The U.S. power generation sector continues to move toward a future that will be less dependent on coal-fired baseload capacity.
Coal continues to be squeezed by cheap gas, weak power demand, ever-tougher environmental standards and markets that often don’t adequately reward fuel diversity or capacity needs, according to a study commissioned by the Department of Energy (DOE).
More recently, the Energy Information Administration (EIA) predicted that coal will see its share of the U.S. power generation mix eclipsed by natural gas in 2040.
While higher natural gas prices allowed coal to recapture some of the power generation output share it lost to gas in 2012, the trends for installation of new generating capacity favor gas over coal.
Through the first 11 months of 2013, about 6,568 MW of natural gas-fueled generating capacity has been installed, according to the latest infrastructure update from FERC. By contrast, only 1,543 MW of new coal generating capacity was installed during the first 11 months of the year.
Various estimates have suggested that upwards of 60 GW of coal capacity could be retired by 2016 due to cheap gas, EPA’s impending Mercury and Air Toxic Standards (MATS) and EPA’s proposed CO2 standards for new and existing power plants.
Coal retirement news has sparked concern about regional grid reliability. FERC has become increasingly focused on gas-electric interdependence issues. ISO New England (ISO-NE), for instance, is working on short-term and long-term enhancements to better ensure that it builds fuel security into its generation markets.
Not all the future coal news is bad. The newer, scrubbed units should be well positioned for the future. In addition, Duke Energy (NYSE:DUK) has started operation of its Edwardsport coal gasification power plant in Indiana. Likewise, the Southern (NYSE:SO) subsidiary Mississippi Power is also in advanced stages of construction of its Kemper lignite coal gasification plant in Mississippi.
Nuclear retirements, consolidation among other issues during 2013
Here are a few of the other much-discussed stories during 2013:
Bad news on nuclear included the announced retirements of the Dominion (NYSE:D) Kewaunee plant in Wisconsin; the Duke Energy Crystal River 3 (CR3) station in Florida; the Entergy (NYSE:ETR) Vermont Yankee plant and the Edison International (NYSE:EIX) San Onofre Nuclear Generation Station (SONGS) Units 2 and 3 in Southern California.
Vermont Yankee is retiring next year and Kewaunee retired this year in what their owners described as economic decisions. CR3 and the two San Onofre units were already experiencing significant extended outages.
Some good news for nuclear advocates included the recent announcement that NRC has cleared the Omaha Public Power District (OPPD) Fort Calhoun unit in Nebraska to restart. It had been offline since spring 2011.
In addition, groups led by Southern and SCANA (NYSE:SCG) are building four new reactor units in Georgia and South Carolina respectively. Also the Tennessee Valley Authority (TVA) is completing the Watts Bar 2 facility in Tennessee.
The Department of Energy continues to invest in small modular reactor technology. DOE recently picked Oregon-based NuScale Power LCC as the winner of its second round of funding to commercialize SMRs. A Babcock & Wilcox (NYSE:BWC) affiliate, mPower, won the first DOE SMR cost-sharing award in 2012.
In the courts, the U.S. Court of Appeals for the District of Columbia Circuit has ruled that the Nuclear Regulatory Commission (NRC) was wrong to stop reviewing the application for the proposed Yucca Mountain spent fuel site in Nevada.
The same court also effectively suspended collection of a nuclear waste fee while the government looks at long-term spent fuel storage options.
Meanwhile the U.S. Supreme Court heard arguments on whether to over-rule the D.C. Circuit and let the EPA’s Cross-State Air Pollution Rule (CSAPR) go forward. Expect a ruling on that in 2014.
Solar energy might have become the new wind power in 2013. The Solar Energy Industries Association (SEIA) has said that it expects solar photovoltaic (PV) installations in 2013 to be 27% more than 2012.
Wind power installation was down dramatically in 2013, but should bounce back in 2014. There have been only 1,108 MW of new generating capacity installed during the first 11 months of 2013. That’s down from 7,808 MW in the first 11 months of 2012.
The falloff has been tied to the timing of a temporary expiration of the production tax credit (PTC). But a January 2013 congressional deal renewed the PTC said any wind projects placed into “construction” by the end of 2013 are eligible. The IRS has defined this term liberally. The wind power industry says numerous new wind power contracts have been signed for the next couple of years.
The Interior Department also awarded its first offshore wind energy leases for the East Coast in 2013.
There was change at the top in 2013 as Duke named Lynn Good to succeed James Rogers as CEO. Rogers is also retiring as Duke chairman. Also, American Wind Energy Association (AWEA) named Tom Kiernan as its new CEO. Ex-Progress Energy CEO Bill Johnson became TVA’s new CEO in January 2013.
The Obama administration also brought in some new blood for the second term. After some early resistance from fossil fuel interests, Gina McCarthy was eventually confirmed as the new administrator of EPA.
Ernest Moniz became the new secretary of energy and Sally Jewell was named to the top slot in Interior. Cheryl LaFleur was appointed acting chairman of FERC after the departure of Jon Wellinghoff.
There was also some merger news in the past year. NV Energy (NVE) is now officially part of MidAmerican Energy Holdings (MEH), which is part of Berkshire Hathaway (NYSE:BRK.A; NYSE:BRK.B).