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US coal power won't come back: power-sector CEOs

Houston — The US electricity sector faces many uncertainties in the spring of 2017, but the resurgence of coal-fired generation is not among them -- it will not happen.

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Those were points made by speakers at S&P Global Platts' 32nd annual Global Power Markets Conference in Las Vegas.

"I don't know one CEO who says, now that Trump is in office, let's go build a coal plant," said David Crane, senior operating executive of Pegasus Capital Advisors and former CEO of NRG Energy. "[Trump] will be out of office before such a plant is even permitted."

Crane spoke during a panel discussion entitled "Global Power Markets Executive Roundtable."



Coal plants "are just not economic," said Nazar Massouh, Orion Energy Partners CEO, co-founder and managing partner, who added that perhaps all of the attendees of the panel discussion realized this, but "99.9% of the US population does not."

"In order for coal to [make a comeback], we have to make electricity lots more expensive," Massouh said.

Declan Flanagan, Lincoln Clean Energy founder and CEO, said, "largely, there's zero appetite" for new coal-fired generation.

Roman Kramarchuk, managing director for global power at PIRA Energy, now a unit of Platts, had earlier addressed the issue in a presentation entitled, "Is Window Closing for Coal & Opening for Gas?"

Factors that affect the viability of various types of generation fall into three broad categories: market fundamentals, policy/regulations and technology.

The energy intensity -- GWh/GDP in terms of purchasing power parity -- of developed economies, especially in the US, has been in decline, Kramarchuk said. Thus, the fundamentals of demand have been in decline in the US.

One factor in that decline is the increased energy efficiency of the various uses of electricity, such as lighting and space heating, Kramarchuk said. On just one of those uses, lighting, the US Energy Information Administration has projected that the widespread adoption of LED lighting would cause a 261-TWh drop in power demand by 2030.

Another fundamental factor is the spread of distributed generation, which has already caused peak demand to drop substantially in places such as California, where rooftop solar is common, Kramarchuk said.

Regarding policy/regulatory issues, those range from high level, such as global and national pronouncements, to local and private-sector decisions.

At the federal level, Congress faces a May 9 deadline to act on proposals to review rules instituted late in the Obama administration, and lawmakers have higher-priority items on their plate, currently, Kramarchuk said. Passing new legislation also can be time-consuming and may face substantial hurdles on both sides of the aisle.

The White House has issued executive orders and memoranda, and may institute traditional rulemaking proceedings, but these may face legal challenges and entail time-consuming processes.

Related: Find more content about Trump's administration in our news and analysis feature.

Regarding issues that would be decided by the Federal Energy Regulatory Commission, the White House has yet to nominate a person to establish a quorum on the five-person body, which now has two members.

At the other end of the scale, commercial and industrial customers have been taking advantage of improvements in technology, such as rooftop solar and increasingly efficient wind generation, to commit toward substantial or 100% renewable power.

During the CEO roundtable, Mark Goodwin, Apex Clean Energy CEO, said, "What's happening now is the performance of turbines is increasing -- the technology is terrific, capacity factors are going up, the cost is going down."

Capacity factors have been approaching 60%, which Goodwin said resembles that of a natural gas-fired combined-cycle plant.

Goodwin pointed out that MGM Resorts International, which owns much of the Las Vegas strip, announced in May that it is shifting much of its power supply from NV Energy to renewables.

And Orion Energy's Massouh pointed out that Toyota, as part of its commitment to obtain all of its power from sources that emit zero carbon dioxide, pushed Kentucky officials and its local utility to facilitate the delivery of renewable power from a solar plant and methane derived from a landfill to Toyota's large plant in central Kentucky.

When Pegasus Capital's Crane was leading NRG, he said, pro-renewables companies such as Ikea would not do business with his firm, despite NRG's own renewables portfolio, because NRG also owned coal plants and was the nation's fourth-largest polluter at the time.

Utilities that stay secure in their "safety bubble" of state regulation and fail to respond to such private-sector demand for renewable power are in a "death spiral," Pegasus Capital's Crane said.

"We're in a world of activist shareholders," Crane said. "Those activist shareholders will say to utilities, 'You should stick to what you do best.' If I'm an activist, I don't care what you will be doing 10 years down the road, because I will only be in your stock for a year."

--Mark Watson, markham.watson@spglobal.com

--Edited by Lisa Miller, lisa.miller@spglobal.com