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As natural gas replaces coal, U.S. utilities invest big in the future
Fortune ^
| AUGUST 26, 2015
| Katie Fehrenbacher
Posted on 08/27/2015 5:45:42 AM PDT by thackney
Southern Company isn’t alone in spending billions to position itself for the natural gas future.
One of the largest companies that owns utilities in the U.S., Southern Company, announced a big deal this week that highlights just how aggressively power firms are looking to boost their natural gas power resources at the expense of the declining coal industry.
On Monday, Southern Company SO 2.61% said it plans to buy natural-gas distributor AGL Resources GAS -0.08% for $8 billion in cash. The deal, which is for $12 billion but includes $4 billion in debt, offers AGL shareholders a 38% premium over AGL’s stock price when the deal first closed.
When combined, the new company will be the second largest U.S. utility with 9 million customers, and will be positioned with AGL’s natural gas pipeline. Bloomberg estimates that the combined company’s natural gas use will grow 22% from 1.8 billion cubic feet a day to 2.2 billion cubic feet a day by 2020.
Coal plants, which currently provide 39% of U.S. electricity, have closed all over the U.S. in recent years. Twenty three gigawatts—or 7% of US coal capacity—will be taken offline this year, according to Bloomberg New Energy Finance. For comparisons sake, a large coal plant can have enough capacity for about one gigawatt.
The retrenchment is partly due to the abundance of lower cost natural gas that has become readily available from shale deposits in states like Pennsylvania, West Virginia and Texas. By some estimates the U.S. now has 360 trillion cubic feet of proven natural gas in the ground that can be recovered.
It’s also because federal environmental regulations have started—and will likely continue—to push dirtier-burning coal out of business. Older coal plants have had to undergo expensive upgrades to make them cleaner, and many of their owners have opted to just shut them down instead of retool them.
That transition will likely continue if President Obama’s controversial Clean Power Plan remains in effect. The mandate, developed with the Environmental Protection Agency and recently finalized, imposes rougher rules on power plant operators to lower greenhouse gas emissions.
Many carbon emissions in the power sector come from coal plants. The Clean Power Plan is expected to help boost natural gas use while substantially cutting coal use.
There’s so many decommissioned coal plants that companies are being creative in how they reuse the newly vacant land. Google, for example, says it plans to build a new data center at an aging coal plant in rural Alabama.
This transition means that the coal industry is in real trouble. According to analysts, coal producers’ revenues have dropped at least 25% over the past three years while their profits have turned into losses. As a result, coal companies are cutting jobs. Meanwhile, some like Alpha Natural Resources, which lost $875 million in 2014, have filed for bankruptcy.
This shift in the energy industry means that big utilities like Southern Company have been forced to shed coal assets. Over the years, the company has announced plans to close over a dozen coal plants. But in keeping with its big billion dollar deal this week, Southern Company is pushing more into natural gas. Currently, 42% of its power generation from coal and 39% from natural gas—with those numbers. Down the road, natural gas could become its dominant power source.
TOPICS: News/Current Events
KEYWORDS: coal; electricity; energy; epa; globalwarminghoax; methane; naturalgas; opec; petroleum; popefrancis; romancatholicism; saudiarabia; waroncoal
1
posted on
08/27/2015 5:45:42 AM PDT
by
thackney
To: thackney
“The retrenchment is partly due to the abundance of lower cost natural gas”... and that’s fine and appropriate. It takes into account the (guessed) cost of natural gas over the 50 year lifetime of the plant. In 20 years demand for Natural gas may have skyrocketed forcing the price up.
But forcing conversions by adding an idiotic regulatory factor into the costs is a recipe for future disaster.
2
posted on
08/27/2015 5:53:09 AM PDT
by
mrsmith
(Dumb sluts: Lifeblood of the Media, Backbone of the Democrat/RINO Party!)
To: thackney
Ah, those mythical “greenhouse gasses”
We’ll find them, no matter how many people die for the cause.
To: headstamp 2
To: thackney
The USA literally sits on a mountain of coal. And we are just ignoring this energy source.
5
posted on
08/27/2015 6:15:48 AM PDT
by
2banana
(My common ground with terrorists - they want to die for islam and we want to kill them)
To: 2banana
but, is natural gas cheaper than preobama coal?
6
posted on
08/27/2015 6:26:59 AM PDT
by
bert
((K.E.; N.P.; GOPc.;+12, 73, .. Iran deal & holocaust: Obama's batting clean up for Adolph Hitler)
To: thackney
In my view, eliminating or trying to eliminate coal as a viable source of energy is a big mistake. Just in the interest of diversifying our sources of energy seems a prudent way to go.
Using coal can be made to be more environmentally friendly without destroying or severely curtailing their operations, and without bankrupting them.
Interesting that Soros has bought, or plans to buy, hundreds of thousands of shares of now near bankrupt coal companies Peabody Energy and Arch Coal. What is it that GS knows? Mabye coal isn’t dead, it’s just a game to take it away from us on the cheap.
7
posted on
08/27/2015 7:04:39 AM PDT
by
MichaelCorleone
(Jesus Christ is not a religion. He's the Truth.)
To: thackney
While George Soros is buying coal mining company stock.
8
posted on
08/27/2015 7:19:59 AM PDT
by
george76
(Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
To: bert
That’s the real question and letting the market decide is the best course of action. The next POTUS is in the dream position of simply being able to move us back to 2007-level regulations* and watching the economy boom.
* including repealing Democratcare.
9
posted on
08/28/2015 5:50:41 AM PDT
by
1010RD
(First, Do No Harm)
To: thackney; 11B40; A Balrog of Morgoth; A message; ACelt; Aeronaut; AFPhys; AlexW; alrea; ...
10
posted on
08/31/2015 8:38:54 PM PDT
by
Tolerance Sucks Rocks
(Democrats and GOP-e: a difference of degree, not philosophy)
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