Coal vs. natural gas: It's complicated

Sep 27 - McClatchy-Tribune Regional News - Jeannie Kever Houston Chronicle

The glut of natural gas unleashed by hydraulic fracturing -- and the resulting low prices -- make it seem like a no-brainer: Ditch coal-fired electric plants, with all their baggage about air pollution and water consumption, and switch to natural gas.

Trends over the past year suggest that's starting to happen nationally, as natural gas has overtaken coal for generating electricity.

Use of coal to generate electricity was down almost 18 percent for the first seven months of 2012, compared with the same period in 2011, according to the U.S. Energy Information Administration. Natural gas use was up by 30 percent.

In Texas, the proportion of electricity generated with coal dropped 8 percentage points so far in 2012. But with a new Central Texas coal plant scheduled to begin operations next spring, coal-generated electricity is likely to remain a substantial part of the state's grid for years to come.

Low natural gas prices alone aren't enough to prompt power companies to shift multimillion dollar investments.

"Nobody's going to tear down a half-billion-dollar coal plant to put in a new natural gas plant just because natural gas is slightly cheaper," said Edward Hirs, an energy economist at the University of Houston.

In a recent analysis, Hirs and his co-authors predicted no more than 20 percent of coal-fired electric power nationally would shift to natural gas within the next 20 years.

Politics may play a role in determining coal's future.

War on coal?

The House of Representatives earlier this month passed the Stop the War on Coal Act of 2012, aimed at blocking federal regulations that could affect coal mining and highlighting Republican differences over energy policy with the Obama administration.The bill stalled in the Democrat-controlled Senate.

A federal appeals court last summer cleared the way for the Environmental Protection Agency to move ahead with additional efforts to limit greenhouse gas emissions from industry and vehicles, and the EPA is expected to introduce the first set of national limits on carbon dioxide from new coal-fired power plants.

"It's hard to know which way the politics will go," said Steve Piper, associate director at SNL Energy. "The greenhouse gas standard is fairly new. That's going to make it hard to build new coal plants. If a new administration was hostile to that rule, they could probably get it stopped. But at the same time, everybody wants to embrace natural gas."

Austin's city-owned utility is talking about selling the city's share of a coal-fired power plant and investing in natural gas to reduce its carbon footprint.

Almost 40 percent of electricity generated nationally is now produced by burning natural gas, Piper said, while coal use accounts for about 35 percent.

In Texas, coal-fired plants produced about 39 percent of the electricity flowing through the grid operated by the Electric Reliability Council of Texas last year. That's down to 31 percent so far this year, a more modest drop than reported nationally. There are several reasons.

Relatively new

Texas coal plants are relatively new, with the oldest dating to the 1970s, said Kent Saathoff, vice president for grid operations and system planning at ERCOT, which operates most of the state's grid.

Until then, virtually all electricity in the state was generated by natural gas. When natural gas supplies appeared to be declining -- and prices rising -- utilities started to build coal-fired plants.

Newer plants can be retrofitted to meet changing air quality standards more easily than older plants in other parts of the country, Saathoff said.

Many of the state's largest power generators already use a mix of fuels.

NRG Energy's W.A. Parish plant in Fort Bend County has four coal units and five natural gas units.

The company also has plants powered by nuclear, oil and renewable energy, including wind and solar.

Luminant, the largest power generator in Texas, has natural gas, nuclear and coal-powered plants. It notified ERCOT last month that it hopes to mothball two coal units near Mount Pleasant for up to six months.

Spokeswoman Ashley Barrie said if ERCOT approves, the units will shut down.

Piper said Texas coal plants have another advantage over plants in some parts of the country because they are closer to coal mines -- Luminant operates a number of lignite mines in the state -- or have access to coal from other states.

Transportation costs, as well as the direct cost of coal, are a factor.

But Hirs noted that access to natural gas would become an issue if the number of natural gas-fired plants were to increase substantially.

"If we replace coal plants in the Northeast with natural gas plants, we need a constant supply of natural gas," he said, rather than relying on the same pipelines used to carry gas for heating and industrial production.

"Until the government gets behind building more pipelines for natural gas and making the supply available for generators, we're not going to see wholesale change," Hirs said.

jeannie.kever@chron.com