Some of the conditions influencing the natural gas and power markets were outlined for the Paducah Power System board Monday.

PPS General Manager Dave Carroll updated the board on some industry analytics after he and Doug Handley, PPS director of finance, power supply and rates, attended a conference in Florida at the invitation of NextEra Energy, a large wholesale provider of electricity to municipals.

"We were pretty fortunate to be invited to their summit," Carroll said. "They have a tremendous data analytics team. I think it's important for us to kind of understand this data and how it drives the market.

"As we move forward in time, I think it's going to be important for us to understand how the gas markets and renewables are affecting the power markets as a whole as we make strategic decisions related to our generating assets and what we perceive is coming."

Natural gas prices are at an all-time low, according to Carroll.

"That's very significant, because the gas markets kind of set the electric market with the prices on the wholesale," he said.

And, even though demand for gas is down, there is record production in natural gas in the county.

"All of that excess gas ends up going into the power markets essentially to generate electricity," he said.

The U.S. is now the largest oil producer in the world, Carroll noted.

"We reached energy independence in 2020. We still import some oil even though we're the largest producer, but we're exporting other sources of energy, so we're net energy independent," he said.

"And, as U.S. oil production goes up, you're also going to see gas production go up, with gas being a byproduct of some of those wells."

Key drivers of the power market include the price of natural gas, the cost of performance on new generation, the demand for electricity and regulator requirements.

Prior to 2007, the country's electricity market had been on an upswing for decades, according to Carroll. However, it has been flat since that time. One of the reasons is renewable forms of energy like wind and solar.

Factors influencing renewables include tax credits and changing renewable portfolio standards set by states and even local governments. The country's nuclear fleet is also somewhat stabilized due to state subsidies, according to Carroll.

With the retirement of less efficient coal plants becoming more prevalent, "coal is making up a smaller percentage all the time of the generation fleet of our country," Carroll said.

According to Handley, the information presented at the conference is not new.

"Conditions really haven't changed. We're not describing something that just happened in the marketplace that we're reacting to," he said. "The idea is to get a better understanding of the underlying forces, drivers that create the trends. Is this something to do with weather? Or growth? Or tax reform?

"And, so we get a better understanding of what some of the forces are, not just in our region, but other regions too," he said.

Paducah Power's gas-fired peaking plant is providing capacity revenue for the utility through an existing contract and is used for short-term periods to adjust to market conditions.

"With the growth and proliferation of renewable energy, prices are more likely to exhibit spikes more than they do now," Handley said. "That plant may become even more valuable in the future."

While some older, less efficient coal plants are being retired, the Prairie State Energy Campus, in which Paducah Power owns capacity, is one of the most efficient coal plants in the country, according to Handley.

"If you think of it as 'survival of the fittest' ... it's going to be the last one standing."

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.

Thank you for Reading!

Please log in, or sign up for a new account and purchase a subscription to read or post comments.