(Bloomberg) — Forget the coal-to-gas switching that’s happening at power plants across the U.S. In Texas, power generators are just trying to wean their plants off some of the dirtiest coal around by switching to, well, less dirty coal.
NRG Energy Inc. said Wednesday it will cancel a contract with Westmoreland Coal Co. for lignite mined near its Limestone power station in Jewett, Texas, and instead bring in “cleaner burning” coal from Wyoming’s prolific Powder River Basin. The decision was an “economic” one that will also cut emissions at the plant, David Knox, an NRG spokesman, said in an interview.
“This change is important to improve Limestone Electric Generating Station’s competitiveness,” Knox said.
NRG isn’t the first in Texas to search for “cleaner” coal in the face of looming environmental rules. In 2014, Energy Future Holdings Corp. said it would be cheaper to use Powder River Basin coal instead of locally mined lignite at two of its Texas generators. Meanwhile, nationally, the shift has been away from coal entirely and toward cheaper, cleaner-burning natural gas.
“You get more bang for your buck with Powder River Basin coal,” said Andrew Cosgrove, an analyst for Bloomberg Intelligence. Generators have more incentive to switch as the price difference with lignite has narrowed due to a slump in demand, Cosgrove said.
Gas has, meanwhile, surpassed coal as the premier fuel for U.S. power generation, according to the Energy Information Administration. Coal’s dominance of the nation’s electricity-generation market began to slide as far back as 2009 as a flood of gas from shale formations sent prices for the power-plant fuel crashing, making it a cheap alternative.
NRG’s Knox said it would cost “millions” to convert its Limestone plant to gas. Switching to Powder River Basin coal has “no significant cost involved,” he said.
NRG will end its supply agreement with Westmoreland two years early on Dec. 31.
By Mark Chediak.