With natural gas the cheapest backup for intermittent renewable-based electricity, combined with growing U.S. abundance of shale-based supplies, gas is not just a bridge fuel, it is the nation’s fuel for the future, said Calpine CEO Jack Fusco, speaking at the Barclays Capital CEO Energy-Power Conference in New York City.

In addition to stressing the importance of gas-fired generation in the current low-priced, low-growth wholesale electricity markets, Fusco ruled out Calpine following some of its national competitors into the retail power market. He said Calpine management recently completed a detailed analysis that concluded that retail would not be a good fit for Calpine.

“The combined-cycle gas turbine is the cheapest form of backup power from a levelized cost basis,” said Fusco, noting a coal plant would be 1.5 times and solar thermal or offshore wind would be at 4.8 times that.

“That is interesting, but what I found even more compelling is what you have to assume will be the price of carbon,” he said. “Regulatory and legislative folks talk about a zero-carbon world, but if you support 1,000 MW of offshore wind, not only would it take close to $600 million annually in taxpayer or ratepayer subsidies, you would have to believe carbon prices were more than $651/metric ton.”

In contrast in the mid-Atlantic, northeastern states regional exchange, the recent price for carbon cleared at $2/metric ton, Fusco said.

“We at Calpine believe that with the shale gas finds in America, natural gas is affordable, abundant and domestic, so [the nation] needs to start capitalizing more on that fuel source, not only as a bridge fuel, but as a fuel for the future,” he said.

In response to a question about Calpine adopting a retail power strategy, Fusco said he and the management team have spent “an enormous amount of time” looking at that very question in recent months. (Another large national independent power producer, Princeton, NJ-based NRG Energy Inc., is into retail in Texas and elsewhere and its CEO, David Crane, has been touting the move.)

“When I describe how we make our money on peak and super-peak hours, we have a lot of flexibility with our units,” Fusco said. “That is where we get the majority of our income. The retail business would be a completely new business for us.

“When one of our competitors [NRG] bought a Houston retail shop, there were 1,100 employees that came over to run that business. We have 2,000 employees and 92 power plants, having another 1,000 employees would take a completely different skill set, and not one for which we currently have the skills in-house.”

Fusco thinks under current conditions of low retail prices and low volatility, the retail business is great, but when that reverses, it doesn’t look very good. “We did a lot of analysis, and it turned out that [retail] just wasn’t right for us at this point, and I don’t see that changing under my watch,” he said.

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