Dive Brief:
- In what could be indicative of a growing nationwide trend, American Electric Power burned nearly 15% less coal in the first quarter of 2015 compared to the year before, with natural gas largely picking up the slack.
- The company released its generation data for the first three months of 2015 Thursday morning in its first quarter earnings presentation. AEP reports that gas prices were down 43% from the same period a year before, and that power prices were 44% lower than the first quarter of 2014, during the polar vortex.
- Cold weather helped the utility's bottom line. The last two years have been the coldest in AEP's service territory in the last three and a half decades. AEP reported earnings of $629 million, or $1.29 per share, compared with $560 million in the same period a year ago.
Dive Insight:
As the Obama administration's proposed Clean Power Plan seeks to steer the nation away from coal fired generation, there are signs that economic pressures are already pushing utilities in that direction. American Electric Power reported Thursday that it burned 15% less coal in the first quarter of 2015 than the year before due to low gas prices.
AEP generated 9.9 million MWh of electricity with coal in Q1, down 14.7% from the 11.6 million MWh a year before, Columbus Business First notes. Natural gas accounted for 3.7 million MWh, up from 2.2 million MWh the previous year.
If the EPA's Clean Power Plan survives its legal battles and is implemented fully, utilities will have to learn to live with less coal. Navigant Research estimates that the proposed rule would result in the retirement of 45 GW of coal fired generation.
The new infrastructure needed to fill that gap will be immense. A report released by the North American Electric Reliability Corp. (NERC) this week estimates that if the proposed rule is not altered before it is finalized this summer, the nation would have to add 45.9 GW of natural gas capacity from 2016-2020. By 2030, that number would grow to 96.6 GW.
That AEP was able to burn so much gas during this year's cold winter could be viewed as a success. Early in 2014, many utilities, especially those in the Northeast, were forced to do without gas when cold weather caused pipelines to freeze or other equipment to malfunction. That caused electricity prices for millions of customers to dramatically spike. FERC reports that the nation's grid performed better this year.
For AEP, it has been a strong start to 2015, with colder weather and load growth from shale gas operations bolstering the utility holding company's earnings.
"Our strong first-quarter financial results reflect the continued success of our strategy of investing in regulated operations, growing the transmission business and effectively managing our operations and maintenance spending," AEP Chairman, President and CEO Nicholas Akins said in a statement.
