Coal to Gas Part of National Trend
Last week, Louisville Gas & Electric and Kentucky Utilities announced a plan to retire three coal-fired power plants over the next four years. The plants will be replaced by facilities that burn natural gas—which is cleaner than coal. The utilities are part of a growing trend across the nation to retire older coal plants. To most people, a gas turbine doesn’t sound any different than a jet engine, or than the sounds you’d expect to hear in a coal-fired power plant. But in terms of what this sound means for the region’s energy mix, it’s a big deal.
There are gas plants in Kentucky, but more than 90 percent of the electricity generated in the commonwealth comes from coal. Now, LG&E and KU plan to spend about $700 million building a new natural gas power plant at the Cane Run site and purchasing existing turbines in Oldham County.
“The Midwest and the Southeast, particularly, have been heavily dependent on coal-fired power plants and have been slow to adopt other technologies,” said Stephen Smith, the executive director of the Southern Alliance for Clean Energy.
Kentucky, West Virginia, Missouri, Ohio, Indiana, Georgia and Tennessee are all states that get most of their energy from coal. But that’s slowly changing.
“The trend has been that most utilities now are saying that investing in new coal-fired power plants is a very risky proposition because if they want them to perform for another 30-40 years, most thoughtful people recognize that over that timeframe we’re going to have to deal with the issue of carbon emissions,” Smith said.
The United States saw a huge spike in natural gas generation in the first decade of the twenty-first century, according to the federal Energy Information Administration. The same data show that at the end of last year, nearly three quarters of the country’s coal-fired capacity was 30 years or older.
The lifespan of a typical coal-fired power plant is about 50 years. So in the face of stricter environmental regulations and declining coal reserves, it makes fiscal sense for some older plants to be converted to natural gas.
The latest example is last week’s announcement from LG&E and KU, but the utilities are a few years behind some other companies. North Carolina-based Progress Energy decided in 2009 that it would replace 30 percent of its coal fleet with natural gas.
“We look at it as a win-win all around,” Progress spokesman Scott Sutton said. “It’s a win for the company because we get reliable generation and cleaner generation—substantially fewer emissions of everything from carbon dioxide to mercury to sulfur dioxide. And it’s a win for our customers in that the money that is spent on building these new power plants will be less than we anticipated it costing to retrofit these plants to meet new environmental standards.”
Transferring a few units to a new type of energy can also work out well because it diversifies a fleet. If a utility has power plants that use a variety of fuels, it can tweak its generation based on what’s cheapest. If gas prices plummet while coal prices skyrocket, some utilities are flexible enough to burn more gas and less coal, saving their ratepayers money.
The coal industry has seized on the LG&E’s announcement as an example of the way that increased environmental regulations will harm the coal industry. But the low point for the Kentucky coal industry—in terms of employment—came in 2000, years before the Obama Administration began putting pressure on the industry.
“In our outlooks we really see coal continuing to kind of hang in there,” said Michael Mellish, an economist with the Energy Information Administration.
“So we still continue to see coal-fired generation increase in the forecast, although we didn’t get back to like, the historical highs were in 2007, 2008, we didn’t get back to those levels of coal-fired generation until somewhere around 2025,” he said.
Mellish says increasing coal prices and decreasing gas prices are one of the major factors behind many coal-to-gas conversions. If coal isn’t as inexpensive as it’s traditionally been, utilities can’t justify the added expense to install advanced pollution controls.