PEG’s fuel mix
Public Service Enterprise Group (PEG) is aggressively increasing its generation fleet with a focus on gas and nuclear energy sources. It is heavily relying on nuclear and natural gas currently for power production. With a total capacity of 13,146 megawatts, 46% of PEG’s generated power in 2015 came from natural gas while 18% came from coal-fueled power plants. Two new natural-gas-fired plants, which are expected to be operational in the next two years, may shape a greener fuel mix for PEG.
New capacity addition
In August 2015, PEG announced its construction plan for Sewaren 7, a new duel-fueled (gas and steam) power plant in Woodbridge, New Jersey, which will be operational in 2018. A 540-megawatt plant in Woodbridge is expected to cost ~$650 million. In June 2015, PEG acquired a development project to construct a 755-megawatt gas-fired power plant known as Key Energy Center in Maryland. The estimated investment for the project ranges between $825 million and $875 million, and it is expected to complete in 2018.
PEG also operates marker nuclear plant units with a combined capacity of ~2,500 megawatts in Salem, New Jersey. PEG owns 57% of this power plant while the remaining 47% is owned by Exelon (EXC). According to PEG’s 2Q15 presentation, PEG’s nuclear fleet is the most cost efficient in the US, as it generates 1 MWh (megawatt-hour) for just $37 while the industry average stands at $44.
Threat to coal players
In order to adhere to the EPA’s (U.S. Environmental Protection Agency) Clean Power Plan, utilities are striving to switch from coal (KOL) to greener energy sources. In the last two quarters, utilities have been increasing the natural gas portion of their generation mix due to massive price correction of natural gas (UNG). Therefore, a further fall in the natural gas prices may eat into coal’s market share in power generation. This is negative for the pure-play coal companies like Arch Coal (ACI), Peabody Energy (BTU), and CONSOL Energy (CNX).