With a 92-plant, 20-state fleet of predominantly natural gas-fired electric generation plants, Calpine Corp. CEO Jack Fusco on Tuesday predicted opportunities for his company on continuing low gas prices and an increasing number of coal-fired plants being retired.
Speaking at the Barclay Capital CEO Energy-Power Conference in New York City, Fusco said more than 40,000 MW of coal-fired plants have been identified for retirement, and that is “just the tip of the iceberg.”
“I like a low-priced gas environment,” he said. “I like having gas prices at the $4[/MMBtu] range for the foreseeable future. I don’t have to worry about a competitive threat [from coal].”
With the low gas prices and after four years of tightening up Calpine’s internal operations following a Chapter 11 bankruptcy reorganization, the independent power producer now is “ready to break out.”
Four years ago the expectation was for more stringent environmental regulations to drive gas-to-coal switching, Fusco noted. Now it is more a matter or price.
“The low-priced gas environment has created an opportunity for Calpine and companies like ours against those companies that use solid fuels [coal, uranium, etc.]. Whether they are coal or uranium, they are under distress at these ultra-low gas prices.”
Fusco said the average age of the 40,000 MW of coal-fired generation slated for retirement is 58 years, which he called well beyond their useful lives. “The remaining coal fleet in North America average is well more than 40 years old, so it is fully depreciated and getting up in age.
“There are significantly more megawatts of power plants that are going to be replaced during the next few years, regardless of what environmental regulations come out.”
Two coal-fired units are slated to be mothballed in the Powder River Basin next year by a competitor, which Fusco said was another indication that coal-fired generation plants were “coming under a lot of pressure, and we think that is long overdue.”
The current situation is “an opportunity to grow” for Calpine. He said the power plant operator has to raise the overall efficiency level of its fleet and tap in more to the Texas power generation market, which he said was growing at about 3,000 MW annually.
“‘What’s going on in Texas?’ is probably the number one question we get,” said Fusco.
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