Tag Archives: natural gas

energy supply - AZ Business Magazine May/June 2012

Report Shows Changing Arizona Energy Mix

Arizona Public Service today released its official forecast of how Arizona will meet its growing energy needs over the next 15 years. The report, called an “Integrated Resource Plan,” takes a big-picture look at Arizona’s energy future that helps APS and other stakeholders plan responsibly. The forecast identified three major trends shaping Arizona’s energy future:

* Arizona’s energy mix will be cleaner. The report predicts that energy from renewable sources will double by 2029. The fastest-growing segment within the renewable category is expected to be rooftop solar, which should triple over the same period. Savings from energy efficiency measures, which are intended to reduce customer demand, are also expected to triple by 2029.

* Natural gas will be the new energy source of choice. Because renewable energy can’t supply customers with steady, predictable energy around the clock, Arizona will need more generation from natural gas, which can start and ramp up quickly, and can provide energy reliably day or night. Over the next 15 years, natural gas is projected to surpass coal and nuclear as the largest source of electricity generation for APS customers. APS still will maintain a diverse, balanced resource portfolio to provide customers with affordable electricity, and manage exposure to fuel price volatility.

* Advanced technology will change the electricity grid. In the next 15 years, APS customers will have more choices about their energy use – smart appliances, plug-in electric vehicles, rooftop solar panels and even the possibility of battery storage. To enable these choices while ensuring safe and reliable electricity, APS is modernizing its electricity grid, making it more dynamic and flexible.

“Arizona’s energy future is bright,” said Tammy McLeod, Vice President of Resource Management for APS. “When we look into the future, we see Arizona’s growing energy needs being met with resources that are increasingly clean, diverse and innovative.”

The report paints an optimistic picture of Arizona’s economic growth. It projects that the state’s energy needs will grow 52 percent in the next 15 years. The requirement for peak demand is predicted to hit nearly 13,000 megawatts by 2029, up 60 percent from today’s peak requirement of 8,124 megawatts. Peak demand measures the amount of electricity being used when energy use is at its highest point.

The projected growth of renewable energy, combined with other actions including the recent closure of three coal-fired units at the APS-operated Four Corners Power Plant, is predicted to make the overall APS energy mix cleaner and more efficient. The report anticipates that in 2029, the APS generation portfolio will produce 14 percent less carbon dioxide and use 24 percent less water per megawatt-hour of electricity generated.

The report also envisions the need for flexible generation and a modern electricity grid. In the past, the electricity grid was like a one-way street. Electricity was generated at large, centralized power plants and delivered to customers at the flip of a switch. Today, power generation is becoming more complex and, in the case of renewable energy, unpredictable and variable based on the weather.

To ensure a steady and reliable energy supply, the report anticipates that utilities like APS will need more generating plants that can respond quickly to changes in customer demand and renewable output. For example, when cloud cover suddenly decreases production from solar sources, APS customers will need smaller, quick-starting generation that can respond within minutes to changing conditions. Power plants fueled with natural gas are better at “ramping,” as it is called, than generating sources such as nuclear and coal.

Along with a more flexible energy mix, Arizona will also need a more flexible, modern electricity grid. APS plans to invest $170 million in modern grid technology over the next five years, in addition to routine grid maintenance and upgrades. This includes installing more than 5,000 advanced devices across the electricity grid that will help APS workers keep it safe and reliable.

APS files its Integrated Resource Plan with the Arizona Corporation Commission every two years, forecasting how it will meet customers’ energy needs over a 15-year planning period.

APS, Arizona’s largest and longest-serving electric utility, serves nearly 1.2 million customers in 11 of the state’s 15 counties. With headquarters in Phoenix, APS is the largest subsidiary of Pinnacle West Capital Corporation (NYSE: PNW).

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SRP Buys Natural Gas Power Plant

Salt River Project has agreed to purchase one block of the Mesquite Generating Station located in Arlington, about 40 miles west of Phoenix.  The natural gas-fired power plant, owned by San Diego-based Sempra U.S. Gas & Power, includes two 625-megawatt (MW) combined-cycle generating blocks.  SRP is purchasing one of the blocks for $371 million and under the terms of the agreement, will operate the entire facility.

“We studied the market very carefully and determined that this purchase would provide an economic benefit to SRP and its customers,” said SRP general manager Mark Bonsall.  “While recent load growth has been fairly modest, more substantial growth is expected and this plant will position us well in the long term to meet our customer’s needs at a reasonable cost.”

The agreement is subject to approvals from the Federal Energy Regulatory Commission and the U.S. Department of Energy.  The companies anticipate receiving these approvals in early 2013.

According to Bonsall, SRP will save money by purchasing an existing power plant now rather than building a new and much more expensive facility in the future.
As part of the purchase agreement, Sempra and SRP will form a joint operating entity called Mesquite Power Operations, LLC that will hold the plant permits.

The Mesquite Generating Station has been in operation since 2003 in Arlington.  More than 30 people are employed at the plant and SRP anticipates hiring the existing staff while making minimal changes to accommodate normal SRP operational procedures.

SRP is the third-largest public power utility in the nation, serving more than 950,000 electric customers.

Sempra U.S. Gas & Power, LLC is a leading developer of renewable energy and natural gas solutions.  The company operates solar, wind and natural gas power plants that generate enough electricity for nearly 1 million homes, along with natural gas storage and pipelines, and distribution utilities. Sempra U.S. Gas & Power is a subsidiary of Sempra Energy (NYSE: SRE), a Fortune 500 energy services holding company with 2011 revenues of $10 billion.  The Sempra Energy companies’ nearly 17,500 employees serve about 31 million consumers worldwide.  For more information, visit www.SempraUSGP.com.

freeport

Freeport-McMoRan buys energy companies for $9B

Mining company Freeport-McMoRan is buying a pair of oil and gas producers for $9 billion, creating a natural resources conglomerate with assets ranging from oil rigs in the Gulf of Mexico to mines in Indonesia.

Freeport, based in Phoenix, is paying $6.9 billion in cash and stock for Plains Exploration Co., and $2.1 billion for McMoRan Exploration Co. Freeport will also assume $11 billion in debt in the deal.

Plains Exploration, based in Houston, produces oil in California, Texas and the Gulf of Mexico, along with natural gas in Louisiana. McMoRan Exploration, based in New Orleans, is developing natural gas resources that lie deep below shallow water regions of the Gulf of Mexico.

The recent track record of miners buying oil and gas companies has been mixed.

BHP Billiton, the Australian mining giant, wrote down the value of its U.S. natural gas assets by $2.8 billion in August. The company had paid $5 billion for much of those assets in 2011 when it bought reserves in the Fayetteville Shale in Arkansas from Chesapeake Energy.

Natural gas prices in the U.S. have been pushed sharply lower in recent years because drillers have learned to unlock enormous amounts of natural gas from shale formations under several states, dramatically boosting supplies.

BHP Billiton also acquired Petrohawk Energy in 2011 for $12 billion. Petrohawk focused on oil instead of gas, though, so BHP did not have to write down those assets.

U.S. oil production is at its highest level since 1998, according to the Energy Department, but global oil prices have remained relatively high.

Freeport shareholders generally owned the company for its exposure to copper and will not embrace the move, Anthony Rizzuto, an analyst at Dahlman Rose, wrote in a note to clients.

The company’s stock price fell $5.06, or 13 percent, to $33.22, in midday trading.

The Freeport deals, which must be approved by shareholders, are expected to close in the second quarter of 2013.