers one example of the predicament.
In late December, Great River Energy (GRE)
announced that Coal Creek had made a number
of operational changes and minor modifications
that enable the plant to ramp down to
less than 300 MW.
" In the past, we wanted to park our power
plants at the top, " Rick Lancaster, vice president
and chief generation officer for GRE,
said in the release. " In today's energy market,
there is added value for plants that can reduce
output-flexibility is an enviable trait. "
Coal Creek has one advantage most other
plants lack: It is a mine-mouth operation and
has a coal contract structured favorably for
flexible operation. Coal Creek and GRE's
34
www.powermag.com
POWER | February 2017
Spiritwood Station
(a 2015 POWER Top
Plant) are the only power plants supplied by
the Falkirk Mine. As such, GRE works closely
with the mine, including through a joint
planning and budgeting process.
" We are not dealing with the common
model where utilities have fixed commitments
to fuel supply and shipping, " GRE spokesperson
Lyndon Anderson told POWER. " If the
future market reduces demand for fuel, the
joint planning process will take advantage of
the flexibility the mine plan has to adjust to
variable needs. "
Many fuel managers don't have the same
luxury. Those who bring coal in by rail often
have contracts not only with multiple mines,
but also with the railroad (Figure 1). One fuel
procurement specialist for another Midwest
generator said his company has been working
with its coal suppliers to restructure contracts,
if there are shortfalls, and it has been
looking to add greater flexibility into future
deals.
" We don't have remedies as part of our
contracts. The coal mines have really just
worked with us to adjust tonnage, " he said.
" It's a little bit more than that now, but no
penalties. "
Brett Phipps, Duke Energy's managing
director for fuel procurement, suggested that
all coal-based power generators face similar
challenges. He said the increased volatility
in unit dispatch has driven Duke Energy to
review and update its fuel procurement strategies.
He noted that the process is dynamic
and changes with market conditions. Some of
1. Choo, choo! For some generators, the cost of rail transportation exceeds the cost of the
coal itself, and contracts can include penalties for plants that miss delivery targets. Courtesy:
Gail Reitenbach
http://www.powermag.com

POWER February 2017

Table of Contents for the Digital Edition of POWER February 2017

Contents
POWER February 2017 - Cover1
POWER February 2017 - Cover2
POWER February 2017 - Contents
POWER February 2017 - 2
POWER February 2017 - 3
POWER February 2017 - 4
POWER February 2017 - 5
POWER February 2017 - 6
POWER February 2017 - 7
POWER February 2017 - 8
POWER February 2017 - 9
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POWER February 2017 - Cover3
POWER February 2017 - Cover4
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