At the Public Utilities Commission of Ohio, utility rate applications to support coal-fired plants have spurred an examination of Ohio’s electric generation mix. FirstEnergy, which owns Toledo Edison, Cleveland Electric Illuminating and Ohio Edison, is currently seeking approval to collect subsidies for three coal plants and one nuclear plant (PUCO Case No. 14-1297-EL-SSO). According to FirstEnergy, the primary basis for this proposal is purportedly to hedge against volatile retail rates. But FirstEnergy also states that its proposal will maintain generation fuel diversity by keeping coal in the mix. Without maintaining this diversity, FirstEnergy grimly states that it places “Ohio’s energy future” at risk.
Ohio Power Company (OPC), a subsidiary of American Electric Power (AEP), already has a placeholder rider to subsidize electric generation at a zero rate, and is now requesting commission approval to collect subsidies over a period of several years for portions of 6 coal-fired plants located in Ohio (PUCO Case No. 14-1693-EL-SSO, et al). OPC states that their Application will “reduce the likelihood of premature retirements” of these coal plants, which they describe as currently being “on the economic bubble.” OPC also states that these plants are “vital to Ohio’s economy” and that, without them, Ohio faces the prospect of being “a perpetual importer of power and a taker of volatile market prices in the future.” (Ohio is already a net importer of electricity, according to several sources, including the U.S. Chamber of Commerce. Ohio obtains electricity through a regional grid known as “PJM”).
What is Ohio’s generation mix? What natural resources are used for electricity generation? Ohioans and Ohio appear to be employing an “all of the above” strategy. Coal is the primary natural resource, but natural gas-fired generation is increasing with the availability of low cost natural gas from the Utica and Marcellus shale plays increases, along with the continued development of renewable generation facilities and industrial cogeneration.
Currently, Ohio has approximately 17,000MW of coal generation. The PUCO must decide wither customers will subsidize AEP’s share of approximately 5,800MW of coal generation capacity and 2,200MW of coal generation capacity for FirstEnergy. Regionally (within the territory served by PJM, which covers Ohio and all or parts of 13 other states), 26,000MW of generation facility retirements have been announced. In 2014, coal fueled 67% of Ohio’s electricity generation, according to the U.S. Energy information Administration. But this is decreasing, as uneconomic coal plants are retired.
Facilities fueled by coal are being replaced by natural gas fired plants (along with renewable generation). According to the PUCO, natural gas currently accounts for 25% of Ohio’s electric generation. This is expected to increase significantly as new natural gas-fired facilities come on line and as older facilities are converted to natural gas. In the PJM region, generation resource additions for the period of 2007-2017 are expected to surpass 35,000MW. 75 percent of those new MW are gas-fired. In Ohio alone, six natural gas-fired plants are under construction or being developed that total more than 5,000MW of capacity, according to a recent letter to the Columbus Dispatch from Robert Flexon, the CEO of Dynegy. Thus, coal units will yield to natural gas-fired units as the primary supplier of Ohio electricity generation in the near future.
In order to operate those plants, a consistent natural gas supply is needed (gas supply for some plants was an issue during the Polar Vortex of 2014). Again, in the PUCO cases mentioned above, correspondence from America’s Natural Gas Alliance (“ANGA”) describes the state of natural gas production and usage. According to ANGA, production levels of natural gas from the Marcellus and Utica shale plays has doubled since 2012 to 15 billion cubic feet per day (“Bcf/d”). ANGA asserts that production will increase again in 2015, thus enabling gas production to keep up with consumer demand, including the demand of natural gas-fired power plants.
Currently, according to the Ohio Oil and Gas Association, there are 1,004 horizontal production wells in the Utica shale play, with 584 other wells drilled or being drilled, and 414 wells permitted. ANGA notes that while existing infrastructure is capable of carrying the produced gas/anticipated supply requirements, pipeline expansions have added 1.3Bcf/day of takeaway capacity from the Marcellus and Utica regions, placing Ohio’s electricity generators and other consumers in a strong position. ANGA’s conclusion appears to be that supply for natural gas plants is not an issue as the Commission considers whether to grant subsidies to coal-fired plants.
Finally, despite last year’s freeze of renewable generation requirements for electric utilities, the PUCO has registered over 5,000MW of renewable energy projects of varying size, located in Ohio or deliverable into the state as of October 2015. These are mostly solar and wind generators, but there are also biomass and hydroelectric facilities. In addition, recent studies have noted that Ohio has the potential for 9,800MW of technical cogeneration for combined heat and power facilities, a technology that enables industrial and commercial customers to generate electricity and capture heat from the process. 50 sites across Ohio are operating CHP systems with a combined generating capacity of 766.6MW, indicating that the potential for this technology has yet to be realized.
It appears that a better long term strategy may be to support the continued development of a wide range of generation resources rather than merely subsidizing uneconomical coal resources. The development and utilization of natural gas resources, the continued deployment of renewable generation facilities and the potential for industrial cogeneration provide additional options to secure Ohio’s energy future and act as a shield against potential market volatility.