Is Less Carbon Worth the Risk?

The electricity generation industry is in transition. As you’ll read in my article “King Coal is Soon to be Dethroned” beginning on Page 20, some 20 percent (60 GW) of U.S. coal-fired power plants will be retired in the next few years.

Low natural gas prices are contributing to these retirements, but natural gas also will allow much of the retired generation capacity to be replaced with combined-cycle gas turbines.

Electricity generators and consumers should be thankful that gas producers developed technology that can be used to extract shale gas because it is key to keeping electricity rates reasonable as coal-fired plants are retired.

Because of space limitations, I wasn’t able to include everything I uncovered when researching coal generation, so I want to share some of it with you in this column.

I attended the Edison Electric Institute’s (EEI) Annual Convention in early June, where I heard several large investor-owned utility executives discuss the changing generation mix and the need to retire many coal plants to adhere to proposed Environmental Protection Agency regulations; most notable, the recently released (June 2) proposed clean power standards for existing power plants 111(d) rule.

American Electric Power (AEP) Chairman, President and CEO Nicholas Akins said AEP plans to retire 6,600 MW of coal plants by late 2015 to help it meet the proposed requirements of the 111(d) rule. The utility is one of the nation’s largest CO2 emitters,

Although such retirements will drop AEP’s CO2 emissions, they could create another issue: unreliable power supply. Fewer operating coal-fired plants could mean that AEP cannot provide needed electricity in extreme conditions.

Supply challenges created in AEP’s service territory during winter’s polar vortex could have caused big problems had the coal plants AEP has targeted for retirement not been available.

“During the polar vortex, 89 percent of our coal that is slated to retire in mid- to late 2015 ran at more than 50 percent capacity,” Akins said during the EEI conference. “We didn’t have a prayer of getting enough natural gas because of pipeline infrastructure (constraints) and customer heating was the priority, and you can’t cut much customer demand in the winter.”

Akins spoke about the increased winter demand caused by the polar vortex during testimony before the Senate Energy and Natural Resources Committee.

“This country did not just dodge a bullet-we dodged a cannonball,” he said during the testimony.

AEP is not the only utility concerned about unreliable power supply. Southern Co. Chairman, President and CEO Tom Fanning said his company faced issues similar to AEP’s during the polar vortex. When temperatures in the Deep South dipped to levels that are pretty much unheard of, Southern Co. called on 75 percent of its coal units that are scheduled for closure, Fanning said.

The National Coal Council (NCC) performed a study at the request of Energy Secretary Ernest Moniz that looked at the valuable role coal generation played this past winter. The NCC found that nationwide, more than 90 percent of the increase in power generation in January and February 2014 vs. January and February 2013 came from the existing coal fleet.

Retiring these coal-fired plants could create a major problem for many utilities that have relied on coal-fired generation to meet capacity demand.

Less CO2 in the air can’t be bad, but is it worth not having enough capacity to provide reliable electricity? It’s something to ponder.

Teresa Hansen, editor in chief

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