Power companies are switching over from coal to natural gas at an accelerating rate, with potential consequences for both the US emissions profile and the industry’s economics.
In his presentation to the Platts Annual Financing US Power conference in New York on Friday, Federal Power Company President Steven Gilliland said the rate of coal to gas switching is increasing dramatically year over year. He said that while a surplus of coal stockpiles at thermal plants required utilities to burn coal even when gas was much cheaper, stockpiles are shrinking and plants are slowly burning more gas instead.
But the coal sector is far from suffering through the transition. In fact, the mood of the gas presentation was perhaps the most optimistic of all sessions at the two-day conference.
“Coal stockpiles have continued to decline because coal exports have continued to increase,” Gilliland said. “Some of your top producers are reiterating in their quarterly statements that they are seeing the highest number of coal exports that they’ve ever seen.”
But as Environmental Protection Agency emissions regulations tighten with various new rules limiting sulfur dioxide and nitrogen oxide, companies will slowly shut down their US coal operations, Gilliland said, and as the price of gas begins to steady at just over $4 and adequate infrastructure is built, gas will become an increasingly attractive alternative.
Saving The Day
Competitive Power Ventures Executive Vice President John Foster delivered a strongly pro-gas speech, proclaiming that unlike any other generation type, gas is “affordable, reliable, domestic, flexible and clean.” Renewables, he said, could not exist without gas to “firm” them and ensure their reliability by quick ramping up and down when the wind stops blowing or the sun stops shining.
He opened his speech: “We are in difficult times. Are we in the beginning of the decline of America? Did we have our great run in the 21st century? And the lives of our children will be less good than we have?”
This coming century can only be great for America, Foster said, if domestic natural gas resources are developed, providing, jobs, energy security, and the possibility of transition to renewables with back-up natural qas turbines.
“Natural gas allows us to reduce the amount of emissions from coal plants by a half. We don’t have to reduce our standard of living or massively increase our power generation prices at the retail level to address [global warming],” he added.
All Smiles In This Gasland
As it takes about five years to build a gas plant, Foster encouraged developers to start building gas plants now. With the panelists of the “Gas-Fired Generation as the Predominant Bridge Fuel” session mostly agreeing that stockpiles of gas were overly abundant, the only impediment to clean cheap gas, they said, was actually more power plants to burn the gas.
“I don’t think its quite the doom and gloom that you heard yesterday,” said GE Capital Markets Senior Managing Director Donald Kyle. GE has invested heavily in flex gas turbines and power plants. This August, GE broke ground on an 800 MW natural gas plant it built with CPV called the CPV Sentinel.
“I feel good about the year. We’ve managed to raise a lot of debt. We compete with banks and investment banks,” Kyle said.