Electric utilities are rethinking the way they produce power and taking a hard look at the efficiency of their plants, all with an eye toward the economics of their business and the regulatory landscape.
Most energy experts agree that regardless of shifts in political power, and whatever climate bills come out of Washington, D.C., it will pay utilities to begin moving toward cutting power plant emissions and making more use of renewable sources. Coal-fired plants will be retired or retrofitted to cut greenhouse gas emissions. Expect to see more use of natural gas and biomass, along with solar and wind.
A recent report from Navigant Consulting prepared for Boston-based Ceres (a group of environmental groups and institutional investors) noted “the traditional operating paradigm of building large generation facilities to sell ever-increasing amounts of electricity is changing.” The report is titled The 21st Century Electric Utility: Positioning for a Low-Carbon Future.
Tom King, National Grid U.S. president, said in a foreword to the report: “The modern utility must expand its vision and adapt to changing circumstances by providing energy sustainably for our customers, communities and shareholders.”
Simply, how can utilities continue to produce reliable and affordable power while remaining economically viable?
Coal always has been touted as the most abundant and least expensive source for power generation. A question now is how long that will continue.
Consider: a Bernstein Research study in March of this year said Environmental Protection Agency regulations would likely mean some 25 percent of U.S. coal-fired generation would be forced into retirement by 2015. That’s more bad news for a coal industry under fire on many fronts from a variety of environmental, safety and other groups.
The Bernstein report also said 120 coal-fired power projects have been canceled in the past 10 years, and legal action threatens either the operation or construction of another 50 plants.
Utilities already are repowering plants with natural gas and looking at upgrading emissions systems; the Department of Energy last week announced $67 million in grants would be divided among 10 projects working on carbon capture. President Obama has a goal of developing carbon capture and storage technologies over the next decade and opening at least five commercial demonstration projects by 2016.
That’s good news for CCS developers. It also shows the government knows coal needs to remain part of the energy landscape, so efforts to develop “clean coal” technologies must continue.
But natural gas is making a strong push thanks to favorable pricing and a supply enhanced by unconventional plays like Marcellus in the Northeast and Barnett in Texas. New gas-fired plants are in the works; for example, Progress Energy and Siemens last month said they would team on five plants in North Carolina.
The Navigant report also said renewable energy costs are decreasing, a welcome sign since the cost of getting solar and wind power to the grid has been a sticking point.
So while utilities move toward more diverse power generation, achieving efficiency and embracing change is likely to take years. Hurdles remain: Government support, an uncertain regulatory environment, well-established business models and transmission capacity constraints. Calculating a return on investment first involves knowing where to invest.
For many utilities, that remains a moving target.