FPL undergoing a natural gas revolution

FPL undergoing a natural gas revolution

By Susan Salisbury
Palm Beach Post Staff Writer

Photo illustration of the Riviera Beach Next Generation Clean Energy Center, scheduled to go online in 2014, will feature a combined cycle natural gas unit capable of producing 1,250 megawatts of electricity, or enough to power 250,000 homes and businesses.

The nation's natural gas revolution is no more apparent than at Florida Power &
Light Co., headquartered in Juno Beach.

FPL has bet big on natural gas, an abundant, affordable fossil fuel that's
cleaner than oil and coal. It's in the midst of $9 billion in rate-payer
funded capital expenditures, the largest in its history, which includes $3
billion for new natural gas-fired plants in Rivera Beach and Cape Canaveral.

In 2011, FPL added a third unit to its $2.2 billion gas-fired West County
Energy Center in Loxahatchee. Now FPL wants to convert its Port Everglades
plant to natural gas also, with a proposed $1.18 billion project that would
be completed in 2016.

It's seeking a $695 million base-rate increase that would take effect in 2013,
in part to pay for the Cape Canaveral plant.

All of Florida's natural gas is transported from other states. The two main
pipelines are the Florida Gas Transmission line, which runs from Texas
through the Florida Panhandle to Miami, and the Gulfstream pipeline, an
underwater link from Mississippi and Alabama to Central Florida.

FPL sought approval in 2009 to build a new third natural gas pipeline in 2009,
but the Florida Public Service Commission denied that application. The
company still believes there is a need for a third pipeline and is reviewing
options, company officials said.

"If you are getting ready to build a plant right now, the plant du jour
is natural gas," Florida Public Counsel J.R. Kelly said.

Plenty of gas out there

The rush to natural gas is being fueled by a glut of supply. That's because of
the extraction from vast formations of gas-rich shale, resulting in low
natural gas prices. In 2005, U.S. natural gas was priced at more than $15
per million British Thermal Units. In recent weeks it's been trading as low
as the $2.50 range.

Major U.S. producers such as ConocoPhillips, Chesapeake Energy, Murphy Oil and
others have reduced their gas drilling this year as prices hit a 10-year low.

Fracking involves extracting natural gas from shale rock by injecting water
mixed with chemicals.

It's expected to increase the gas supply by 20 percent to 26.1 trillion cubic
feet in 2025, up from 21.7 trillion cubic feet in 2010, the U.S. Energy
Information Administration said.

"It's game changing," said Paul Patterson, a utility analyst with
Glenrock Associates LLC, New York. "It certainly is changing the
economics of the industry when you have a fuel with the environmental
profile that natural gas has being as low cost as it has become."

In fact, the U.S. has more than 100 years' worth of natural gas supplies, and
in 2016 it will become a net exporter of liquefied natural gas, the Energy
Information Administration said.

Over the past decade, the electricity generated by gas-fired plants has risen
nationally by more than 50 percent, Energy Information Administration said.

FPL President Eric Silagy said that FPL has been moving to natural gas for a
decade.

It has reduced its oil consumption from 40 million barrels a year to about
100,000 barrels a year in the past decade.

"I think anything we can do to make sure that America is not dependent on
other countries for its energy supply is smart," Silagy said, adding
that a balance of energy sources, including nuclear, is important.

Despite huge supplies, there's some concern that FPL could become too
dependent on natural gas, the basis for 65 percent of FPL's energy
production. About 55 percent of the state's electricity is produced using
natural gas, up from 38 percent in 2006.

"It does raise some concerns. Natural gas is priced very low right now,
but for how long?" Kelly asked.

FPL ratepayers pay fuel costs as a pass-through charge.

"We don't make any money on fuel. The best way to keep bills down and to
keep the bill as low as possible, is to try to use as little fuel as
possible. We have really focused on how we can be more efficient and started
embracing more fuel-efficient technology," Silagy said.

Natural gas-fired plants are also cheaper to build than coal-fired or nuclear
plants and are cleaner than the oil-fired plants they're replacing, industry
experts say.