Coal news and updates

Pipeline import costs for state-owned gas distribution company Botas are set to increase steeply when the next quarterly adjustment is made in April, because of recent strength in oil and oil product prices. They could rise by around $3/MWh to more than $20/MWh, according to Argus calculations, assuming prices for oil and oil products remain flat for the rest of the quarter. This would imply a generation cost of more than $35/MWh for a 55pc-efficient gas-fired unit, assuming Botas reflects the higher import costs in its tariffs for gas utilities, compared with a cost of $34.75/MWh with the current tariff.

 

Botas does not have any obligations to pass through any increase or decrease in import costs to gas-fired power utilities, but it has rarely offered tariffs below its import costs.

 

The company this month hiked its regulated tariff for power utilities by 1pc to 1,428.15 lira/'000m³ ($19.11/MWh), despite import costs remaining unchanged in dollar terms at around $17.50/MWh.

 

Meanwhile, prevailing coal prices do not suggest that coal-fired generation costs will rise in April-June. The API 2 second-quarter contract stood at $63.75/t yesterday, meaning utilities will face an unchanged import cost of around $70/t. Utilities' import costs are topped up to $70/t by a variable tax that is levied on imports when the API 2 is below $70/t. This means that implied generation costs for 40pc-efficient coal-fired plants will remain at around $25/MWh.

 

Turkish coal-fired utilities are already operating with favourable margins, as reflected in recent strong load factors. The country's 8.9GW fleet of plants that run on imported coal has had a utilisation rate of around 90pc since the beginning of this month.

 

A widening cost advantage against gas would ensure there will be no cost-driven fuel switching in the next quarter, but coal burn is expected to soften regardless in April-May, when hydropower output usually reaches its annual peak.

 

Most coal-fired utilities schedule their annual maintenance for April-May, as higher hydropower output weighs on the need for thermal generation. But this year some coal-fired units are expected to come off line for longer than normal, as logistical disruptions caused by Covid-19 prompted some utilities to reduce the extent of maintenance works last year.

 

Source : https://www.argusmedia.com/en/news