Latest posts by James M. Taylor (see all)
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The largest coal power plant in the western United States may shut down soon due to low natural gas prices, the plant’s operators report. The struggles of the power plant – the Navajo Generating Station – illustrate the changing economics of power generation and new opportunities provided by affordable, low-emissions natural gas.
According to the Salt River Project, which operates the 2,250 megawatt Navajo Generating Station, “The economics of the energy industry are changing rapidly and falling natural gas prices are changing how coal-fired power costs compare with other options.” Shutting down the plant at the end of 2019 is a real possibility, Salt River Project noted.
The Navajo Generating Station, located near the northern border of central Arizona, dominates power supply in the region. A 1,000-megawatt power plant is considered a very large plant, and the Navajo plant generates more than twice that much power. By itself, it provides 90% of the power for the Central Arizona Project, which pumps Colorado River water to Phoenix, Tucson, and southern Arizona.
Built and paid for over 40 years ago, it would seem the facility would have little difficulty competing against other power sources. However, natural gas prices are so low that existing and future natural gas power plants can generate power less expensively than the existing coal plant. Not only is natural gas quite inexpensive, but natural gas power plants cost only about one-third as much to build as coal power plants. The theoretical savings from operating an existing coal power plant that has already been paid for vanish when the cost of building and operating a newer natural gas facility are so low.
Natural gas critics frequently argue that a history of higher and more volatile natural gas prices should steer utilities and government policymakers away from natural gas. However, such critics are comparing apples to oranges. The fracking revolution, which began approximately a decade ago with new advances in fracking and directional drilling technologies, has forever changed the economics of natural gas production. Vast natural gas deposits that were too costly to recover as recently as the George W. Bush administration are now accessible at very low costs. Absent new government measures to obstruct natural gas production, our nation’s enormous natural gas resources and inexpensive production technologies will keep natural gas prices low for the lifetime of newly built natural gas power plants.
For the Salt River Project, the changing economics of power production may necessitate the closure of one of the nation’s largest coal power plants. For energy consumers and environmentalists who value natural gas’ minimal air pollution, the changing economics of power production represent another tangible benefit of technological progress.
[Originally Published at Forbes]