Utility coal plants closing, natural gas to replace

A North Carolina utility closed one of its coal-fired power plants this past weekend, to be replaced with a natural gas-fueled combined cycle combustion turbine facility.  Duke Energy subsidiary Carolina Power & Light, which does business as Progress Energy Carolinas, announced on Friday that it would close its coal-fired H.F. Lee facility on September 15.  The Lee Plant closure is part of a broader shift away from utility and non-utility "merchant" use of coal to generate electricity, in favor of natural gas and other fuels.

Progress Energy Carolinas provides electricity to about 1.5 million customers in both North Carolina and South Carolina.  The utility owns more than 12,200 megawatts in generation capacity, and serves a 34,000 square mile territory, including the cities of Raleigh, Wilmington and Asheville in North Carolina and Florence and Sumter in South Carolina.

The Lee Plant's story resembles that of a number of other coal plants across the country.  Built in 1951 on the Neuse River near the town of Goldsboro, the plant was gradually expanded over time.  By the 1960s, the Lee Plant hosted three coal-fired units with a total generating capacity of 382 megawatts.  Four oil-fueled combustion turbine units were also added to the plant, adding another 75 MW of generating capacity, will be retired Oct. 1, 2012.

U.S. energy markets and environmental regulations continued to develop over the ensuing decades.  Most recently, tighter federal air emissions regulations and an abundant supply of low-cost natural gas have made older and smaller coal-fueled power plants uneconomic to operate.  As a result, owners are retiring these plants, and converting others to alternative fuels.  For example, last week utility Dominion Virginia Power announced plans to convert its Bremo Power Station in Virginia from coal to natural gas. 

Progress Energy Carolinas is following this trend.  The utility closed its coal-fired W.H. Weatherspoon power plant near Lumberton, N.C. last year.  It also plans to retire the remainder of its coal-fired plants without advanced environmental controls by the end of 2013: the Cape Fear Plant near Moncure, N.C., the Robinson coal-fired unit near Hartsville, S.C., and the L.V. Sutton Plant near Wilmington, N.C.  These coal-fired unit retirements will represent about a third of the utility's coal-powered fleet, or about 1,600 MW of generating capacity.

To replace the power produced from these closing plants, Progress Energy Carolinas is building new natural gas-fueled combined-cycle units.  Adjacent to the Lee Plant site, the utility is extending an existing natural gas pipeline and building a new, 920-MW natural gas-fueled combined-cycle facility.  This plant, along with the five dual-fueled combustion turbines at the existing Wayne County Energy Complex, will be called the H.F. Lee Energy Complex when complete.

Projections suggest that natural gas will remain available at a relatively low cost for the next twenty years.  At the same time, environmental regulations tend to grow tighter over time.  These two factors suggest that the current trend of utilities switching from coal to natural gas to fuel electric generation may continue for the foreseeable future.

Utilities switching from coal to gas

Utilities around the country are closing or converting older coal-fired power plants, and increasing the use of natural gas.  Pressure to make this shift comes from several factors, including tighter regulation of air emissions and the low price of natural gas compared to recent history.

The stacks of the Salem Harbor Power Station rise above Cat Cove in Salem, Massachusetts.  Dominion announced last year that it would close this plant, which it then sold to Footprint Power.

One electric generation plant that may illustrate this trend is Dominion Virginia Power's Bremo Power Station on the James River in central Virginia.  Originally built by the Virginia Electric & Power Company in 1931, the plant can now produce 227 megawatts of electricity by burning coal to boil water; the resulting steam spins turbines attached to electric generators.  According to Dominion, the Bremo plant consumes an average of 2,500 tons of coal per day.

This week Dominion announced plans to convert the Bremo plant from coal to natural gas.  In a filing with the Virginia State Corporation Commission, the regulatory body responsible for electric utilities, Dominion asked for approval to convert the plant over the next year at an estimated cost of $53.4 million.  If the SCC approves the conversion, the utility anticipates stopping coal consumption at the plant by the fall of 2013.

Dominion had previously agreed to convert the Bremo Power Station by spring 2014 as part of the air permit it received for the 585-megawatt Virginia City Hybrid Energy Center.  That plant entered commercial operations in July of this year, burning a mix of coal and biomass.

Dominion describes the Bremo conversion as being the ninth company-owned, coal-fired power station with units recently announced to be closed or converted to alternative fuels.  The utility points to the uneconomic nature of operating smaller, older coal-fired stations given the spread of cheaper natural gas and new environmental regulations requiring operators to retrofit plants with upgraded emission control equipment.  According to Dominion, the Bremo conversion would allow consumers to save about $155 million when compared to continued operation on coal.

Other utilities are making similar conversions or are considering closing some existing coal-fired plants. Natural gas consumption is on the rise, particularly in the electric generation sector.  At the same time, many utilities continue to rely on coal as part of their generation portfolio, as evidenced by Dominion's construction of the the primarily coal-fired Virginia City plant.  The trend appears to be one of closing or converting older or smaller coal-fired plants, consolidating coal consumption in larger, newer plants and increasing the use of natural gas to produce power.