Electric power generation is like any other process industry. The goal is to minimize costs, maximize efficiency, and remove complexity whenever cost-effective technologies become available.

A primary factor driving new-build decisions for power generators in the U.S. is natural gas. In particular, the relatively stable price of natural gas and its widespread availability. Both factors have been enhanced through technological advances in hydraulic fracturing and directional drilling.

Two decades ago, price volatility and uncertain supplies made it impossible for electric utilities to specify natural gas-fired generation as a long-term investment option. And 15 years ago it seemed certain that the U.S. would have to import natural gas.

Technology Advancements

All that changed with the widespread adoption of hydraulic fracturing (fracking) technology, which opened natural gas fields that previously were uneconomic to develop. What's more, directional drilling has enabled multiple wells to be drilled from a single pad site. Doing so reduces costs and boosts efficiency.

At the same time, new pipeline construction has made it possible for natural gas produced in the Marcellus field of Pennsylvania and Ohio to reverse the historic flow of natural gas by sending gas from the north to the south. What's more, the U.S. is beginning to export natural gas to global markets. Low-cost natural gas has also prompted investments in chemical and related facilities along the Gulf Coast, a factor that helped to fuel the economy's recovery after the 2009 recession.

These factors have been emerging over a period of years but gained traction between 2010-2012 and have persisted. One casualty has been nuclear power generation. A number of nuclear power plants in the northeast and midwest have been forced to shut down because they are uneconomic to run.

A residual effect was the March 29 announcement by Westinghouse Electric Co. to reorganize its nuclear power business in the U.S. under bankruptcy protection. Expected orders from U.S. utilities for its AP1000 reactor proved sparse as enthusiasm for nuclear power cooled following the March 2011 Fukushima accident in Japan, and as natural gas emerged as the fuel of choice for new thermal power plants.

Natural gas prices also has played a large role in wrecking the prospects for coal-fired generation. In 2011 for the first time, the economic displacement of coal-fired power plants by natural gas-fired units became widespread, first in the southeast but spreading to parts of the midwest. In several instances, coal-fired generating units entered their spring 2011 maintenance outage season and did not return to service until months later as economics favored natural gas plants and kept coal-fired generation out of the mix.

These economic conditions are becoming entrenched, leading to the retirement of coal-fired and uranium-fired units alike.

Favoring Flexibility

As a process industry, electric power generation favors flexibility. On this score, natural gas also prevailed over coal and uranium. From a combined cycle power plant with a heat recovery generator that runs as a baseload unit to a combustion turbine that operates only a few hours during the year as a unit to meet peak demand, natural gas offers flexibility unavailable in coal or uranium assets.

Coal-fired power plants and nuclear generating stations work best when they are brought online and allowed to run non-stop until the next maintenance or (in the case of a nuclear plant) refueling outage. Coal-fired power plants have suffered in recent years as growing amounts of renewable energy have been built, forcing baseload units to cycle; in other words, forcing them to scale back their generation output when the wind blows or the sun shines then ramp back to full load when the intermittent renewable resources become unavailable.

Cycling has challenged operators of coal-fired power plants in particular as the technology was never intended to do anything other than run at near-full capacity 24/7. Natural gas-fired generation, meanwhile, has emerged as a technology flexible enough to back up intermittent renewable generating resources. Turbines built by General Electric, Siemens, Mitsubishi/Hitachi and others boast of being able to ramp to full load withing a matter of minutes and operate efficiently at a wide range of load scenarios.

What's more, natural gas generation eliminates the need for a coal yard, coal handling equipment, and ash disposal programs. Where a coal-fired power plant might employ 1,000 or more, a baseload natural gas plant might need only a couple of hundred employees. Labor costs are one expense that process industries like power generation seek to minimize.

Environmental Profiles

From an environmental point of view, among thermal generating options nuclear may have the most favorable profile, followed by natural gas, and then by coal.

In the U.S., nuclear's ongoing environmental challenge has been long-term storage of spent nuclear fuel. Radioactive releases from possible actions are an ongoing concern. But the largest domestic U.S. nuclear accident to date at Three Mile Island resulted in the destruction of the damaged reactor but no release of radioactive material.

In the case of Fukushima, the reactor was successfully shut down after the 2011 earthquake; the unprecedented tsunami that followed, however, swamped diesel generators that were running pumps to keep the plant's reactors cool. And radioactivity released by the Chernobyl disaster was so widespread because the reactor had no containment vessel, an approach impossible to build in the U.S. and elsewhere in the west.

Both natural gas and coal are fossil fuels, which means that they emit carbon dioxide as a result of their combustion. But coal combustion also results in significant emissions of compounds such as sulfur dioxide, nitrogen oxide, mercury, particulates, and so on.

Water discharge can be an issue as can coal ash and its disposal or reuse. The industry suffered a black eye in 2008 when a coal ash pond used by the Tennessee Valley Authority collapsed and flooded homes and businesses downstream of the facility. The U.S. Environmental Protection Agency (EPA) wrote rules to regulate coal ash ponds, a first for the industry. EPA could have rules that coal ash was hazardous waste and created an enormous expense for utilities to deal with. Instead, it more broadly (and some might say reasonably) decided that coal ash was not a hazardous waste thus opening a wider range of disposal options.

(Farther upstream in the production of natural gas, methane leaks often pose environmental concerns. Likewise, hydraulic fracturing has raised concerns of possible water contamination. And, as many Oklahomans can attest, reinjecting into the ground waste water from fracturing operations can lubricate fault lines and lead to earthquakes.)

Did the EPA Kill Coal?

But didn't the Environmental Protection Agency (EPA) kill coal-fired generation with regulations? Let's consider a few examples.

First, for investor-owned utilities across the country, prudently incurred investments to meet environmental rules may be recovered over an extended number of years from customers. Baghouses, scrubbers and other pieces of technology may be placed into the rate base and recovered through the monthly electric bill. Coal-fired assets where these pieces of environmental equipment were deployed continued (and in many instances continue) to operate. Decisions on prudent investment decisions by investor-owned utilities are made by state utility regulators.

Can there be regulatory overreach? Of course. Science makes it possible to detect even minute traces of a pollutant or harmful substance. But just because a test can detect a possible health threat does not mean that it should be regulated to eliminate it entirely.

As a result, a second point to keep in mind is that the EPA must rank near the top of federal agencies for spending time in court. Environmentalists and industrial interests alike have readily and enthusiastically sued the agency, either to compel rulemaking or to challenge rules once they have been issued.

For example, the EPA dragged its heels for decades to issue rules related to the entrapment and impingement of aquatic life. Fish and other animals that swam too close to the submerged water intake pipes for power plants risked being drawn into power plants and killed.

Environmental groups sued the EPA, and finally compelled the agency to write rules during Barack Obama's second term as president. Environmentalists hoped the rules would compel "closed loop cooling" for power plants. The industry said that reconfiguring their thermal power plants to meet such a rule would mean that dozens of power plants--coal and nuclear alike--would be forced to close.

The EPA concluded that entrapment and impingement could be effectively controlled by scaring away fish with underwater flashing lights and sound. In a few cases, nets might have to be installed, the agency said. Cheap and easy carried the day.

Outraged, environmentalists threatened to sue. But the electric power industry largely was satisfied by the EPA's approach and 2014 rulemaking on the issue.

A Deck Stacked for Natural Gas?

For coal, technologies such as integrated gasification combined cycle power plants held promise a decade ago, but have stumbled due to their complexity. (Read "Kemper County and the Perils of Clean Coal Technology.") For nuclear, small modular reactors may open a market opportunity, but the first design closest to market deployment has only recently entered license review and remains years away from becoming reality. (Read "NuScale Reactor Nears One Milestone, With More to Follow.")

The very nature of a process industry like electric power generation means that companies are highly sensitive to reducing cost, boosting efficiency, and adopting technology wherever economically feasible. Innovation and technical advances currently favor natural gas and so are driving business decisions.