Mr Bones,
Unfortunately I don't have a choice of buying gas turbine power; my power probably comes from nuclear or possibly coal neither of which I find particularly endearing from an environmentalist point of view. So for me, given the choice between an efficient fuel cell and my current electricity supplier, I'd go for the fuel cell. There are other people in the same boat.
I agree completely. I am not saying Plug will not sell fuel cells. I am taking the position that the penetration of Plug Power fuel cells in the next decade will not be sufficient to justify its current valuation.
The existing electric companies don't want to replace their existing non-gas generating stations (I guess that's coal and nuclear?) with gas turbines.
Below is an article from Dec. 7, 1999. My argument here is that electric utilities using coal and nuclear power will convert to natural gas turbines for many of the reasons I have proposed. I agree with you that in those areas where natural gas transmission is provided by a separate company than electricity transmission, there exists the possibility that the natural gas company can expand its product offering by selling/leasing/owning/operating residential fuel cells. Plug could benefit here. But remember, the nation-wide electricity generation market is undergoing deregulation. Smaller independent power producers (IPP's) are starting to enter the market. Now that the electric monopolies are under new pressures, they must compete on matters of cost, reliability and environmental concerns. Expect them to begin vigorously improving on these three issues. Free markets will determine the cost of power as people will have choices from whom to buy their power, placing new downward pressures on prices. To any degree this happens will provide more pressure on PLUG to meet lower costs, better reliability and the improved environmental response by utilities.
One other issue that may derail your scenario of natural gas companies essentially producing electricity at people's homes is the same issue that is slowing deregulation in the industry. As monopolies, the electric utilities made large investments in equipment, etc and agreed to produce electricity for various regions, including provisions to provide electricity to everyone, with special programs for the poor. In return, the monopolistic utilities were guaranteed a given rate of return in the form of essentially fixed prices. With deregulation, IPP's could focus their marketing efforts on the most profitable customers only. As a result, in many states the IPP's are being charged a fee to cover the big investments made by the utilities, including costs of abandoned nuclear plants. The most important example of this is in California. So, in many regions, if a natural gas company wanted to get into the electricity generating business, they would likely be treated as an IPP and may be responsible for covering costs already incurred by the utilities. This does not necessarily eliminate the incentive for natural gas companies to enter this business, but it does make it a bit less desirable. And if you run a natural gas company and want to enter the market as an IPP, I still think the economics will favor operating their own gas turbines, as Enron is starting to do. (Full disclosure, I do not own any Enron stock, or Tampa Electric.)
In any event, here is the article. Best wishes and I enjoy the dialogue.
Erik (IMHO)
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Tampa Electric And Florida DEP Announce Agreement On $1 Billion Environmental Plan
TAMPA, Fla., Dec. 7 /PRNewswire/ -- Tampa Electric Company and the Florida Department of Environmental Protection (DEP) today announced a sweeping 10- year $1
billion program that will dramatically decrease overall emissions from the company's power plants.
A major feature of the program is the conversion of Tampa Electric's Gannon Station from coal to natural gas. Coal-fired Units 1, 2, and 6 will be shut down by year-end
2004, while Units 3, 4, and 5 will be re-powered with new technology and switched to natural gas at a cost of some $600 million.
The redeveloped plant will be renamed Bayside Power Station and by 2004 will provide 1,475 megawatts of natural gas-fueled electric energy.
By using natural gas at the new Bayside Power Station along with high- efficiency, state-of-the-art controls at its newer remaining coal-fired plants, Tampa Electric will be able
to significantly reduce emissions and meet its customers' growing energy needs for the next 20 years.
``At Tampa Electric, we're always evaluating the most cost-effective, environmentally responsive technologies available to expand our power generation capabilities,' said
Tampa Electric President, John Ramil.
``Through implementation of this different technology, we will be able to significantly reduce environmental emissions while providing clean, reliable, and affordable energy to
our customers.'
Tampa Electric said its decision to reconfigure its Bayside Power Station and to switch to natural gas was based on several factors.
Among them were the company's need to satisfy increasing customer demand for reliable electricity at reasonable costs, the ability to continue meeting environmental
compliance regulations, utilization of existing substations and transmission facilities, the availability of natural gas from proposed natural gas pipelines in the area and the
opportunity to reuse existing plant equipment.
The $1 billion project is expected to have a small impact on Tampa Electric customers' monthly bills over the 10-year period, and is subject to Florida Public Service
Commission approval. The company will be working with the PSC to develop new programs to further reduce the impact on its 550,000 customers throughout West Central
Florida.
Gordon L. Gillette, TECO Energy chief financial officer, said, ``From an investor standpoint, this is a continuation of our strategy to focus on our Florida operations, and will
help strengthen our competitive position for the future. The plan is consistent with our growth projections for the years ahead.'
A Multi-Faceted Plan
Using a variety of proven technologies, Tampa Electric said it expects to reduce sulfur dioxide (SO2) emissions by almost 80 percent and emissions of nitrogen oxide
(NOx) by over 85 percent by the year 2010 from 1997 levels. These reductions are on top of Tampa Electric's efforts with the Environmental
Protection Commission of Hillsborough County to develop a voluntary program to lower nitrogen oxide emissions.
Today's announcement demonstrates Tampa Electric's continuing efforts to decrease emissions. Just this week the company began testing a new SO2- removing scrubber at its
Big Bend Station Units 1 and 2. This scrubber will help the company comply with the requirements of Phase II of the U.S. Clean Air Act Amendments of 1990 by significantly
reducing sulfur dioxide emissions.
Improvements in coal preparation and combustion technology have also been incorporated to achieve compliance with the nitrogen oxide reduction requirements of that law.
In addition to the conversion of Gannon Station to high-efficiency, combined cycle gas turbines, the plan calls for the company to:
Maximize the efficiency of the new scrubber serving Units 1 and 2 at Big Bend Station to target a 95 percent sulfur removal efficiency.Achieve major NOx emission
reductions of 33,400 tons from the Big Bend Station units by 2010, with significant reductions as early as 2007.Undertake a study of improved particulate removal and
monitoring at Big Bend Station and make improvements based on results.Invest up to $8 million for developing innovative technologies for reducing NOx
emissions. (Don't need to do this, CTAL has already done this.) Cooperate with DEP on its Bay Regional Air Chemistry Experiment program that studies nitrogen deposition
in Tampa Bay, including contributing of up to $2 million.?Collaborate with DEP to develop and implement state tax policy aimed at emissions reductions and other
environmental programs.
Implementing the Agreement
The agreement between Tampa Electric and DEP has been formalized by a consent judgment entered by the Circuit Court of the Thirteenth Judicial Circuit in Tampa.
This agreement with the state also responds to a federal coal-fired utility initiative announced last month by the U.S. Environmental Protection Agency. The agreement makes
Tampa Electric the first utility in the nation to respond to the EPA initiative.
``We are grateful to David Struhs and the entire DEP for their leadership and support of a plan that works for our customers and our community,' Ramil said.
For additional media materials, including high-resolution company logos, power plant photos, electricity generation and distribution graphics, and a glossary of terms, please
visit their Online Newsroom at www.tecoenergy.com. |
