POWER October 2013 - 48

COAL-TO-GAS CONVERSIONS
Utility Options for Leveraging
Natural Gas
For many utilities there is a razor-thin difference in the price of electricity generated
by natural gas and by coal. Slight changes in fuel price can therefore
produce dramatic swings in production costs, creating market opportunities
for utilities with both gas- and coal-fired assets and assured fuel supplies.
Utilities considering new gas-fired assets have several options.
Una Nowling
A
Platts report released in August 2013
predicts that retirements of coal-fired
plants will " surge " through 2015, when
the U.S. Environmental Protection Agency's
(EPA's) Mercury and Air Toxics Standards
go into effect. This will be accompanied by
a commensurate increase in the amount of
natural gas used to produce electricity. In addition,
Platts' analysts project that if the EPA
adopts some form of cap and trade scheme
to effect reductions of CO2
in the future, we
should expect a " materially larger increase "
in natural gas use for power generation.
In the meantime, coal, which accounted
for 50% of U.S. generation in 2005, will
end 2013 at about 40%, with natural gas-
fired generation at an expected 27.2%, down
slightly from a peak of 30.6% in 2011 but up
from 18% in 2004. As former Exelon CEO
John Rowe famously observed, " coal will remain
King. Gas will be Queen. " That may be
true for the short term, but Black & Veatch
predicts that over the next 25 years, natural
gas will dethrone coal (Figures 1 and 2).
Projected Coal Rebound in 2013
New construction of efficient combined
cycle generation continues, with the majority
developed in states that traditionally burn
mostly coal. On average, the U.S. coal fleet
operated at a 57% capacity factor during 2012
and will likely increase slightly in 2013.
Thomas Fanning, Southern Company's
chairman and CEO, noted in an April 2013 interview
that Southern ran its combined cycle
fleet at near-record 70% capacity factor during
the first quarter of 2013. Southern expects to
produce 47% of its power from gas in 2013
and 30% from coal. Five years ago, Southern
produced 70% of its power from coal and
16% from gas. PPL Electric Utilities ran its
gas-fired units at 92% capacity factor during
the first quarter, said CEO William Spence
in May. Similarly, PSEG ran its New Jersey
and Connecticut coal-fired plants at just 2%
capacity factor during the first quarter, heav48
3%
42.9%
21.6%
53%
18.4%
1.
Changing generation mix. The market share for natural gas will increase from about
23% of electricity consumption to roughly 54% (combined cycles plus combustion turbines), while
coal's share will decrease from 43% to 21% over the next 25 years. Source: Black & Veatch
Coal
Solar
Nuclear
Other
0.6%
4.5%
10.2%
0.8%
6.6%
8.4%
20.7%
9.1%
Combined cycle
2014
1.2%
0.4%
Combustion turbine
Wind
Hydro & other renewables
2038
0.9%
2. Changing installed capacity mix. The amount of gas-fired capacity is expected to
significantly increase during the next 25 years. Source: Black & Veatch
Coal
Solar
1.1%
8.8%
9.2%
11.7%
6.9%
12.9%
20.9%
9.2%
16.4%
40.3%
28.5%
10.4%
Nuclear
Other
Combined cycle
2014
2.7%
Combustion turbine
Wind
Hydro & other renewables
2038
4.2%
12.5%
4.4%
www.powermag.com
POWER | October 2013

http://www.powermag.com

POWER October 2013

Table of Contents for the Digital Edition of POWER October 2013