January 13, 2022 - Coal-fired generation in the Midcontinent Independent System Operator appears to be making a comeback this month as colder weather drives up total power demand. The rebound comes despite earlier indications that gas-to-coal switching in the US may have been approaching the limits of available capacity.

Across the US Midwest, population-weighted temperatures have plunged over the past week, dropping to a frigid 19-degree average, with multiple single-day recordings in the teens and single digits Fahrenheit.

In January, total power demand in MISO has surged in response, hitting seasonal highs at over 2,000 GWh in the past week with both coal and gas-fired generation rising to meet the higher demand.

Since the start of January, coal has made notable gains in MISO's generating stack, consistently outperforming gas for the first time since mid-October. Month to date, market share for coal has edged up to over 35% of total power generation in MISO, eclipsing gas at an estimated 29% this month, data from the ISO and S&P Global Platts Analytics shows.

The recent uptick in coal generation across MISO follows a prolonged contraction in market share for the fuel from mid-October through late December 2021. Over the roughly 10-week period, both coal and natural gas accounted for about 30% to 31% of total power generation in MISO, respectively.

At the time, the drop in market share for coal came partly in response to higher wind generation. But with natural gas also adding market share during the period – despite historically elevated prices – it appeared that emerging constraints on coal supply were becoming a limiting factor for the fuel.

Coal Production, Stocks

Since third-quarter 2021, multiple indicators have signaled tighter balances in the US coal market.

In late September, domestic coal production reached an annual high at 12.2 million short tons per week, but it has since faltered, with weekly output dipping as low as 10 million st in October with the fourth-quarter average at just 11.3 million st per week. For the week of Jan. 1, data from the US Energy Information Administration showed coal production at just under 10.4 million st.

US coal stocks have also taken a hit since the start of the pandemic, recently falling to their lowest since at least 2014, according to data available from the EIA. As of September, US inventories sat at just 85.1 million st – down from a prior-year level at over 134 million st, the administration's latest report shows.

Despite this month's rebound for coal-fired power in MISO, existing data suggests that there could be limits to the fuel's potential upside in US power generation markets this winter.

During the peak-summer months of 2021, coal power accounted for nearly 43% of total electric generation in MISO. Assuming current supply constraints remain in place, its could be a challenge for the fuel to regain its earlier dominance in the Midcontinent ISO's generation stack this winter.