(Blog post derived from The Columbus Dispatch)
“There was big energy news today that American Electric Power (AEP) plans to close a coal-fired power plant near Beverly, Ohio, that had been slated for conversion to run on natural gas. The Columbus-based utility said yesterday that Muskingum River Unit 5, with a capacity of 585 MWs, will stop operating in 2015. The company is taking that action at a time when wholesale electricity prices remain low, and Ohio’s power demand has been close to flat.”
Teresa Ringenbach, Senior Manager, Government & Regulatory Affairs, Direct Energy, comments: As coal-fired power plants age and new environmental rules are put into place, it is likely some plants will be shut down. However, just like any other industry where new technology replaces the old, new plants will be built if and when they are needed. In fact, many new plants are already approved and several new plants went online in PJM over the last few years. There are federal, state, and regional reliability protections for customers to ensure the lights stay on. Lastly, competitors such as Direct Energy have the capability to offer innovative products designed to allow customers the flexibility to save money even if market prices increase. Read the July 12 article from The Columbus Dispatch.
(Post derived from the Pittsburgh Post-Gazette)
There was big energy news this week that FirstEnergy will be deactivating two coal-fired power plants in Pennsylvania – 1,710 MW Hatfield’s Ferry power station in Masontown, Greene County, and the 370 MW Mitchell plant in Courtney, Washington County. One reason is the cost to comply with EPA’s mercury and air toxics standards. Another is the cheap price of natural gas nudging coal generation to the side. And a big part of it is the lack of demand for electricity. Direct Energy comments.
In the electricity business, we talk A LOT about natural gas market. Where is the market going? What affects the market? If our business is mostly about electricity, why do we talk so much about natural gas? Simply put, the greatest driver of electricity prices is the price of natural gas. Let’s take a look at why this important correlation exists.
First, a significant amount of electricity that is generated in the U.S. comes from the burning of natural gas - historically it’s been about 20%. The rest comes from coal (about 50%), nuclear (about 20%), hydro-electric (about 8%) and renewable (about 1%). If 50% of all electricity generated in the U.S. comes from coal, why is the correlation between natural gas more important? To answer that question, you’ll need to understand the order in which electricity generators are dispatched and how prices for electricity are set.
Click here to view a Gas Power chart. Continue reading to learn what it means.