US power utility Edison International announced over the weekend (3-4 March) it would shut two, and possibly three, coal plants in Illinois. Edison will shut down its two Chicago coal-fired power plants–one this year and one by 2014–rather than install pollution-control equipment to comply with state pollution limits, the company said. Edison said it also would probably shut down a third coal plant in Waukegan, Illinois, and possibly others.
The move comes as a result of a collapse in the wholesale price of natural gas in North America, thanks to the boom in domestic production of shale gas. Production from the US “lower-48” states reached 63.7 bcf/d in January, pushing prices on the Henry Hub market as low as USD2.36/mmBtu. This has led to around 175-TWh-worth of coal-fired generation being displaced from the merit order across the country, mainly in the north-east. With the shale gale showing little sign of abating, utilities have reacted by mothballing their coal-burning power plants: American Electric Power Co. Inc. has said it plans to shut down up to 6,000MW (mainly in Ohio) of capacity, while GenOn Energy Inc. said on Wednesday (29 February) it intends to shut down a further seven coal-fired power plants, with capacity of around 3,140MW.
Significance: North America’s experience in coal/gas price differentials comes in stark contrast to the European sector. In Europe, gas prices have regained much of the ground lost since their peak in 2008, thanks to oil-indexed contract rates being dragged up by bullish crude prices. At the same time, much of the coal that was being shipped to the US from Latin America and South Africa is being redirected to Europe, depressing coal prices there. As such, the clean spark spreads in Europe are well below clean dark spreads (in some cases even negative). In addition to this, surging volumes of power supply from renewable energy sources are squeezing the run time of gas-fired power plants (see: Statkraft Places 430MW Gas-Fired Capacity in Cold Reserve).
Therefore, whereas the US is seeing coal pushed out of merit by cheap gas, in Europe the opposite is true.
Solar power is booming in California—in urban and rural areas, along the coast and throughout the Central Valley, in Democratic and Republican strongholds alike—and a growing number of California’s leaders are seeking to build on this foundation by supporting Gov. Jerry Brown’s goal to build 12,000 megawatts (MW) of local, distributed energy throughout the state by 2020. That’s significant—12,000 MW is the equivalent of 24 coal-fired power plants.
To date, 8 Members of Congress, 35 Members of the California State Legislature, and 38 local officials from San Jose and Sacramento to Los Angeles and San Diego have signed on to say: “Yes, I endorse Governor Brown’s pioneering vision to build 12,000 megawatts of clean energy—enough solar energy to cover a million solar roofs—by 2020. By building solar on houses, apartment buildings, offices, schools, and warehouses across California, we can create green jobs, reduce air pollution, and generate clean energy to power our lives.”