Move to Renewables Puts Natural Gas-Fired Power Plants on Chopping Block

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Researched by Industrial Info Resources (Sugar Land, Texas)--As states move toward more renewable generation, a trend to retire or close older, or less efficient, natural gas-fired generating plants is taking place in California and elsewhere due to economic reasons. New renewable solar and wind generation is putting economic pressure on operational natural gas-fired power plants, especially plants that do not have resource adequacy contracts, according to a report from the California Independent System Operator (CALISO) (Folsom, California).

Attributed to economics and environmental and emission control costs, the closing of coal-fired and nuclear power plants around the country will continue over the coming years, but a new phase of closures has now begun. Natural gas-fired power plants are now starting to see closures due to competition with renewable generation and uncertain economics where owners cannot make a profit due to lower power prices, no matter how many plant jobs are combined or cut to lower overhead costs. At that point, with losses mounting, the plant owner must stop producing power and close or file for bankruptcy or reorganization.

Due to economics and high transmission fees, the Calpine Corporation (NYSE:CPN) (Houston, Texas) placed the Sutter Energy Center (Yuba City, California) into cold layup status last year. Calpine Corporation recently asked CALISO for permission to retire four peaking units at the Yuba City and Feather River power plants, both located in Yuba City, California, following the expiration of long-term power delivery contracts with Pacific Gas and Electric.

The deregulation of utility markets will continue, with wholesale markets growing, and states will continue to change how electricity services are delivered. Renewable Portfolio Standards (RPS) will continue to grow, putting more pressure on fossil fuel and nuclear power plants, while states undertake regulatory action to upgrade their aging transmission and distribution systems.

Flat and shrinking demand due to greater technology and energy efficiencies, and the construction of combined-cycle plants closer to load centers, reduce the need for large-scale transmission line projects. They focus the shift to replacing aging infrastructure, lower voltage transmission and distribution upgrades. Grid security will continue to be a priority for the electric utility industry.

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