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Coal sector warns of overreliance on natural gas as plant retirements loom

The economics-driven shift from coal-fired to natural gas power generation should raise policy questions about the stability of the U.S. power grid, Consol Energy Inc. CEO Jimmy Brock said at an industry event.

Citing coal's headline role in providing power during recent cold-weather events and past volatility in gas markets that have been reliably cheap as of late, Brock warned that natural gas exploration and production companies are beginning to show signs of supply discipline that could increase prices.

"Do we want all of our eggs in a high-risk basket?" Brock said May 10 at the Eastern Fuel Buyers Conference in Orlando, Fla.

To ensure grid reliability, Brock suggested getting rid of the U.S. EPA's New Source Review program, which requires expensive, new pollution controls to be added when "major" modifications are made to an existing "major source," including coal-fired power plants. He also called for policies that value resiliency attributes of coal-fired generation, a reference to proposals by the U.S. Department of Energy under Secretary Rick Perry that would incentivize coal and nuclear generation.

Orlando Utilities Commission COO Jan Aspuru said the organization values fuel diversity and is becoming concerned about an increased reliance on natural gas. He warned that a problem with a major pipeline could result in rolling blackouts through the state. However, he said every month the commission gets calls to retire coal-fired plants, and those are "challenging to counter."

Keeping coal in a diverse generation mix is "the right thing to do," Southern Co. Vice President of Commercial Operations Scott Teel said. Coal and gas have long accounted for about 80% of Southern's generation mix, he said, but gas's share has gone from about 10% to about 50% in recent years. He expects that will remain stable for some time and said Southern cannot retire many more coal-fired plants without replacing them with other capacity.

Each time a new natural gas forecast is released, the conversation about preserving a coal plant becomes a little more difficult, he said.

"Every single dollar that we need to spend on a coal plant now requires some analysis," Teel said. "I think the pressure in the long term is keeping those units alive."