Florida gas-fired power plant latest move away from fuel oil

Houston (Platts)--29Apr2013/435 pm EDT/2035 GMT

The start-up last week of Florida Power & Light's Cape Canaveral combined-cycle, natural gas-fired power plant, replacing an older fuel oil powered plant, marks the latest move away from domestic petroleum power demand in the state.

It is a trend that will continue, with FP&L set to replace two more fuel oil-fired plants with gas units over the next two years.

The 1,200-MWh Cape Canaveral project, which started operations on April 24, replaced an older dual fuel plant that had used about 60% fuel oil and 40% gas, FP&L spokesman Neil Nissan said Monday.

The move is part of FP&L's 10-year site plan for upgrading and maintaining its power grid and generation capabilities.

With the completion of the Cape Canaveral project, FP&L has already moved on to replacing its Riviera Beach dual-fired generator with a gas-fired plant, which is due to be operational in 2014.

FP&L also plans to replace its Port Everglades dual fuel unit with a plant fired solely by gas by 2016.

The new units will not completely abandon liquid fuels, as they will keep some on hand for emergency gas supply constraints. The new units, however, will rely on ultra low sulfur diesel rather than fuel oil for those emergency supplies, Nissan said.

The new plants are the most recent developments in a decade-long shift away from fuel oil, and liquid petroleum fuel in general, and towards gas by the Florida generation market.

FP&L estimates it has cut its oil demand from 40 million barrels/year in 2001 to less than 1 million barrels/year in 2012, FP&L spokesman Eric Hofmeyer said. FP&L does not break that transition down by years, he said.

And it is unlikely that trend will do anything but continue, market sources say.

"The only way fuel oil has a chance to run in Florida is if natural gas is cut off," a fuel oil trader said, comparing the situation to recent infrastructure changes in the Northeast which is also moving towards gas for heating and power generation.

"Then the problem becomes anyone having the specs you need when you need fuel oil," the trader said.

Despite that risk, there is not much interest in keeping some dual-fired generation on the grid in case of large scale gas constraints, Hofmeyer said.

Much of that is due to a well developed gas pipeline infrastructure and ease of access to supply even in high demand times, when compared with the Northeast.

Over the last three years, the gas price at the Florida city-gates has risen no higher than $8.155/MMBtu during the summer cooling season or $17/MMBtu during the winter, according to Platts data, still well below the equivalent cost of fuel oil.

By comparison, winter demand in the Northeast in 2013 saw spot gas prices rise in excess of $30/MMBtu.

With the addition of the Cape Canaveral plant, gas now accounts for 73% of FP&L's fuel mixture for power, Nissan said, while fuel oil accounts for less than 1% of it.

The bulk of the rest of FP&L's power comes from nuclear --21% -- then coal and a small amount of solar power.

While that mix will continue to shift, the move away from oil looks to be flattening out in the near term. After the Port Everglades project is completed in 2016, FP&L will moving on to focus on its nuclear plants.

FP&L will still have five dual fuel oil/gas plants in use on its system, but has no plans to renovate them, according to its current site report, which was released in early April.

The next FP&L site report, which will cover the 2014-2016 cycle, will not be out until April 2014.

--Joshua Starnes, joshua_starnes@platts.com
--Edited by Keiron Greenhalgh, keiron_greenhalgh@platts.com

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