U.S. needs all fuel sources to meet electric use

By Eileen O'Grady

NEW YORK (Reuters) - Concern over soaring electricity prices and a deteriorating environment mean no single fuel, whether natural gas, coal or wind, can satisfy the growing U.S. appetite for electricity, industry executives agreed this week at the Reuters Global Energy Summit.

"Looking forward, the U.S. and the world are going to need a diverse mix of environmentally compatible generation solutions," said Randy Zwirn, president of Siemens' (SIEGn.DE) power generation business in the U.S. "There won't be a silver bullet. We are going to need to utilize all the fuels."

Zwirn said he was surprised at the speed at which public concern about energy security which launched a coal revival were overwhelmed by worry that increasing carbon-dioxide emissions would worsen air quality, contributing to global warming.

"The lines are now blurred," Zwirn said. "That causes a tremendous amount of discussion and delay."

Power-use records were broken across the U.S. last summer, straining generation supply for the first time in years as a heat wave moved from the West Coast to the East Coast.

Higher demand forecast for this summer will shrink the cushion of surplus power needed to avoid blackouts to 16.5 percent from 17.4 percent a year ago, said the North American Electric Reliability Corp., which oversees the power grid.

Gas, which fueled the last power building boom, lost favor as its price soared after hurricane-related production disruptions in 2005, opening the door for coal to reemerge as a low-cost alternative. Utilities rushed to develop new coal units or dusted off long-delayed projects.

Meanwhile, federal incentives breathed new life into the U.S. nuclear power market which had languished for nearly three decades. Nuclear reactors emit no carbon.

Construction of a new reactor will take a decade, executives said, meaning coal, gas and renewable sources, such as wind and geothermal, must all be exploited to allow time for carbon-related technology to be developed and tested. Energy efficiency measures and more programs to limit soaring demand will also be needed, they said.

Despite price volatility, gas-fired plants will help meet power needs in the next few years, executives agreed, along with renewable sources, followed by coal, then nuclear.

"Natural gas is our best bet" to meet growing demand quickly, said Martha Wyrsch, chief executive of Spectra Energy Corp.'s (SE.N) gas transmission arm.

Despite pollution worries, coal will be key as well, executives said. "If you want to have electricity, you're going to have to have coal for a very long time," said Thomas Farrell, chief executive of Dominion Resources (D.N).

Dominion is also studying a new reactor to supply power to its growing utility territory in Virginia.

A decision earlier this year by TXU Corp. TXU.N to drastically cut its Texas coal-building program from 11 units to three after an outpouring of opposition, has hurt all coal developers, said Bruce Williamson, Dynegy Inc.'s (DYN.N) CEO.

"It's has gotten harder for the whole industry to build new plants," he said.