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Tuesday, January 17, 2012

Low cost of newly plentiful gas discourages both use of coal and investment in alternative energy

In the early 1980s, oil as a source of energy was threatened by alternative sources, but when oil prices dropped, the prospect for alternatives quickly faded. Now, a similar situation appears to be happening as a result of the boom in natural gas from tight, deep shales. Energy & Environment News reports investment in alternative energy sources is decreasing with the emergence of gas as a plentiful and cheap source of energy.

The largest U.S. wind energy producer, NextEra Energy Inc. has canceled plans for new wind projects and Exelon Corp. isn't going to expand its nuclear power plants. Even plans for new coal-fired power plants are being shelved as CMS Energy Corp. in Michigan has cancelled plans to build a new $2 billion facility. Electricity pricing in linked to the low-cost gas market, resulting in dramatically lower profits for power producers and discouraging investment in coal, nuclear and wind.

Some are warning, though, that a major shift from coal to gas will leave the industry with few alternatives, especially when gas prices rise again."The way to make $4 gas $8 gas is for everyone to go out and build combined-cycle natural-gas plants. We need to be cautious about how we go about this," Michael Morris, chairman of American Electric Power Co. Inc. told Energy & Environment News. (Read more)

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