A “perfect storm” of economic and regulatory factors is driving major United States utilities to rapidly switch from coal to natural gas as an electric power source, the top executive of one of the nation’s largest utilities said on Thursday.
Nicholas K. Akins, chief executive of Ohio-based AEP, said the company plans to retire 5 of its 25 coal-burning plants and shut down coal-powered units at other plants it owns in a shift that collectively means the elimination of about 5,000 megawatts of capacity. The result will be that by 2020, only about half of the power AEP produces will come from coal, down from about 67 percent last year.
The surge in domestic production of cheap natural gas, largely yielded by the rise of the controversial technique of forcing gas out of shale through hydraulic fracturing, has been a big factor in this shift. A series of new environmental regulations and pressure from environmentalists are also leading major utilities to either shut down older plants or spend billions of dollars to upgrade them.
Mr. Akins estimated that AEP alone would have to spend about $300 billion through the end of the decade to expand natural gas power generation capacity or retrofit older coal-fueled plants so they can meet new environmental standards — investments that it is asking regulators to allow it to pass on to its customers, at least in part, which total five million accounts in 11 states.
Renewable energy is expected to contribute a larger share of power to AEP’s mix by 2025, Mr. Akins said, but perhaps not as much as expected because of a decline in federal subsidies and continuing repercussions from the bankruptcy of Solyndra, the California solar manufacturer that collapsed last year despite receiving a $535 million federal loan guarantee.
And the once-anticipated nuclear power renaissance will probably not materialize, he added, in view of the Fukushima disaster in Japan last year.