Coal Fleet Optimization
While coal is a smaller portion of our fuel portfolio today than in the past, it remains an important resource and will be for the foreseeable future. Flexibility in generation resources is important to managing the intermittency of distributed energy resources and maintaining grid reliability. In February 2018, coal represented 47 percent of AEP’s generating capacity, compared with 70 percent in 2005.
Coal-fueled generating facilities have the ability to store coal onsite to supply power as required. In contrast, natural gas generating facilities rely on gas as a “just in time” fuel that is delivered in real time, without backup, unless the plant has the ability to run on dual fuels. Even in that case, the backup supply is typically only a few days and does not equate to the resilience of coal inventory on site at a coal plant.
In a significant event that impacts grid reliability, we rely on a variety of resources to meet increased electricity demand. We know from experience that the system is best able to meet demand when there are diverse, resilient generation resources to draw from.
In the PJM region during the first cold spell in January 2018, coal and nuclear-fueled generation made up as much as 65 percent of the resources available and able to meet higher levels of power demand. Natural gas, which is increasingly used as a 24/7 resource for baseload power generation, provided less than 25 percent of the electricity load during that time.
AEP has retired about 25 percent of its coal-fueled generating capacity. The remaining coal units in the fleet are equipped (or are in the process of being equipped) with environmental controls to assure compliance with current regulations. These units provide critical 24/7 capacity and other services to the grid that ensure reliable, uninterrupted electricity for customers. At the same time, the use of coal will change in the future. Lower natural gas prices, operational cost structures and seasonal capacity needs will dictate when coal units are dispatched to serve customers.
Because coal will continue to be important to a reliable, diverse and secure energy mix, we have planned additional investments from 2018 through 2025 to comply with new environmental regulations that keep our fossil-fueled generating capacity available to serve customers.
However, we are managing the investments in and operation of our coal fleet differently than in the past, based on the remaining life of these important assets. By 2030, more than one-half of AEP’s coal units will be within a decade or less of their typical useful life of 60 years. When they are retired, they will be replaced with cleaner forms of generation, including renewables and highly efficient natural gas. Until that time, we need these units to serve our customers for as long as is economically and operationally appropriate.
Today, we manage the remaining coal fleet to reduce the need for capital investment over time, allowing us to optimize the operation of the units, as well as investment and depreciation rates. This approach delivers value to both customers and shareholders.
Although we have no plans to build another coal plant, we continue to monitor the development of technologies for carbon capture and storage and utilization. Should any of these technologies be demonstrated commercially to improve the scalability and cost-competitiveness of low-carbon fossil-fueled power generation in the future, we would want to have those technology options available for consideration.
To support development, demonstration and deployment of these technologies, the industry, along with the Electric Power Research Institute, the U.S. Department of Energy, technology suppliers and academia, is working to develop state-of-the-art processes, equipment and components, new metal alloys, alternative materials, and advanced manufacturing techniques, all of which could have beneficial impact on the industry.
Learn more about AEP’s strategic vision for reducing carbon emissions