Power Industry Refocuses, Faces “New Normal”

There’s never a lull in the challenges facing the power industry. Coal-fired power plants remain targets of the Greens. Nuclear power incurs more negative publicity via the earthquake-induced nuclear-plant crisis in Japan.

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For the foreseeable future, renewables will require government subsidies to stay alive. And the entire industry attempts to cope with “new normal” operations.

Natural gas presents its own challenge. Its cost has dropped and stayed low, states Harry Forbes, a senior analyst with Dedham, Mass.-based ARC Advisory Group (www.arcweb.com). “This is a different expectation for the industry. So, now, natural gas competes pretty favorably for new facilities.” An example Forbes gives is a combined-cycle plant—in which a gas turbine generates electricity and steam derived from the turbine’s waste heat generates more electricity through a steam turbine—having very high thermal efficiency, a small areal footprint and about half of the carbon emitted by coal-fired power plants.

The U.S. Department of Energy’s (DOE’s) Energy Information Administration concurs with Forbes: “Natural gas, used for about 9 percent of electric utility generation, is the preferred energy source for new generating capacity.” For example, electricity-generating giant American Electric Power (AEP) (www.aep.com), in Columbus, Ohio, owns approximately 38,000 megawatts (MWs) of generating capacity. It plans to build a new 580 MW gas-fired unit in Ohio and convert a coal-fired unit on the West Virginia-Kentucky border to a 640 MW gas-fired unit.

The smart-grid concept also refocuses power generation. “It [the smart grid] has taken a lot of attention off the power plants. Utilities [had] focused on transmission and distribution (T&D) because there is a wave of money the federal government is throwing at it,” Forbes says.

DOE defines the smart grid as an automated, widely distributed energy delivery network characterized by a two-way flow of electricity and information—one that will be capable of monitoring everything from power plants to customer preferences to individual appliances. “It [the smart grid] incorporates into the grid the benefits of distributed computing and communications to deliver real-time information, and enables the near-instantaneous balance of supply and demand at the device level,” DOE states.

The “new normal”

And, generally, regarding supply and demand, owners/operators now make plans for the “new normal,” Forbes says. For what do they plan? “That their loads may be lower and, thus, old plants may not be as important.” He notes demand drop comes for energy-intensive industries such as primary metals and chemicals because they’re less robust.

Mainly, new normal is an industrial energy-intensive issue and it’s about money, Forbes believes. Questions needing answers: Which plants to retire, or which plants to replace? If new or replacement plants, combined cycle is the most popular, he comments. But for coal-fired power plants that combined generate more than 56 percent of utility power, according to DOE, “these are much more long-term and more difficult to build,” he says.

Why so? “It’s partly plant complexity and partly regulatory,” Forbes says. To deal with current U.S. Environmental Protection Agency air-pollution-control regulatory challenges for coal-fired plants, AEP plans to close plants and retire units.

Underestimated impact

“The cumulative impacts of the EPA’s current regulatory path have been vastly underestimated, particularly in Midwest states dependent on coal to fuel their economies,” said Michael G. Morris, AEP chairman and CEO, in a June 9, 2011, press release. “We have worked for months to develop a compliance plan that will mitigate the impact of these rules . . . but because of the unrealistic compliance timelines in the EPA proposals, we will have to prematurely shut down nearly 25 percent of our current coal-fueled generating capacity, cut hundreds of good power plant jobs and invest billions of dollars in capital to retire, retrofit and replace coal-fueled power plants.”

Meanwhile, nuclear loses ground. “The prospects for new nuclear builds are significantly reduced. There will still be some, but I don’t think very much,” Forbes predicts. In North America, that may be due to the recent earthquake-induced fears following the Fukushima Daiichi plant crisis in Japan, he believes.

With all this industry flux, what challenges the industry most? “They have to figure out how to give better service, higher quality service effectively, when there is less demand,” Forbes says. And that means changing their culture—and also integrating what the industry calls distributed energy resources, he explains. That also means turning from focusing totally on grid T&D .

American Electric Power (AEP) (www.aep.com) 

ARC Advisory Group (www.arcweb.com)

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