New capacity additions
The first half of 2014 saw 4,350 MW (megawatts) of new electricity generating capacity, according to the EIA (Energy Information Administration). Of this, 2,319 MW, or 53.3%, was natural gas–fired. Backed by federal and state incentives, renewable energy made big strides, accounting for 1,821 MW (or 41.9%) in new capacity additions during 1H 2014.
Coal’s losing steam
But we didn’t see any new coal-fired capacity. Plus, the Kemper plant in Mississippi is the only-coal fired power plant slated for commission in the remainder of 2014. As you saw in Part 3 of this series, new coal-fired power plants must reduce their uncontrolled carbon dioxide emissions by 50% from 2005 levels. To make that happen, new plants need to install carbon capture sequestration (or CCS) technology. And that’s costly.
CCS captures, compresses, and transports carbon dioxide through pipelines. It stores the carbon dioxide in underground rock formations. This approach lowers pollution.
While CCS can reduce coal-fired plants’ emissions, some people are questioning its viability. Implementing CCS means higher costs. Plus, growing natural gas production means that fewer new coal-fired power plants will come online. Gas-fired plants could replace coal plants, depending on price dynamics.
The upcoming Kemper Project—a CCS-enabled power plant—surpasses EPA requirements. But the project is ultra-expensive. It costs $6,800 per kilowatt compared to the $1,000 per kilowatt for modern natural gas plants.
So new electricity capacity additions will mostly center on natural gas and renewable energy. IGCC projects like Kemper are the last hope for thermal coal producers (KOL) like Cloud Peak Energy (CLD), Peabody Energy (BTU), Arch Coal (ACI), and Alpha Natural Resources (ANR). But they may not help maintain coal’s market share in the long run.
Why has natural gas become a favorite? Find out in the next part of this series.