INTERVIEW-U.S. power industry to invest $85 bln annually in electric grid

Wed Feb 6, 2013 10:24pm GMT

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Feb 6 (Reuters) - U.S. investor-owned utilities will invest about $85 billion annually this year and next to keep the power grid reliable and integrate new natural gas plants while cleaning up older coal units, the president of the industry's trade group told Reuters on Wednesday.

"Our industry is the most capital-intensive industry in the United States and projects to spend an average of about $85 billion a year on capital expenditures through 2014," said Tom Kuhn, president of the Edison Electric Institute.

He told Reuters those investment levels are about double what they were 10 years ago.

Of the $85 billion, Kuhn said power companies would spend about $50 billion on new generation and upgrades, $25 billion on distribution to consumers and $10 billion on transmission between power plants and distribution networks.

On the generation front, Kuhn said EEI has organized meetings between its diverse members - some who want more regulation on coal and some less - to propose recommendations to federal environmental regulators that would make it easier for utilities to comply with stricter air emissions and other rules.

"A great deal of our recommendations were accepted by the administration and have mitigated the effect of (environmental) rules and made it more economic for us to comply," Kuhn said.

EEI members include utilities with several coal-fired plants like American Electric Power Co Inc, Duke Energy Corp and Southern Co, and companies with more nuclear, natural gas and renewable plants like NextEra Energy Inc , Exelon Corp and Entergy Corp.

With natural gas prices averaging a 13-year low last year and still relatively cheap due to record shale production, even power companies with large coal-fueled operations have been shifting their fuel mix toward cleaner-burning gas.

Kuhn said the U.S. Environmental Protection Agency still had a lot of proposed regulations in the pipeline, including rules on coal ash, cooling water, greenhouse gases and other air emissions.

GREENHOUSE GASES

"The most important rule is on greenhouse gases," Kuhn said.

By midyear, he said, the EPA was expected to put out a greenhouse gas rule for new power plants that would preclude new coal plants from being built unless they had carbon capture and storage technology.

The average coal plant emits about 2,400 pounds per megawatt hour of carbon dioxide emissions. The standard in the EPA proposed rule is 1,000 pounds, which Kuhn said "may even preclude some gas plants from being built."

"We're advocating the EPA have some flexibility to bring the standard up to 1,200 or 1,300 (pounds)," he said, which would still exclude new coal plants without carbon capture and storage.

There are only a few coal plants under construction in the United States with carbon capture technologies, including Southern's Kemper County plant in Mississippi and Duke's Edwardsport in Indiana.

Kuhn said some in Washington think President Barack Obama may direct the EPA to issue rules limiting carbon emissions for existing plants in his State of the Union address on Feb. 12.

"That would be a challenge because it's hard to write a rule for existing coal plants and certainly you could not write one based on the rule proposed for new coal plants because that would put them all out of business," he said.

COAL PLANTS RETIRED

Kuhn said the industry has already retired a lot of older coal plants to meet the stricter environmental rules and is investing billions to upgrade emission control equipment at the coal plants that will remain.

"After investing billions ... you don't want to force their closure. We're already moving toward a cleaner fleet," he said.

Since Obama took office in 2009, power companies have announced plans to shut more than 40,000 megawatts of coal capacity as weak gas prices have depressed power prices, making it uneconomic for generators to invest in emission control equipment needed to keep older coal plants compliant with stricter environmental rules.

Kuhn said it is difficult for the EPA to regulate carbon emissions and said it would be better for Congress to write legislation on emission levels.

But energy analysts note that gridlock in Congress would make it virtually impossible to pass a sweeping carbon emissions law. (Additional reporting by Tim Gardner in Washington and Eileen O'Grady in Houston; Editing by Dan Grebler)

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