Coal Isn’t the Only Power Source Hurt by Natural Gas: Exelon Corporation (EXC)

Duke Energy merged with Progress Energy in 2012 and inherited the ailing Crystal River nuclear plant in the process. The new company recently announced that it will retire the facility and consider replacing it with — what else? — a state-of-the-art natural gas power plant. The company’s portfolio was much too heavy in coal, which comprised 41% of capacity before the merger, at the beginning of 2012. Natural gas made up just 28% before the merger.

NRG Energy doesn’t bring much nuclear capacity to the table, but it does support more than 37% of its total generation capacity with natural gas. A recent merger with GenOn created the country’s largest provider, with more than 47,000 MW of capacity. Similar to NextEra, NRG is focused on building its renewable portfolio with its eVgo charging network, which aims to make electric vehicles more feasible for the everyday consumer.

What can be done?
Two things can help nuclear regain competitiveness: a better pricing environment and tighter regulations on emissions. The EIA expects natural gas prices to gradually appreciate over the coming years, while infrastructure expenditures passed on to the consumer will result in higher electricity prices across the country.

While nuclear facilities undergo regular enhancements, the cost is unlikely to make any major contribution to national electricity prices, which will help close the gap against natural gas. For instance, The Southern Company (NYSE:SO) got the nod last year to build two new reactors at a cost of $14 billion. After accounting for a Department of Energy loan, the company is responsible for $6 billion, which will raise its customers’ energy bills by just 1% each year for the next five years.

Stricter emissions regulations, which will be a major initiative for the White House in the next four years, could also improve nuclear energy’s outlook. Natural gas is cleaner burning than coal in most major emissions categories (except methane), but nothing beats a string of goose eggs:

Emission Coal Natural Gas Nuclear
Carbon dioxide 2,249 lbs/MWh 1,135 lbs/MWh N/A
Sulfur dioxide 13 lbs/MWh 0.1 lbs/MWh N/A
Nitrogen oxides 6 lbs/MWh 1.7 lbs/MWh N/A

Source: EPA.

According to the U.S. Department of Energy, nuclear power plants avoided 613 million metric tons of CO2 emissions in 2011. That’s the same total produced by 118 million cars, which is nearly the same number of cars in the United States.

Although a carbon tax would have the biggest positive impact on nuclear-generated electricity prices, the White House has hinted that it accepts natural gas as the lesser of two evils. Recent emissions standards have set the bar out of coal’s reach and favorably within that of natural gas.

Foolish bottom line
There’s no reason to believe energy providers won’t grow in 2013, but each has to successfully navigate the best course forward in an ever-changing market. When it takes years and decades to build capacity, monthly or yearly changes in energy prices are difficult to respond to. So don’t expect Exelon to dump its nuclear capacity just because the current market is less favorable to uranium.

The article Coal Isn’t the Only Power Source Hurt by Natural Gas originally appeared on and is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool recommends Exelon and Southern Company.

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