Types of Generation

U.S. Generation Output by Type:

Coal 50%
Natural Gas 19%
Nuclear 19%
Hydro 7%
Fuel Oil 3%
Renewables 2%

(Increases may have occurred since data report)

As you know, utilities or generating companies try to match generation types with the aggregate needs of their customers. To understand how this is done, it is important to first understand that each generation type has different operating, financial and environmental characteristics. Key characteristics include capital costs, variable costs, operational flexibility, environmental impacts, fuel availability, and restraints on locations where units can be constructed. Following is a discussion of each generation type and an assessment of the key characteristics outlined above.

Coal:
The ready availability of low-cost coal has historically made coal-fired generation a favorite of many U.S. utilities. Most coal-fired generation employs steam turbine technology where coal is burned to hear water in boiler tubes. The water becomes steam and is run through a steam turbine that drives a generator shaft to create electricity. Because of economies of scale, most coal units are fairly large in the range of 250 to 1500 MW. The capital costs associated with building coal units are generally high compared with gas units, but many existing units have been on-line for a number of years and thus have been significantly depreciated. Operations and maintenance (O&M) costs are relatively low depending on the age of the unit. Fuel costs have tended to be among the lowest of generation sources in the U.S. Due to technological constraints, coal units do not have good operational flexibility as they generally require several hours to go from cold status to full operation. Because burning coal can be responsible for considerable emissions, coal units are generally considered to have a higher environmental impact than other sources of generation. For this reason and because of high transportation costs, there are areas of the country that do not use coal to generate electricity.

By 2005, high natural gas prices led some utilities and merchant generators to reconsider the value of coal units. A large number of new coal units are currently proposed and their sponsors are moving forward with obtaining permits and other regulatory approvals. While fuel availability and low price are currently attractive, future emissions mitigation costs are unknown since the U.S. has yet to develop regulation for carbon emissions (in the works now). Some companies are turning to development of clean coal technologies such as Integrated Gas Combined Cycle (IGCC) units, while others are choosing to use traditional technologies in the face of uncertainty.

Nuclear:
A number of nuclear units were brought on-line in the United States in the 1970s and 1980s. These units are generally large and range in size from 600 to over 1200 MW. Nuclear generation uses the heat of nuclear fission to create steam that is then run through a steam turbine. Capital costs associated with new nuclear units are very high, but as the units age and are depreciated their book values have declined. Variable costs including fuel are generally low, but fixed maintenance costs are higher due to the extreme safety procedures required as well as the need to collect costs for future decommissioning. Because of the technology employed; nuclear units do not have good operational flexibility, and start-up times are usually measured in days. Because of this inflexibility, nuclear units are used for baseload needs. New development of nuclear generation in the U.S. has been hampered by two key issues-the lack of waste disposal site for spent fuel and public concerns over the risks of a major nuclear accident or terrorist attack. In fact, no new units have been brought on-line in the U.S. since 1996 (although new nuclear units have continued to be built in other countries). As of late 2006, a few companies had begun the licensing process for new nuclear units in the U.S., but any construction appears to be many years away at the earliest. Despite the perceived safety issues, nuclear generation is favorable form the standpoint of emissions-no greenhouse gasses or pollutants such as NOx, SO2, or Mercury are emitted from nuclear generation.

Natural Gas:
As we have seen, very high percentage of new generation built in recent years in the U.S. has been natural gas generation. There is also a large base of older gas-fired steam turbine units in the U.S. generation portfolio. Gas-fired generation makes use of three primary technologies-combustion turbines that use natural gas directly to fire a turbine which drives the generator shaft; steam turbine that burn natural gas to create steam in a boiler which is then run through a steam turbine; and combined-cycle units that utilize a combustion turbine(fired by natural gas) and then steam turbine (wherein waste heat from the combustion turbine is used to produce steam which is the run through the steam turbine). Utility-owned natural gas units vary significantly in size, ranging from as small as 1 MW to over 500 MW. Natural gas is also used to fuel on-site cogeneration units and backup generators for many buildings. Capital costs associated with natural gas units are considerably lower than other generation sources. O&M costs are also generally low. Fuel costs vary depending on the market value of natural gas. As you might imagine, a major concern among owners of natural gas generation are the recent fluctuations in natural gas prices and the apparent tightness of U.S. natural gas supply. Depending on technology, natural gas units can be very flexible operationally. Combustion turbines, often called peaking turbines, can be started and stopped within minutes. Steam turbines may require up to six hours to go from cold status to full power. Although gas units do have some air quality impacts, they are generally less harmful than other carbon fuels (coal or fuel oil) and thus considered favorable from an environmental standpoint. For this and other reasons (units can be smaller, easy access to fuel supply, etc.) gas units also have the advantage that they can be located closer to major loads, and thus require less transmission.

Hydro:
Hydro power is the backbone of many electric generation systems across the United States where significant hydro resources are available (notably the West and parts of the Southeast). Hydro power is created by running water from a reservoir through as hydraulic turbine that spins and drives a generator shaft. Because the power output can be controlled by simply adjusting the water flow, hydro units are generally very flexible. Hydro units range from very small (100 kW) to very large (over 500 MW) with many units in the 100 MW range. Most hydro units were built a number of years ago (with some units dating back to the 1920s), so capital costs have generally been depreciated. O&M costs are generally low and, of course, there is no fuel cost once water rights are acquired. Given their operational flexibility, hydro units are very useful for managing peal loads and for power regulation purposes (keeping supply and demand in balance minute-by-minute) as well as for restoring the grid after a blackout. Although a new hydro dam would now be considered to have large environmental impacts, existing units are generally considered environmentally favorable, with the exception of concerns over impacts on fish populations and downstream activities. A related technology is pumped hydro storage which uses off-peak power to pump water uphill into a reservoir, thus making it available for generation during peak hours. This process is used by utilities as one of the few forms of electricity storage available to them.

Fuel Oil:
A limited number of utilities make use of fuel oil generation as an alternative to natural gas. Fuel oil generation is typically seen in regions where natural gas supply is limited or where utilities have the capability of fuel-switching units based on the relative price of fuel oil compared to natural gas. The technology used in fuel oil generation is similar t natural gas with a few changes to account for physical characteristics of the different fuel. Thus operational characteristics of fuel oil units are similar to natural gas units. The major drawback to fuel oil units is that they have more environmental impacts than their natural gas counterparts. In fact, some areas of the country do not permit fuel oil generation due to air quality concerns.