|Image Source: forbes.com|
Shifting from coal to gas hasn’t triggered the financial tailspin about which many utilities had warned. But it has created an economic wave, which is fostering the next-generation of energy jobs while also helping to clear the air.
All utilities that own and operate coal-fired fleets must decide whether to retire or to retrofit their aging plants, many of which were built in the 1950s. Multiple federal regulations are now in the pipeline and involve mercury, coal ash and greenhouse gases. That will result in the closing of a cadre of coal plantsand the construction of numerous combined-cycle natural gas facilities.
“Our analysis shows that switching to cleaner energy sources and investing in energy efficiency often makes more economic sense than spending billions to extend the life of obsolete coal plants,” says Steve Frenkel, director of the Union of Concerned Scientists‘ Midwest office. “Regulators should require utility companies to carefully consider whether ratepayers would be better off by retiring old coal plants and boosting electricity generation from natural gas and renewable energy sources like wind.”
Spending billions to upgrade old coal plants is unwise, he continues, saying that as much as 18 percent of the nation’s coal portfolio should be mothballed. That equates to 353 generators in 31 states.
While the industry is hoping for delay, action will ultimately be inevitable. Standard & Poor’s says that a third of coal plants are working to comply. Utilities such as Exelon Corp. and PSEG Corp. began ditching their older generators in the 1990s and replacing them with cleaner alternatives.
But the ratings agency says that two-thirds of the existing U.S. coal fleet is older than 30 years and must either be retired or retrofitted. The older and smaller facilities are better candidates for closure while the newer and bigger coal plants could be modernized. Coal now supplies about 40 percent of the electricity here while natural gas comprises about 30 percent, says the EnergyInformation Administration. That could rise to 40-50 percent in 20 years.
Coal is responsible for about a third of all carbon dioxide emissions. It also releases double the other pollutants regulated by the Clean Air Act that include sulfur dioxide and nitrogen oxide. When combusted, natural gas produces roughly half the emissions as does coal. But it, too, has its critics who say that the exploration methods are harmful and that more of the national treasure should be invested in sustainable energy.
Several utilities have recently announced that they would retire their older coal-fired plants and replace them with those that burn natural gas. The decisions are predicated on federal and state environmental laws as well as prior court cases, not to mention the relative cheap price of natural gas.
Georgia Power, a subsidiary of Southern Company, is retiring 2,000 megawatts of fossil-fired generation. Altogether, it will be shedding 15 coal and oil facilities. Five years ago, the parent’s fuel mix consisted of 70 percent coal but now it is 47 percent. That coal configuration will fall further unless technologies that would capture and bury carbon are commercialized.
“They are faced with economic choices that are becoming untenable,” says Craig Dowdy, a partner with McKenna Long in Georgia. “Now, with the pricing of natural gas, it has become a good option. I would still advise utilities to have diverse portfolios, which will be their continued plan as it will be for their regulators. It adds to the ultimate reliability.”
Meantime, Duke Energy just held a teleconference with analysts to discuss, in part, its move to shutter 6,800 megawatts of coal-based electricity by 2015. It will spend $9 billion to upgrade its generation fleet, which involves mostly the construction of natural gas units as well as an advanced coal gasification plantthat will become operational later this year.
The company’s progressive chief executive, Jim Rogers, is calling on the U.S. Congress to put a price on carbon. The timing is right, he said, during the call. That’s because the cost of competing fuels is becoming economical: natural gas as well wind and solar. Wind and natural gas have comprised the preponderance of installed generation capacity in the past decade.
Consider MidAmerican Energy, a unit of Warren Buffet’s Berkshire Hathaway: It is nixing five coal-burning facilities by 2016 in Iowa, which is all part of a legal settlement it had reached with the Sierra Club. At the same time, it will retrofit two other coal facilities there next year. For its part, MidAmerican has become a leading wind energy producer.
American Electric Power, meanwhile, said that it would close three coal-fired power plants in Ohio, part of an earlier legal settlement that also requires the company to build 200 megawatts of wind and solar. And, Minnesota Power, a division of Allete, said this year that it would shut down two coal plants in the northern part of the state within two years.
What is the economic impact of switching from coal to gas? Coal has typically been considered more plentiful and its overall tonnage rates have been cheaper than all other competing fuels. Hence its high market share. But the huge new swaths of shale gas that can also be found in the country’s regions where coal now sits also provide a potentially rich new vein.
Billions will be ultimately invested throughout the shale gas supply chain. Those jobs would replace, or add to, those in the coal fields.PricewaterhouseCoopers says the tally will be 1 million new shale-related jobs by 2025.
“Every utility will have a series of coal units that must be replaced over time,” adds attorney Dowdy. “That does not mean that coal will become obsolete. Clean coal technologies will develop but coal will not have the same percentage of the utility market that it has today.”
Federal regulations have hastened the move from coal to natural gas. But abundant and cheap shale gas has sped up that transition. That’s a boon to both the economy and the environment, although one that does not obviate the need for utilities to hold a mix of generation assets.
Other petroleum production issues can be read in this Ali Ghalambor site.