Southern could be 57% powered by natural gas in 2020

Under a scenario where natural gas prices are still low and coal prices are high, Southern Co. (NYSE: SO) could see 57% of its electric generation fueled by gas in 2020, according to presentation materials that the Atlanta-based company released April 25 in connection with its quarterly earnings call.

CEO Thomas Fanning discussed Southern’s changing fuel mix during the call. While Southern has traditionally been one of the largest coal burners in the nation, it is now also becoming one of the largest natural gas users among U.S. electric utilities, Fanning said.

The second of three new natural gas combined-cycle units is expected to go online later this spring at Georgia Power’s McDonough station, Fanning said.

In the fourth quarter of 2011, 80% of Southern’s generation output was split about equally between coal and natural gas.

In 2012 it is estimated that Southern’s fleet will be 47% powered by natural gas; 35% from coal and 18% from nuclear and other sources. The low gas price, high coal price scenario predicts that the new mix could be 57% gas; 22% coal and 21% nuclear and other in 2020.

Things could look much different under a high gas price, low coal price scenario, which means the natural gas, coal and nuclear and other numbers could be 34%; 45% and 21%,respectively. Much will also depend on deadlines for new EPA standards, Fanning said.

Southern is now one of the largest consumers of natural gas among U.S. electric utilities. Southern’s operating fleet is expected to burn roughly 600 bcf of natural gas in 2012.

Southern currently expects to burn less than 45 million tons of coal in 2012 compared to the nearly 80 million tons burned at the peak in 2007, Fanning said.

Southern saw first quarter 2012 revenues of $3.60bn, compared with $4.01bn for the first quarter of 2011, a 10.2% decrease. Like other power companies, Southern cited the unusually mild weather as a major factor.

Fanning lauds progress on nuclear, IGCC projects

Georgia Power and its group of partners can still develop Vogtle nuclear units 3 and 4 even without a federal loan guarantee, Fanning said. Negotiations with the U.S. Department of Energy have grown more complex due to the fallout over the failed Solyndra solar loan, Fanning said.

Southern will not agree to any loan guarantee arrangement that it is too burdensome for the company, Fanning said. “We have a negotiation going on,” Fanning said.

Earlier this year the NRC issued its first new nuclear plant licenses in over 30 years to Vogtle units 3 and 4. Fanning lauded the early construction work occurring at the Georgia nuclear plant site.

“We are making significant progress in Vogtle 3 and 4 as those of you following along on the slides can see, work is already underway on the nuclear islands and cooling towers and our heavy lift derrick, one of the largest in the world, is being assembled,” Fanning said.

Fanning added that site work is going well at Mississippi Power’s new integrated gasification combined-cycle plant. The plant, initially called Kemper County but now officially known as Plant Ratcliffe, which will be fueled by locally-mined lignite coal, recently won its second-round certification from the Mississippi Public Service Commission, the CEO said.

On April 24, the Mississippi PSC finalized a new certificate of public convenience and necessity for Plant Ratcliffe. This became necessary after the Mississippi Supreme Court’s recent reversal of the commission’s previous order. In the interim, construction continued on the Kemper County site under a temporary authorization granted by PSC on March 30 and will now proceed under the authority of the new permanent order, Southern executives said.

Initial start-up and testing are now only 14 months away on the IGCC project, Southern executives said.

A non-utility subsidiary, Southern Power, is also nearing completion of the nation’s largest biomass generation facility near Nacogdoches, Texas. This project, which is scheduled to begin commercial operation in June, will provide needed power for the city of Austin through a 20-year contract, Southern officials said.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.