You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
By Lori A. Burkhart
Gas-fired power is king today, but fuel diversity needs and new technologies may open the door for nuclear and coal.
The nation's demand for electricity is expected to grow by over 40 percent in the next 20 years, according to the Energy Information Administration (EIA). Meeting that need will require a great number of new generating plants. The burning question is, what will fuel these new plants?
Gas-fired plants are the current kings of the industry. EIA in its Annual Energy Outlook 2002 projects that the share of generation from natural gas will double in the next 20 years, increasing from 16 percent in 2000 to 32 percent in 2020. At the same time, the share of generation from coal in the United States is expected to decline from 52 percent to 46 percent, mostly due to more investment in the less capital- intensive, more efficient natural gas generation technologies. Also, nuclear generation capacity at exis ting plants has been maxed out.
Yet, nuclear and coal aren't exactly pretenders to the throne. The sleeping nuclear and coal industries are waking up, not only because of need for new capacity, but also because they've been stirred by higher natural gas prices, the debacle in the California power market, and the situation in the Middle East.
The renewed call for fuel diversity in light of the need to lower dependence on any one fuel source could really buoy the coal and nuclear industries. Due to lower coal prices and with the nuclear-friendly Bush administration in office, things already are getting interesting.
Add to the mix the fact that Congress finally voted for the Yucca Mountain nuclear waste storage site-which could remove one of the main objections to the building of more nuclear plants-and you have the recipe to begin chipping away at the domination of natural gas as the favored fuel.
For example, the EIA reports that due to improvements in production costs over the past 17 years, exi sting coal plants now are very economical. Their average production costs-1.8 cents per kWh-make them among the lowest-cost plants operating today. And the numbers could go lower as the average mine-mouth price of coal is projected to decline from $16.45 per ton in 2000 to $12.79 per ton in 2020.
But even if pure cost were the only factor looked at when deciding which type of plant to build, the n umbers can be difficult to interpret. Year-by-year reduction in coal plant operating costs could stem fro m: a) improvements in technological efficiency; b) a simple drop in the price of coal; or c) the retirem ent of older, less efficient plants, leaving a more up-to-date fleet of surviving plants. According to D ave Kelly, spokesman for the American Nuclear Society, the latest figures available for the average prod uction cost of electricity powered by various types of plants are from 1999. They are:
- nuclear-1.83 cents/kWh;
- coal-fired-2.07 cents/kWh;
- oil-fired-3.18 cents/kWh; and
- natural gas-fired-3.52 cents/kWh.
So while the nuclear industry and the coal industry appear to vie for the title of "King"