Stubborn coal prices vis a vis low natural gas prices
by Jim Pierobon
With the influx of new natural gas supplies from various shale formations throughout the continental U.S., the risks of relying too much, or not enough, on natural gas to generate power to achieve targeted returns on generation assets is front-of-mind for many risk managers and their C-suite colleagues.
AEP CEO Nicholas Atkins expressed concern about over-reliance on natural gas at a recent speech before the U.S. Chamber of Commerce. He reminded lunch-goers of gas' price volatility. He probably has lots of company.
Recent retirements of coal-fired power plants appear to be part of a long-term trend that reaches beyond just low gas prices. The rising cost of burning coal, new regulations governing coal plants by the U.S. Environmental Protection Agency (EPA) and the growing role for demand-side resources also are putting a squeeze on the oldest and dirtiest coal plants.
Many owners of generation plants, coal-fired or not, are deciding to retire power plants when the revenues producing by selling power and capacity non longer cover the costs of its operations and investments necessary to keep them operating plus a reasonable return from the production and sale of electricity.
What does the future hold? Are costs the the only driver? What about system reliability?
CCRO member company reps shared perspectives on the risks of closing power plants too soon at the April members meeting at the corporate headquarters of Jacksonville Electric Authority in northeast Florida.
FirstEnergy was counting on closing five of its old coal-fired power generators in Northeast, Ohio this year. But May 2 it told shareholders it will delay their retirement at the request of the PJM Interconnection. PJM said the units, with a combined capacity of 885 megawatts, are necessary to provide voltage support for the grid.
FirstEnergy spokesman Mark Durbin said the company will now operate them "reliability must-run" arrangements until the company can complete a series of transmission system upgrades in the region to ensure system reliability.
AEP CEO Nicholas Atkins expressed concern about over-reliance on natural gas at a recent speech before the U.S. Chamber of Commerce. He reminded lunch-goers of gas' price volatility. He probably has lots of company.
Recent retirements of coal-fired power plants appear to be part of a long-term trend that reaches beyond just low gas prices. The rising cost of burning coal, new regulations governing coal plants by the U.S. Environmental Protection Agency (EPA) and the growing role for demand-side resources also are putting a squeeze on the oldest and dirtiest coal plants.
Many owners of generation plants, coal-fired or not, are deciding to retire power plants when the revenues producing by selling power and capacity non longer cover the costs of its operations and investments necessary to keep them operating plus a reasonable return from the production and sale of electricity.
What does the future hold? Are costs the the only driver? What about system reliability?
CCRO member company reps shared perspectives on the risks of closing power plants too soon at the April members meeting at the corporate headquarters of Jacksonville Electric Authority in northeast Florida.
FirstEnergy was counting on closing five of its old coal-fired power generators in Northeast, Ohio this year. But May 2 it told shareholders it will delay their retirement at the request of the PJM Interconnection. PJM said the units, with a combined capacity of 885 megawatts, are necessary to provide voltage support for the grid.
FirstEnergy spokesman Mark Durbin said the company will now operate them "reliability must-run" arrangements until the company can complete a series of transmission system upgrades in the region to ensure system reliability.
