Electric Power Industry--Chapter 4

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Overview - Consumption, Stocks, and Receipts
Fossil Fuel Consumption, Stocks, and Receipts Various energy sources are used to produce electricity. Fossil fuels supply about 70 percent of the energy sources for the generation requirements of the Nation. Coal, petroleum, and gas are currently the dominant fossil fuels used by the industry; other fossil fuels include petroleum coke, refinery gas, coke oven gas, blast furnace gas, and liquefied petroleum gas. This section contains information regarding the fossil fuels used to generate electricity.¹ Electric Utilities Fuel Consumption and Stocks Coal, the energy source used by electric utilities to generate more than one-half of the electricity needed in the Nation, is consumed extensively throughout the United States particularly in the East North Central, West North Central, West South Central, and South Atlantic Census Divisions. (See map.) The use of petroleum for generation is not as common on a national level as during the early 1970's; however, some areas of the country (such as in the New England, Middle Atlantic, and South Atlantic Census Divisions) continue to use it extensively. Consumption of gas occurs mostly in areas of the country where it is readily accessible, particularly in the West South Central Census Division, and in dual-fired generator units, which use gas and petroleum as substitute fuels. The purposes of on-site storage are to provide an uninterrupted supply, to allow bulk shipments, and to take advantage of favorable market conditions. Electric utilities maintain stockpiles of coal and petroleum to minimize the effect of an interruption or curtailment in fuel availability (for example, railroad strikes, coal-mine strikes, or oil embargoes). Since gas is generally not stored, there are no stocks of gas. Fuel Receipts and Costs Statistics on electric utility receipts provide information regarding the delivery of fossil fuels to steam-electric plants. The costs include all costs incurred by an electric utility in the purchase and delivery of fuel to the plant. The type of contract under which a fuel is purchased has a significant effect on the cost of the fuel delivered and can be used as a good indicator of market conditions. Transactions where petroleum and coal are obtained by the utility under purchase orders or contracts with a duration of 1 year or more are referred to as contract purchases. Shipments of petroleum and coal under purchase orders or contracts of less than 1-year duration are considered spot purchases. Transactions that are conducted under a contract with uninterrupted delivery to secure gas are identified as firm purchases. Interruptible purchases are those in which the gas is received under a contract that permits curtailment of service under certain circumstances. For example, under both Federal and State regulations, requirements for gas to heat homes and serve industry have priority over requirements of the electric power industry. Consequently, a contract under which gas is purchased is most generally one that allows for an interruption in its accessibility. Coal is obtained from three major coal-producing areas in the United States: Appalachian Region coal is mined in both surface and underground mines located in Pennsylvania, Maryland, Virginia, West Virginia, eastern Kentucky, Tennessee, Alabama, and Ohio. This coal is bituminous in rank and of low-to-medium sulfur content. Its heat content averages more than 12,000 Btu per pound. The coal is transported primarily by train, barge, and truck to electric utility plants throughout the Eastern United States. Interior Region coal is mined in both surface and underground mines located primarily in Illinois, Indiana, western Kentucky, and Texas. It is bituminous coal with a high percentage of sulfur and contains approximately 11,000 Btu per pound. Most of this coal is delivered to plants in the Central and Southeastern United States. Western Region coal is mined in Montana, Wyoming, Colorado, Utah, North Dakota, Arizona, and New Mexico. It is delivered to plants throughout the Western and Central United States. Over one-half of the coal in this region is subbituminous coal that is low in sulfur content (less than 0.5 percent) and contains approximately 9,000 Btu per pound. Most of this coal originates in the Powder River basin of northeast Wyoming and southeast Montana. Coal from this region is delivered by train to plants as far east as Indiana and Georgia. The cost of coal delivered to electric utilities can vary significantly from State to State. Coal delivered to the New England Census Division from the Appalachian coal fields may cost as much as $60 per short ton due to transportation costs and the higher cost of producing eastern coal (generally in underground mines). Environmental restrictions within a State may require electric utilities to burn only the more expensive, low-sulfur coal resulting in a higher delivered cost. In the West, especially in the Mountain Census Division, coal-burning plants are often built close to the mine thus reducing transportation costs. In addition, the cost of mining coal from large surface mines located in the Western United States is significantly less than that of underground eastern mines, resulting in a delivered cost of under $15 per short ton for States such as Montana and Wyoming. The cost of coal delivered to electric utilities in States such as North Dakota, South Dakota, and Texas is well below the national average because of the lower cost of low-grade lignite. Petroleum. Although nationwide receipts at electric utilities are less than one-half the volume of the 1970's, several electric utilities in the New England area, New York, Florida, and Hawaii still depend on petroleum for a significant portion of their fossil fuel requirements. Receipts can vary widely from year to year at electric utilities due to changes in the cost of petroleum. Fuel oil numbers 4, 5, and 6 (heavy oil) constitute the majority of all petroleum receipts at electric utilities. Smaller amounts of fuel oil number 2 (light oil) are also used by electric utilities primarily for start-up and flame stabilization of the boilers. The cost of petroleum delivered to electric utilities varies considerably from State to State. The most important factor in determining cost is the type of fuel oil that is being delivered. States receiving only low-grade heavy oil will show a delivered cost much lower than a State receiving only light oil. Most of the petroleum delivered to the New England, Middle Atlantic, and South Atlantic Census Divisions, California, and Hawaii for use by electric utilities is the number 6 fuel oil. The cost of fuel oil can also vary because of its sulfur content. Electric utilities that are required to meet stringent environmental standards must purchase low-sulfur fuel oil at premium prices. Gas. Gas is used extensively as a primary fuel throughout areas of the country where it is readily accessible (for example, the West South Central Census Division and in California). Large volumes of gas are also transported by pipeline to the Middle Atlantic and South Atlantic Census Divisions. Gas receipts in these Census divisions and in California can vary considerably from year to year because some electric utilities switch between use of petroleum and gas in dual-fired generating units. The highest volume of gas receipts at electric utilities occurs during the summer months when demand for electricity peaks and when there is a greater amount available to electric utilities because of lower demands from residential and commercial consumers. In some northern parts of the United States, receipts of gas at electric utilities are limited during the winter months due to the priority for residential heating and industry needs. Many electric utilities have the capability of burning either petroleum or gas. The cost of the fuel is usually the determining factor. One major advantage of gas over all other fossil fuels is that it is a clean burning fuel. Therefore, some electric utilities use gas in order to comply with environmental regulations. Nonutility Facilities Most nonutility power producers use fossil fuels in their production processes--many are able to switch from one fossil fuel to another when fuel supply is interrupted or when there is a price advantage in using a different fuel. Other nonutility power producers use various renewable energy sources or are able to switch from a fossil fuel to a renewable energy. Although the majority of nonutility power producers generate electricity using fossil fuels, those using renewable energy represent a large portion of capacity. Many nonutility facilities use combustors that are able to burn two or more different fuels simultaneously or their combustors can be converted to burn different fuels. The adaptability of nonutility power producers to using multiple fuel sources depends primarily on the type of generating equipment available and on the economic conditions. Endnote: ¹More detailed information regarding fossil fuel consumption, stocks, and receipts is accessible on the Internet at the following web site addresses: Electric Power Annual Electric Power Monthly Contact: Robert Schnapp Internet E-Mail: rschnapp@eia.doe.gov Telephone: (202) 287-1787