Electrical power producers are challenged with changing mixes of fuel sources due to economics, government incentives and hurdles, and technical challenges from variable sources such as solar and wind power. Emerson’s Douglas Morris, a member of the Power and Mining industries, explores these challenges in today’s post.
It seems that uncertainty for regulated power producers is increasing these days. Wholesale electricity prices are up over the first half of 2013, primarily from the effects of more expensive natural gas, but fluctuating gas prices can make it difficult to plan generation because as they change, a number of scenarios open up. For one, as prices increase, the economics look more attractive to dispatch coal over gas. As a general rule of thumb, at about $4 per MMBTU of gas, power producers begin to look at using coal power.
BUT, at higher gas prices, Independent Power Producers become more competitive with their gas-fired plants so there is added competition to supply power to the grid. And, even though the economics may improve for coal with more expensive gas, there is the ongoing uncertainty about future environmental regulations toward coal. All told, these factors make putting together a generation plan a challenge.
Source: Market Realist, Nat gas should gain market share from coal for power generation in long-term, despite recent losses, https://jimc.me/15kJ5KK
But that’s not the entire picture; let’s add in renewables to make it more interesting. With the increasing number of these sources feeding the grid, companies are adjusting to the new normal—variable supply.Source: Rocky Mountain Institute, Variable renewable output (hourly), https://jimc.me/15kJpcF
Since it’s more challenging to balance the grid with renewables, producers now must look beyond economics and consider the physics of generation assets. Which assets are flexible enough to cycle and stabilize supply to the grid? How fast can a plant ramp up? How much can a coal plant turn down and still keep a selective catalytic reduction (SCR) unit at temperature? These and many other scenarios are juggled as companies try and determine which generation mix affords the best return; complies with environmental regulations; and can cycle with today’s variable supply.
