Coal to renewables
A few decades ago, coal was the favorite primary energy source for power generators, given its high capacity factor and attractive price. But the fuel mix has moved away from coal to meet the changing dynamics of the US power industry (VPU). A combination of factors such as lower natural gas (UNG) prices, slower electricity demand growth, and policies encouraging renewables have accounted for the transition of fuel mix in the recent past.
According to the EIA (US Energy Information Administration), on a net basis, the US (SPY) added an average of 18.3 gigawatts of additional capacity each year between 1950 and 2015. Two time periods of above-average additions occurred during the oil price crisis of the 1970s and the natural-gas-fired capacity buildout of the early 2000s.
In the past few decades, additions to new generation capacity served growing electricity demand, and plant operators relied on electricity sales to rise as demand for electricity-consuming appliances and equipment grew. For this reason, new capacity added during that time had only a limited effect on the utilization rates of existing generation capacity.
The fuel mix transition has also had a significant influence on capacity factors of energy sources. Capacity factor is the ratio of actual output to potential output over a given time. Nuclear, for example, has the largest capacity factor among the other primary sources, while solar (TAN) and wind have the lowest.
However, the renewables’ zero fuel cost and substantially declined installation costs over the past few years have made them more attractive than nonrenewables. Notably, Dominion Resources (D), Exelon Corporation (EXC), and PG&E Corporation (PCG) are utilities that prominently use nuclear energy for power generation.
Now let’s discuss emissions and the Clean Power Plan.