EPA

The power and gas markets look very different today from what we were anticipating three to four years ago. Gas has gone from seeming shortage to seeming abundance with recent spot prices falling to well under $3/mcf. Power prices and volatility are down significantly. Demand is soft and excess capacity exists in most of the country. While it might be easy to attribute the conditions in the power markets largely to the recession, the reality is that the fundamentals of the market are materially changing—creating opportunities while revealing new pitfalls.

Shale gas discoveries and ballooning inventories have pushed natural gas prices down to a 10-year low. At the same time, increasingly stringent emissions regulations are squeezing out some coal-fired power assets. Are we witnessing a power-fuel revolution? And if so, what’s the best survival strategy?

As new EPA regulations drive companies to decommission older power plants, utilities face issues involving plant retirement and demolition. Some sites can host new power plants, but many can be better used for other commercial purposes. Thoughtful planning and decommissioning strategies can bring the greatest value from underutilized assets.

The U.S. Treasury cash grants for new renewable power projects expired at the end of 2011. These incentives, which were implemented under Section 1603 of the American Recovery and Reinvestment Act of 2009, helped to support continued capacity additions throughout the recession. The impending expiration of these grants caused a wave of merger and acquisition (M&A) activity during 2011 as developers and financiers rushed to get deals done and to begin construction in order to meet the Section 1603, 5-percent safe harbor threshold by the Dec. 31, 2011 deadline.

The electric utility industry offers up a wealth of ideas on how the Federal Energy Regulatory Commission might reform its policy, adopted under FERC Order 679 in 2006, of granting financial incentives for investments in transmission line projects that ensure reliability or mitigate line congestion so as to reduce the cost of delivered power. Fortnightly’s Bruce W. Radford reports.

Notwithstanding some past difficulties, trash-fired power plants represent an increasingly attractive opportunity for future clean generation investment. Waste fuel offers a green source of baseload power that’s competitive with fossil fuels. The technology is proven and mature, and it enjoys public policy support. Additionally, waste fuel will help utilities meet diversity goals and environmental mandates.

The Environmental Protection Agency regulates emissions of particulate matter based on the mass of those emissions—not on the toxicity of the particular components. A growing body of evidence shows that different kinds of particulates affect health differently. Research by the Electric Power Research Institute suggests that in order to most effectively protect public health, the EPA’s next round of air quality standards should differentiate between relatively benign sulfate or nitrate compounds, and more harmful trace metals in particulate emissions.

Achieving aggressive renewable energy goals will require building thousands of miles of new transmission lines, and these so-called “green-power superhighways” could bring major new sources of low-cost electricity into the market. But will those sources be renewables? Analysts Roger Bezdek and Robert Wendling argue that with new access to distant wholesale markets, coal-fired generation would become more competitive than ever.

The energy industry has known for decades that federal regulators eventually would set rules under the Clean Air Act to govern emissions of mercury and other air toxics from coal-fired power plants. However, with the U.S. Environmental Protection Agency now having issued a final mercury rule, along with guidelines for possible extensions of the compliance deadline, utilities and power plant owners finally have a clear idea what they are up against. And the outlook isn't pretty. The challenge is to retrofit many hundreds of generating plants across the country--and all on the same three-year compliance schedule. Yet two wildcards remain in play: what deference the EPA will give to electric reliability needs, as it "consults" with the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Council; and how effective FERC Chairman Jon Wellinghoff will be as Republican leadership in Congress works to derail the new rules.

Among all of the investment priorities in the U.S. electric power industry, one stands out as having the greatest momentum: transmission. This is interesting because transmission is perhaps the most difficult type of power infrastructure to develop, and has been for decades. Editor Michael T. Burr talks with executives at Xcel Energy and Great River Energy to learn how the CAPX2020 consortium has managed to succeed where others failed.