Georgia Power looks for alternatives to coal

Just five years ago, 70 percent of the fuel used by Georgia Power to produce electricity came from a source lambasted by environmentalists from shore to shore — coal.

Today, that number is down to 47 percent. And Georgia Power recently announced it will close 15 coal and oil-fired units, removing 20 percent of electrical capacity from its power grid.

Georgia Power — and its Atlanta-based parent, Southern Company — is in the middle of a metamorphosis. Pushed by new environmental rules that could force the closure of hundreds of coal plants nationwide, Southern is looking for ways to reduce its four utilities’ reliance on that resource. Georgia Power is expected to reveal exactly what changes are in its future on Thursday, when it’s scheduled to release its 20-year energy plan.

Hailed by its defenders as reliable and cheap and blasted by critics as dirty and inefficient, coal helped shape America’s history, powering steamships and railroad engines. But the resource has come under increased scrutiny for two reasons —    environmentalists’ pressure on the Environmental Protection Agency to raise clean air standards and a precipitous drop in the price of natural gas.

Up to now, Georgia Power executives have shied away from saying how they would replace the electrical capacity if coal and oil units are shuttered. Georgia Power has won approval to buy electricity produced by natural gas from its sister company Southern Power, which could be a sign of what’s ahead.

“We are in the midst of a significant transition in our fleet that will result in a more diverse fuel portfolio — including nuclear, 21st century coal, natural gas, renewables and energy efficiency,” said Paul Bowers, Georgia Power’s president and chief executive officer.

Georgia Power’s alternative to coal likely will be its cleaner cousin, natural gas.

As for nuclear sources, it’s unclear whether more reactors will be built even though executives have said they would like to. Federal regulators are not approving any new projects while trying to figure out long-term storage plans for used nuclear fuel. And, reactors typically take 10 years to permit and build, which means nuclear cannot be a quick fix.

Environmentalists continue to press for increasing the use of solar and wind power, as well as coming up with more with energy-efficient technology. Georgia Power has agreed to buy more solar from independents, and the Sierra Club said the company should do the same with wind power, even if it has to come from other states where the resource is more viable.

Georgia Power’s sister utility in Alabama has agreed to buy wind energy from Oklahoma.

“(Relying so heavily on natural gas) is kind of a big gamble. It’s a pendulum switch,” said Colleen Kiernan, president of the Sierra Club’s Georgia Chapter. Wind is an intermittent resource and, as with other sources of electricity, becomes less efficient if it has to be transported from far away.

Coal may not be completely off the table in the future. Georgia Power’s sister utility in Mississippi is building a plant that converts coal to gas, then strips the carbon dioxide and other pollutants. Company executives tout the plant’s technology and have said, if successful, it could be used across Southern’s four-state territory.

But there is a cost — literally. The project’s $2.8 billion price tag is almost a half-billion dollars above original projections, and the project is not finished.

Meanwhile traditional coal-fired plants could face additional scrutiny. The EPA has targeted mercury and other air toxins at power plants and is expected to look at greenhouse gas emissions next. The agency is revising a greenhouse gas rule for proposed plants but might also take a look at existing facilities. A year ago, Georgia Power’s Plant Scherer and Bowen topped the EPA’s list of carbon emitters, in part because the plants are some of the largest in the country.

Regulations to curb greenhouse gas emissions also could target natural gas plants, but to a lesser extent. Natural gas plants also contain carbon, but the amount is much less than in coal-fired ones.

“It’s a completely different story,” said Paul Patterson, a utility analyst with Glenrock Associates.

Natural gas is not free from environmental concerns, however. Environmental groups say the process for extracting gas — hydraulic fracturing and horizontal drilling — is leading to contaminated water and earthquakes. Methane emissions, which escape during producing and transporting the gas, also could be as much or more potent than other greenhouse gases, environmental groups say.

The EPA issued rules to reduce air pollution from the natural gas drilling process but has not placed regulations on natural gas-fired power plants.

This year is critical for utilities ordered to reduce emissions by shutting down coal-fired units or equipping them with pollution controls. Companies must meet a federal deadline of 2015 — 2016 if granted an extension — to comply with environmental rules to curb mercury and other air toxins, but shutting down plants takes time. Designing and building pollution-control equipment takes several months as well.

There may be additional closures on the way, analysts predict. Natural gas prices are expected to stay below $5 for several years, making it even less economical to equip existing coal plants with pollution controls instead of shutting them down. Also, the EPA is expected to issue additional mandates targeting power plants, making it even more expensive to keep coal plants running.

That may be the one-two punch needed for regulators and shareholders to pressure utilities such as Georgia Power to close an aging coal plant instead of putting a $1 billion piece of equipment on it, analysts argue.

“This is probably why Southern didn’t announce its revised strategy for its fleet sooner; who knows when the EPA is done on making environmental rules tighter?” said David Parker, an analyst with Robert W. Baird & Co., which ran scenarios to figure out which coal plants likely would be shut down and which ones equipped with pollution controls.

“We thought 25-30 percent would be shut down and the rest get (pollution) equipment,” Parker said. “Today, everybody, including Southern, is kind of redoing the math.”

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