In the heart of coal-fired and nuclear generation, the southeastern United States, natural gas is moving up fast in the power generation fuel mix, according to the third quarter earnings conference call for one of the region’s major utilities, Southern Cos.
While reporting a strong uptick in quarter-over-quarter profits in the third quarter ($918 million, or $1.07/share, compared with $817 million, or 98 cents, for the same period last year), Southern CEO Thomas Fanning reported that gas-fired generation in the quarter accounted for 30% of the power generation in the utility’s fleet, and coal had dropped to 50%.
Four years ago Southern’s generation mix was 70% coal-fired generation and 10% came from natural gas, he noted.
“We have moved in this [more diverse] direction solely for the benefit of our customers,” Fanning said. “Our combined-cycle gas generation units are now starting to look like baseload units.”
While there is the prospect for an added 2,500 MW of gas-fired generation being added to Southern’s overall generation fleet by the end of 2013 in part as coal-fired plants have to be phased out do to future environmental regulations, he nevertheless stressed that added natural gas pipeline infrastructure will be needed in the Southeast in the years ahead to support a ramping up of more gas-fired generation.
“We’re very bullish on natural gas, and I hope everyone understands that,” Fanning said. “We look forward to using more natural gas in the future, but if we shut down some of our coal plants, and if we’re required to convert some of those plants to gas as a result of the proposed EPA [Environmental Protection Agency] rules, we are going to need more gas pipeline infrastructure.”
He said that currently Southern’s firm gas pipeline capacity is full in the Southeast. “We’re going to need more gas infrastructure to support more gas demand.”
Fanning also noted that even as the United States seems to be moving in the direction of reducing the nation’s overall appetite for coal, the fuel will still be used worldwide. “We’ve already seen the big exports to China, India and a variety of other nations,” he said. “The coal will be consumed, but the question is as a policy matter, will it be consumed for the benefit of the United States?”
As a further harbinger of perhaps more gas use, the economic activity — particularly in the industrial sector — is beginning to pick up among Southern’s multiple utility service territories in the region. In the third quarter, industrial sales jumped 1.6% and were 95% of the pre-recession levels in 2008, according to CFO Art Beattie.
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