Despite their disparate interests and diverse geographies, U.S. utilities have locked shoulders, especially when it comes to federal energy policies. At the core of their communique is the will to work with the Obama administration to reduce carbon emissions.
With that, the U.S. Environmental Protection Agency’s Clean Power Plan is expected to be finalized this summer, requiring carbon reductions of 30 percent by 2030. Simply, the rule would give the states and their utilities the flexibility to achieve such aims by replacing coal-fired plants with cleaner ones, by installing energy efficient technologies or by trading credits as they do in California and the Northeast.
“With all the activity we have had with stakeholders, this industry has moved the ball forward,” says Nick Akins, chief executive of Columbus, Ohio-based
Both regulatory efforts and market forces are prompting major coal-burning utilities to shift portfolio strategies: According to SNL Energy, 28,000 megawatts of coal capacity will go by 2022, with American Electric Power,
Indeed, the U.S. Energy Information Administration said in a 2014 report that coal’s share of the electric generation portfolio was 37 percent in 2012 but by 2035, it will be 34 percent and by 2040, it will be 32 percent. Natural gas-fired generation, by comparison, will surpass coal by 2035 and by 2040, it will be equal to 35 percent of the power market.
Coal is responsible for a third of all manmade carbon releases.
AEP’s Akins was joined by the chief executives of Exelon Corp., PNM Resources and Southern Company. And it was only a few years ago that coal-heavy AEP and Southern Company were challenging EPA at every turn while nuclear-dependent Exelon was on the other side, strongly supporting regulators.
For its part, Southern Company is retiring at least 2,000 megawatts of coal and oil plants. About six years ago, 70 percent of its generation mix was comprised of coal. Now that number is about 47 percent, and falling. Meantime, Duke Energy has been shuttering 6,800 megawatts of coal.
“EPA is well intentioned but we — (the utilities) — are the only guys who can be reliable,” says Tom Fanning, chief executive of Southern Co., which is building two nuclear units, advanced carbon capture coal plants, and buying power from utility-scale solar facilities.
In the intervening years, power generation and transmission technologies have improved while the utilities’ customer bases have been demanding cleaner electricity at reasonable prices. And state and federal regulators are working to make this happen while trying to ensure that service remains reliable.
“I think EPA gets it,” says Chris Crane, chief executive of Exelon Corp. “It needs to maintain reliability while it implements the Clean Power Plan. We have asked for nuclear to be recognized” for its low-levels of greenhouse gases.
While Crane said that his behind-the-scenes discussions with AEP's Akins are all in good fun, the public discourse between and among their surrogates has been rather pointed. Exelon, along with Calpine Corp., Consolidated Edison and National Grid, have long supported proposed and existing clean air rules mainly because those companies rely on cleaner fuel sources like nuclear and natural gas.
Previously, Exelon said that those utilities arguing against the requirements of the nation’s clean air laws have been dragging their feet while they had continued to crank out electricity using dirtier coal plants: AEP and Southern, to name two.
They had only wanted to squeeze out more revenues while they sought delays, it said — all tied to rules that they had long known were coming. At the same time, Exelon said that this tack has been unfair to those companies that have made the necessary investments in best available technologies — pursuits that are now helping to reduce health-related costs while also opening up new job opportunities.
“We’ve used coal-fired generation for decades and decades and have had the Ohio River to move the coal,” Akins responded, when asked by this reporter how his company AEP and that of Exelon could reconcile their respective policy stances. “But 25 percent of our coal fleet is now retired. We will replace that with natural gas, energy efficiency and transmission optimization.”
“We’ve had an amazing history of meeting goals,” adds Pat Collowan, chief executive on PNM Resources in New Mexico. “EPA will work with us,” she adds, with respect to the Clean Power Plan. “The industry will do the right thing.”