Southern coal percentage falls to its lowest point in decades

Southern Co. (NYSE: SO) got 48% of its electric generation from natural gas and oil during the first quarter of 2015 compared to 34% during the same period in 2014, due largely to the cheap price of gas, Southern Chairman, President and CEO Thomas Fanning said April 29.

Coal use, meanwhile, has gone in the other direction. It was only 32% during the first quarter of 2015, down significantly from 45% in the year-ago quarter. Nuclear power’s share continues to hold steady at 16%, according to figure distributed in connection with the company’s quarterly earnings call on April 29. Hydro and other was listed at 4% in 1Q15 compared to 5% in 1Q14.

The recent quarter saw the lowest figure for Southern system coal use in “several decades,” said Fanning.

Southern combined-cycle gas power units ran at 71% during the recently-completed quarter compared to 57% one year earlier. By contrast the capacity factors decreased at company units using Powder River Basin coal (71% to 58%) and non-PRB coal (45% to 27%).

A few years ago Southern was getting about 70% of its energy from coal, Fanning said. Today, the Southern power fleet is flexible enough that it can basically modify its coal-gas mix to favor whichever source is cheaper at the time, Fanning said.

The CEO also said that the company continues to look at potential investments in gas pipelines and other “midstream” projects as it grows its natural gas fleet. “But natural gas is not a panacea” because no one can assume that cheap gas prices will last forever, Fanning.

CEO talks about renewables, Vogtle nuclear project

Fanning also used the earnings call to praise his company’s growing footprint in renewable energy. With recent moves, Southern subsidiaries now either own, or buy the output of, more than 3,000 MW of renewable capacity nationwide, Fanning said.

The CEO recounted renewable acquisitions and developments. Purchases include the 299-MW Kay Wind project in Oklahoma as well as the 99 MW worth of Decatur solar projects in Georgia and the 32-MW Lost Hills solar project in California.

“We’ve had a terrific relationship” with the Department of Defense (DOD), which is seeking to increase renewable energy development on military bases, he noted.

The CEO also said that progress continues on Vogtle Units 3 and 4 in Georgia, the first new nuclear reactors being built in the United States in 30 years.

Unit 3 has received its steam generator. Cooling tower work has started at Unit 4. Despite some hiccups in timelines and cost projects, Fanning stressed that the Vogtle units are being built to serve customers for 60-plus years.

The greatest risk for the schedule continues to be “timely delivery” of major components. Delivery service has improved, Fanning said.

Southern continues to have “constructive discussions” with its team of vendors and continues to seek “an amicable solution” to their differences. Absent that, there could still be litigation in a federal court in Georgia, Fanning said.

While Southern likes the idea of eventually building even more nuclear capacity into its fleet, it wants to concentrate on getting Vogtle Units 3 and 4 concluded first.

The Southern CEO also suggested that contractors such as Chicago Bridge & Iron (NYSE: CBI) and Westinghouse Electric need to perform well on the Vogtle units in order to encourage more orders for AP 1000 nuclear reactors in the United States in the future.

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.