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Mills: Low electricity prices doom coal plants

Nov. 24, 2017 at 11:02 p.m.


Texas has been blessed with abundant sources of energy. Crude oil and natural gas have made Texas a powerhouse for about 100 years. Coal has been prevalent, too. Now, solar and wind are bringing new sources of power to the Lone Star State's electric grid.

The competition between these energy sources provides consumers with a reliable source of electricity to power our homes and businesses.

In the marketplace, there are always winners and losers. The market for sources of energy to generate electricity in Texas has evolved so that the demand for natural gas and wind is rising and the demand for coal is declining.

Recently, the utility firm Luminant announced it will close two power plants, Sandow and Big Brown, in 2018, which provide enough electricity for 2.1 million homes. Sandow and Big Brown use coal to generate power.

"Sustained low wholesale power prices, an oversupplied renewable generation market, and low natural gas prices" led to the demise of the coal-fired power facilities, according to Luminant.

Wholesale prices for electricity have declined from $49 per megawatt in 2014 to $25 today.

The Electric Reliability Council of Texas, the primary electric grid agency for Texas, anticipates an increase in electric demand in 2018, and meeting those demands will be a challenge.

"ERCOT will study whether these specific units are needed for transmission system reliability in their respective areas of the grid and will make those determinations by December," the council said in a statement. It forecasts a record-breaking winter with demand reaching 61,000 megawatts. However, ERCOT said it believes that total generation capacity during peak demand will be 86,000 megawatts.

Natural gas and wind will fill the gap left by the closure of coal-fired generation plants.

The dramatic increase in natural gas produced from Texas shale formations has created an inexpensive source of energy right in our backyard.

Anyone who has lived in Texas for a day or two knows the wind blows hard nearly 24-hours a day, 365 days a year. The Electric Reliability Council of Texas estimates wind capacity to be about 21,000 megawatts this year, increasing to 24,000 in 2018. Meanwhile, coal will generate about 20,000 megawatts this year and decline further next year.

Natural gas is the largest source, accounting for 34,000 megawatts generated.

Even though demand for electricity in Texas is expected to grow next year, national predictions are flat.

U.S. Secretary of Energy Rick Perry, former governor of Texas, proposed a change in federal regulations designed to keep coal and nuclear plants in operation even if they cannot compete economically. He reasoned that coal and nuclear are more reliable because both can have large supplies available for immediate usage.

Many doubt Perry's proposal will have a direct impact on Texas electricity generation, but it most certainly could impact future demand for natural gas nationally.

— Alex Mills is president of the Texas Alliance of Energy Producers.

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