The three front-runners in fueling electricity generation-coal, natural gas and nuclear-are so close in the market that utilities have a tough time making choices. The choices come down to markets served, diversification of sources, proximity of fuels to markets, the type of electricity needed-base load, intermediate or peak power-and a variety of other factors rather than strict fuel costs, according to speakers at the midyear IPAA meeting in Tucson. Dominion Energy Inc. looks at full integration from the wellhead to the retail markets, said James Martin, vice president, business development. It has one guiding principle: fuel diversity. "Reliance on one fuel is risky," he said. That's why 24% of Dominion's electricity comes from nuclear plants, 29% from coal, 11% from oil, 21% from gas and other sources, and 15% from purchases on the open market. Dominion also needs balance. Some 55% of its generating capacity goes to base load; 25% to intermediate power, which normally works during busy daylight hours and shuts down at night; and 20% for peak capacity. Costs for that seldom-used peak capacity are 48% higher than base load and intermediate power is 17% higher than base load. In making choices, he said, coal-fueled generation is expensive to build but the fuel cost is cheap. Gas is just the opposite. Coal and nuclear both carry high initial capital costs. Typically, nuclear- plant electricity costs 20 cents to 22 cents a kilowatt hour (kWh), but Dominion owns the least expensive nuclear plant in the country with costs between 11 and 12 cents per kWh. In general, he added, the generation industry favors gas for intermediate and peak loads, but Dominion plans to concentrate on base load and coal will be a part of that plan. The company also plans to file next fall for additional nuclear capacity at one of its existing plants in Virginia. Jim Asselstine, director of high-grade credit research at Lehman Brothers, talked about nuclear fuel's contribution to the electricity industry. Currently, 103 nuclear plants are operating in 31 states, contributing 20% of total annual output. The key to future power generation, Asselstine said, is ongoing operating costs, and nuclear power offers low, predictable fuel costs with environmental benefits similar to that of coal.
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