U.S. Coal Losing Power Business Dominance but Not Going Away

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Coal’s long dominant role in U.S. power generation is steadily losing ground to natural gas, but coal isn’t going away anytime soon.

This seemed to be one of the recurring themes among the keynote speakers at PennWell’s Power-Gen-International conference Dec. 9 in Orlando, Fla.

Economics are no longer the sole driver of the electric power business in North America, Mitsubishi Hitachi Power Systems Americas President and CEO David Walsh told the thousands in attendance. Social and environmental concerns are playing a bigger role and this is hurting coal, he said.

Coal might not be “politically correct” in our lifetime, but it is still a big part of the power system, Walsh said.  He expects there will still be 230 GW of coal power in service in the United States in 2022.

That figure reflects heavy retirements and the fact that an increasing number of large combined-cycle natural gas plants, with a generating capacity of more than 1,200 MW, are being brought online, Walsh said.

The United States is now in the seventh year of the shale gas revolution, said NRG Energy (NYSE: NRG) Executive Vice President and COO Mauricio Gutierrez. It increasingly seems like the power sector is about “all gas, all the time,” Gutierrez said.

But “Mother Nature reminded us of the value of fuel diversity,” during last winter’s polar vortex, the NRG official added. That’s why NRG is not abandoning coal while it pursues new combined-cycle gas plants and utility-scale solar power, Gutierrez added.

Carbon capture and storage is a big focus at NRG Energy, which recently broke ground on a new CCS project at the W.A. Parish coal plant in Texas, Gutierrez said.

Southern Co. (NYSE: SO) is building both next-generation coal and nuclear power plants, said Executive Vice President and COO Kim Greene. Southern utility subsidiaries are constructing Units 3 and 4 at the Vogtle nuclear plant in Georgia, as well the Kemper County integrated gasification combined-cycle (IGCC) facility in Mississippi, she noted.

In addition, Southern utility Georgia Power continues to build large amounts of new solar power in Georgia, although that state lacks a renewable power mandate, Greene said.

Greene, Walsh, and Gutierrez all stressed that electric companies must maintain a diverse mix of fuels for their central station power plants. This is because of both reliability and price risk, they said.

While the United States currently enjoys extremely low gas prices compared to the rest of the world, Walsh said he expects an increasing amount of natural gas to be exported (in the form of liquefied natural gas) due to higher international prices.

Domestically, Walsh also noted that 2014 has seen some price spikes for Henry Hub natural gas that surprised many industry analysts.

Price is always a consideration for Southern because about half of its customers have very low to moderate income, Greene said.

But the power industry officials also said they support prudent steps to reduce carbon dioxide (CO2) emissions linked to greenhouse gases.

During Power-Gen, NRG’s large Ivanpah solar power complex in California was recognized as a breakthrough renewable energy project. In addition to increasing solar power in Georgia, Southern is also moving toward greater research into energy storage, Greene said.

Various states and companies have already been coming up with inventive ways to limit carbon emissions, said the president of the Center for Climate and Energy Solutions, Bob Perciasepe.

Hurricane Sandy and drought along the Mississippi River are examples of how climate change has affected the power sector, said Perciasepe, who previously held a number of leadership posts at the U.S. Environmental Protection Administration (EPA).

Perciasepe said his experience at state and federal environmental agencies made him a believer in the power sector’s ability to adapt. The power industry’s success in slashing emissions of sulfur dioxide is evidence of this, Perciasepe said.

Likewise drought conditions have also affected the amount of cooling water available to nuclear power plants in certain situations, Perciasepe said.

Across the nation right now, a number of conversations are taking place “quietly” among state regulators and power companies about how to comply with the EPA’s Clean Power Plan. The EPA rule proposal would have states curb CO2 from the power sector 30 percent by 2030.

Gutierrez suggested that the growing stringency of various environmental standards is one factor driving the current trend of power industry consolidation.

Both Perciasepe and the three power industry officials cited an increasing interest in both distributed power generation and energy efficiency.

The keynote session also included some international discussion. Walsh, for example, praised some of the changes taking place with power generation in Mexico.

Also, in the wake of the Fukushima nuclear disaster, Japan appears poised to bring back online some of the nuclear capacity it decided to idle following the accident, Walsh said. Japan is also pursuing development of a significant amount of new coal-fired generation.

 

 

 

 

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