Utility chiefs worry U.S. rush to gas will crowd out other fuels
The
stacks of Dominion's power plant tower over a nearby neighborhood in
Salem, Mass. More than 32 mostly coal-fired power plants in a dozen
states will be forced to shut down and another 34 might have to close
because of new federal air pollution regulations, according to an
Associated Press survey. Together, those plants produce enough
electricity for more than 21 million households, but their demise is
unlikely to cause homes to go dark. (AP Photo/Charles Krupa)
While greater use of gas instead of coal for generation cuts air pollution and carbon-dioxide emissions linked to climate change, the executives said the U.S. needed a diverse fuel mix to hedge against cost increases in any one source.
“Having one focus is never good, just like a portfolio having one stock,” Michael Yackira, chief executive officer of Las Vegas-based NV Energy Inc. (NVE), said today at a Bloomberg Government breakfast in Washington.
Energy companies are developing vast reserves of natural gas by hydraulic fracturing underground to push gas out of shale rock. The process, also called fracking, has sent gas prices down about 38 percent in the past year, benefiting industries like chemical manufacturers that use the fuel in production.
The three executives disagreed on whether the U.S. should encourage production of alternative sources of electricity by taxing carbon emissions or by offering tax credits for wind and solar developers, for example.
Natural gas is the “killer app” because it’s the cheapest way to produce power, said Lewis Hay, executive chairman of Juno Beach, Florida-based NextEra Energy Inc. (NEE), the nation’s largest producer of wind and solar energy.
‘Cleaner, Dirtier’
The costs for fossil fuels such as natural gas should pay for their environmental impacts, which would help wind and solar companies compete, Hay, 56, said.
“None of us should be allowed to put pollutants into the air for free,” Hay said. “Either incentivize cleaner stuff, or tax the dirtier stuff.”
Thomas Fanning, CEO of Atlanta-based Southern Co. (SO), said taxing carbon emissions is a “terrible idea” because it would raise energy costs on low-income consumers. The economics of the industry is already pushing power providers to adjust.
“The transition is already occurring in America,” the 55- year-old executive said. “Why would you add a tax burden to an already regressive commodity?”
In the utility industry, the drop in the price of natural gas has helped topple coal from its perch as the main source of power production in the U.S.
Coal and natural gas in April generated equal amounts of electricity for the first time since the government started gathering data, according to the U.S. Energy Information Administration, which tracks and analyzes energy statistics.
Fuel Mix
Southern produced 70 percent of its electricity using coal and 16 percent from gas five years ago, Fanning said. The company cut coal generation in half, and now 35 percent is generated from coal and 47 percent from gas, he said.
EIA expects natural-gas consumption will average 69.9 billion cubic feet a day in 2012, about 5 percent more than a year ago.
Consumption might expand to about 100 billion cubic feet a day by 2020, assuming natural gas is used more as a transportation fuel and exports of liquefied natural gas grow, Fanning said. The U.S. is reviewing several applications for LNG export terminals.
Southern is hedging against price jumps by building a nuclear-power plant in Georgia, among the first such construction project approved in the U.S. in three decades, and a cleaner coal plant in Mississippi, Fanning said.
“One of the things I think that’s been an important lesson learned in our industry over many, many decades is the importance of fuel diversity,” Hay said. “Any time you get too dependent on any one fuel, we’ll live to regret it.”
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