AEP Sustainability - Generation

Traditional Generation

At the end of 2018, coal represented 47 percent of AEP’s generating capacity, compared with 70 percent in 2005. While coal is a smaller portion of our fuel portfolio today than in the past, it will continue to remain an important resource for the foreseeable future. Coal helps provide us with the flexibility necessary to manage the intermittent nature of renewable and distributed energy resources and maintain grid reliability.

AEP has retired approximately 7,800 MW of coal-fueled generating capacity since 2011. Our remaining coal units will continue to provide critical 24/7 energy and other services to the grid to ensure reliable, uninterrupted electricity for our customers. These facilities are equipped with environmental controls to assure compliance with current regulations. We make investments as needed to comply with environmental regulations that keep our fossil-fueled generating capacity available to serve customers. These environmental upgrades will continue through 2025.

In 2018, we announced the retirement of two more coal generation facilities. AEP Generation Resources will close Conesville Units 5 and 6 with a total generating capacity of 820 MW (AEP’s ownership) – in May 2019 and will close the 651 MW-Unit 4 in May 2020. We also announced the closure of our 460 MW (AEP’s ownership) Oklaunion Plant in Oklahoma. The Oklaunion Plant, co-owned by AEP Texas and Public Service Company of Oklahoma, will retire in 2020.

Our use of coal generating facilities changes in response to changing market conditions. Factors such as fluctuating natural gas prices and seasonal capacity needs dictate when coal units are used to serve customer demand. Today, we manage the remaining coal fleet to reduce the need for capital investment over time, allowing us to optimize the operation of the units, as well as investment and depreciation rates. This approach delivers value to both our customers and shareholders. By 2030, more than half of AEP’s coal units will be within 10 years of reaching the end of their 60-year typical useful lifespan.

Although we have no plans to build another coal plant, we continue to monitor the development of new technologies, including carbon capture and storage. Should any of these technologies be demonstrated commercially to improve the scalability and cost-competitiveness of low-carbon fossil-fueled power generation in the future, we would want to have those technology options available for consideration.

To support development, demonstration and deployment of these technologies, the industry - along with the Electric Power Research Institute, the U.S. Department of Energy, technology suppliers and academia is working to develop state-of-the-art processes, equipment and components, new metal alloys, alternative materials and advanced manufacturing techniques, all of which could have beneficial impact on the industry.

Learn more about AEP’s strategic vision for reducing carbon emissions.

In 2018, natural gas accounted for approximately 28 percent of AEP’s generating capacity. According to the U.S. Energy Information Administration (EIA), natural gas has surpassed coal as the main fuel for electricity generation and will continue to grow its share of power production through 2050. AEP’s consumption of natural gas to generate electricity by our regulated utilities in 2018 was up by 29 percent from 2017, largely due to lower natural gas prices and increased demand for electricity. As natural gas becomes an increasingly important 24/7 resource for the future, price, availability and security of supply become higher priorities.

Natural gas is a fundamental part of our portfolio as we seek to diversify our resources while maintaining 24/7 reliability and resilience of the power grid. As wind and solar capacity increases, we need a back-up source of power to ensure the grid operates uninterrupted when other resources are unavailable. Natural gas provides the flexibility renewables need due to their intermittency.

Natural gas emits approximately 50 percent less carbon dioxide compared with coal when burned to generate electricity. High-efficiency combined-cycle natural gas plants can also be built and operated with fewer environmental control systems than a coal-fueled plant. Since 2005, AEP has added over 3,000 MW of natural gas generating capacity to our portfolio, and we anticipate continued growth. At the same time, we are looking for new technologies that are more efficient and have the flexibility needed to meet changing customer needs.

Reliability of supply is vital to reliability of the grid, which is why we remain concerned that an overreliance on natural gas for power generation comes with great risk to the grid and our customers. Assuming favorable foreign markets, as the U.S. continues to export more natural gas, we expect prices to increase in the long term. If our industry becomes overly dependent on natural gas generation, our customers will be more exposed to the potential volatility and price increases in the natural gas market.

Because natural gas facilities rely on a constant supply of fuel to operate, it is critical that we maintain a steady flow of natural gas to our generation plants at all times. This is why several of our natural gas plants are connected to two pipelines or have alternative fuel capabilities. Another challenge we face is limited and aging natural gas infrastructure, which limits our ability to receive natural gas to meet demand at all times. We continue to work with regulators to help manage this risk and gain more certainty and flexibility when procuring and scheduling natural gas delivery for our units.

We remain concerned that the majority of current natural gas security issues (cyber and physical) are addressed through voluntary guidelines. The Energy Policy Act of 2005 authorized the creation of an audited self-regulatory “electric reliability organization” that spanned North America, with FERC oversight in the United States. The legislation made compliance with reliability standards both mandatory and enforceable. In July 2006 FERC certified NERC as the electric reliability organization for the United States. While NERC takes its security responsibilities very seriously, it does not currently have jurisdiction over the natural gas industry. As the electric industry becomes ever more reliant on the natural gas industry, the disparity in regulation is of growing concern.

Carbon Capture and Storage for Natural Gas

To date, the vast majority of the work on carbon capture and storage (CCS) has been performed on coal-fired generation. However, since AEP completed the Mountaineer CCS validation project in 2010, the development of the technology has slowed significantly. In that time, there have only been two commercial scale demonstrations of CCS technology. This slow pace of development can largely be attributed to the high cost of CCS; technical and financial risks associated with capture, storage and enhanced oil recovery; and the lack of regulatory compliance mandates for CO2 reductions. We will continue to monitor CCS technology development.

AEP has 933 MW of hydro and pumped storage on its system, serving customers in five states.

Carbon-free electricity has been part of AEP’s generating portfolio for decades. Customers across our service territory continue to benefit from our operation of nuclear and hydroelectric generation.

Nuclear energy is one of the most reliable carbon-free sources of electricity. The Donald C. Cook Nuclear Plant in Bridgman, Michigan, can provide 2,278 MW of electricity when operating at full power. The plant’s two units are located along Lake Michigan’s eastern shore, producing electricity to serve our customers in Michigan and Indiana.

Cook’s two units were originally designed for a 40-year life, but in 2005 the licenses were extended by 20 years to 2034 for Unit 1 and 2037 for Unit 2. In 2018, Unit 1 surpassed four years of continuous service (excluding time to refuel, which occurs every 18 months), an industry leading accomplishment.

We are undergoing a Life Cycle Management (LCM) project to replace key components and extend the useful life of the Cook facility. We are starting to upgrade the electronic systems throughout the plant, including the reactor protection systems.

The Cook Plant is part of an industrywide, multi-year strategy to transform the industry and ensure the plant’s long-term viability. The strategy, called Delivering the Nuclear Promise, identifies efficiency measures; adopts best practices; and applies new technology solutions that improve operations, reduce costs and drive regulatory and market change to ensure nuclear energy facilities are fully recognized for their value and don’t succumb to premature reactor retirements.

Another clean energy resource serving our customers for more than a century is hydroelectric power. AEP has 933 MW of hydro and pumped storage on its system, serving customers in five states.

The Byllesby hydro plant, owned and operated by Appalachian Power, was inducted into the Hydro Hall of Fame in 2018. To be eligible, plants must be in continuous operation for more than a century. The 19 MW plant on the New River in southwestern Virginia began operation in 1912.