CEOs from Southern (NYSE:SO) and American Electric Power (NYSE:AEP) talked about how their generation fleets are increasingly being fueled by natural gas at the expense of coal during a morning interview on the CNBC ‘Squawk Box’ program.
Southern CEO Tom Fanning and AEP CEO Nick Akins appeared on the segment early May 28 along with Waste Management (NYSE:WM) CEO David Steiner. Both AEP and Southern are customers of Waste Management
“No one recycles more material than the electric utilities industry,” Steiner said. This includes recycling coal ash for roadbeds and other uses. “We also work with the plants to get the inside of the plants more green,” Steiner said.
When it comes to producing electricity, lower gas prices brought about by the shale production boom have benefited rate payers, Akins said.
“Our fuel cost is a pass through to customers,” and lower natural gas prices benefit customers that way, Akins said. Before the shale boom there was a time when gas cost from $11-to-$14/mmBtu. These days gas prices are dipping below $3/mmBtu, Akins said.
When you consider that modern natural gas plants are very efficient, it amounts to a “double-benefit,” Akins said. More time and investment is needed, however, to develop natural gas pipelines and infrastructure, said the AEP official.
Southern generation used to be 70% coal about five years ago and it is now 32% coal, Fanning said. Gas used to be 16% and now it is 48%, the Southern CEO added.
Fanning touted Southern’s research into coal gasification and carbon control technology that could hold great potential for power generation especially in markets like China and Eastern Europe. “Carbon-friendly” technology is badly needed in places like Poland which is very dependent on coal power, Fanning said.
Fanning called solar his “favorite renewable.” Akins said that AEP’s service territories have been able to access more than 2,000 MW of wind power. Strategically-located wind turbines in windy areas with transmission infrastructure can be very economical.
One downside to wind is that it relies on transmission and “the greater the distance the greater the risk,” Fanning said.
Steiner of Waste Management also noted that “garbage” can also produce electricity and there is a mammoth supply of it.
During electric power segment, Squawk Box hosts also noted that Southern has recently signed a battery storage technology agreement with Tesla.