Factors and Issues Re Fuel Switching and Building New Gas
Plants Jeffrey J. Norton, Esq. Energy Law & Policy Institute
University of Pittsburgh School of Law August 1-2, 2013
Slide 2
Agenda Overview of Factors that Lead Toward Fuel Switching SWOT
Analysis of Fuels and Switching Gas Utilization Opportunities Legal
Issues with Increased Gas Utilization in Baseload Generation 2
Slide 3
3 Gas Shale Plays in the U.S.
Slide 4
Slide 5
Outlook for U.S. Energy Use Source: U.S. Energy Information
Administration, Annual Energy Outlook 2011, April 26, 2011. Annual
Energy Outlook 2011
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Total Energy Use By Fuels Oil34% Natural Gas 26% Coal19%
Renewables11% Nuclear 10% (Source: EIA and JohnHanger.com Blog)
6
Slide 7
U.S. Power Generation Trends Source: EIA Black & Veatch
predicts in next 25 years*: Gas-fired generation will increase to
54% Coal-fired generation will decrease to 21% *assumes that
electricity demand will double with economic recovery 7
CoalGasNuclearWindSolar 200052%16%20%00 201142%26%20%3%0.2%
201236%29%20%4%0.4%
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Top Energy Trends Energy Boom Time in U.S. Oil & Natural
Gas are Growing Coal is Declining World and U.S. Trends are
Different Fuel Prices Have Dramatic Impact Shale Gas Continues to
Evolve Rise of the Decentralized Electric Grid Demand Side Consumer
Stakeholders Push for National Energy Policy 8
Slide 9
Coal v. Gas SWOT Analysis
Slide 10
Coal Strengths and Opportunities Vast supplies A major player
in generation Clean coal technologies Carbon capture and storage
Global exports are strong 10
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Coal Weaknesses and Threats 100,000 MW of U.S. Coal-Fired Power
Plants are 40 yrs. old or older Coal retirements in next 10 yrs.
Low nat. gas prices - loss of market share New environmental
regulations NSPS standards for new plants, GHG limits for plants to
be issued by EPA (in Sept. 2013?) Climate change issue, especially
in long-term 11
Slide 12
Obamas Climate Action Plan of 2013 Presidents plan to cut
carbon pollution Directs EPA to establish carbon pollution
standards for both new and existing power plants Likely result:
Stringent CO2 standards; new control equipment too expensive for
coal 12
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Critics of Climate Action Plan Electricity prices will rise
resulting in higher energy bills Lost coal jobs Natural gas prices
will rise halting manufacturing renaissance No impact on real
global climate change Unilateral exec. order bypasses Congress No
realistic backup plan 13
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Recent News re Climate Change First Energy will close 2
coal-fired plants in PA, scrapping gas conversion (380 jobs, 2,080
MWs) AEP will close coal-fired OH plant instead of converting Alpha
Natural Resources will lay off 100 employees in WV coal mines
United Church of Christ to divest pension funds and investments in
fossil fuel companies US Supreme Court to review case re EPAs
Cross-State Air Pollution Rule 3 rd Cir. Court approved EPA rule
that forced PA plant to reduce sulfur emissions into NJ 14
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Gas Development 15
Slide 16
Natural Gas Strengths and Opportunities U.S. Gas Production in
2011 Set Record U.S. is the Worlds #1 Gas Producer Shale Gas is
about 37% of Total U.S. Gas Supply U.S. Oil to Gas Ratio at Record
Levels: 35:1 30% of U.S. electricity gas fired in March 2012 Uses:
Transportation, Generation and Export Cracker Plants and Move to
NGL 16
Slide 17
Natural Gas Weaknesses and Threats Increased
Regulation/Potential Litigation Emotional Response
Gasland/Truthland Impact Studies water, emissions Low Prices Affect
on Drilling Over Supply Gas Storage Nears Capacity Drill rigs count
in PA is down 29% Number of wells drilled in PA in 1 st Q declined
18% from last year (per DEP) Need for infrastructure 17
Slide 18
Protecting the Environment Primary Environmental Issues For
Shale Gas Methane Leakage Gas Migration Air Emissions Injection of
Wastewater in Deep Caverns Water 18
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Gas Utilization and Energy Efficiency
Slide 20
Example: Combined Heat & Power (CHP) CHP co-generation
on-site generation of electricity/use natural gas create thermal
energy can be used in direct process applications or indirectly CHP
has many benefits: lowers demand on the electricity delivery system
frequently reduces reliance on traditional energy supplies makes
businesses more competitive by lowering their costs reduces
greenhouse gas and criteria pollutant emissions refocuses
infrastructure investments towards a next-generation energy system
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CHP - Overall Efficiencies 21
Slide 22
CHP - Continued Incentives are potentially available for a CHP
Project: Accelerated depreciation Section 48 - Investment Tax
Credits (ITC) Net Metering (up to 5MW) for excess electricity Act
129 Funds: FE, PECO, PPL and DLC Possible rebates or financing from
EDCs Gas Energy Efficiency Program PA loan programs/Alternative and
Clean Energy Program AEPS: Renewable energy credits (RECs) or other
potential credits may be generated by the CHP Project 22
Slide 23
Legal Issues and Challenges
Slide 24
Legal Issues Increased Environmental Regulation Level Playing
Field for Energy Incentives Term of Fuel Contract Reps and
Warranties Liabilities Risk of Loss/Insurance 24
Slide 25
Long-Term Purchase Contracts and Hedging Arrangements Natural
gas suppliers, power generators and consumers can share risk of
future price changes agree to a fixed price for portion with
balance priced at market rate buyers and sellers can have contract
terms of different lengths regulators can adopt framework to
approve prudent long-term purchases pipeline owners and regulators
can agree on appropriate tariffs 25
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Thank you. For Further Information: Jeffrey J. Norton, Esq.
[email protected] 26 Two Liberty Place 50 South 16 th
Street 22 nd Floor Philadelphia, PA 19102 (215) 523-7810 213 Market
Street 8 th Floor Harrisburg, PA 17101 (717) 237-7192
