Burning more natural gas to produce electricity is a far more realistic approach to cutting pollution and greenhouse gas emissions than building an expensive fleet of nuclear power plants, Exelon Corp. CEO John Rowe said yesterday.

The head of Chicago-based Exelon, which operates the nation's biggest fleet of nuclear plants, asserted that the growing U.S. gas supply is a "genuine elixir" for at least a decade. Gas prices will stay near historic lows, he says, and power companies will turn to gas as they replace the oldest and dirtiest U.S. coal-fired generators.

Exelon Corp. CEO John Rowe. Photo courtesy of Exelon.

"Natural gas is already jump-starting the transition to cleaner energy," Rowe said in a speech before the conservative American Enterprise Institute. "The simple thesis is that, if we don't do something else, natural gas is going to green our electricity supply very substantially over the next decade, and it's going to make us relatively more competitive."

Gas prices have rested at or below $4 per million British thermal units for two years as a result of an onshore gas boom stretching from Texas to Pennsylvania.

Gas supplies about 25 percent of electricity generated in the United States, and it produces lower carbon dioxide emissions than burning coal and oil. Still, gas has long been the wild card of energy policy. Gas commodity prices in the past two decades have swung wildly at times, spiking in 2005 and 2008 and pushing up the cost of electricity. Lawmakers and state utility regulators cognizant of the mushrooming U.S. gas supply picture continue to express concern about relying on gas too much.

Rowe weighed into this debate, arguing above all that gas will remain cheap and the first option for companies replacing their coal generators.

Commodity prices years out in the gas futures market suggest that using gas will be cheaper than building new coal-burning generators. Power companies have announced they will retire or mothball nearly 12,000 megawatts of coal-fired generation, he noted, and in 2010, gas use by electric utilities increased 6 percent.

'Cheap gas' for perhaps 20 years

"Every consultant I can hire predicts flat real prices for natural gas for at least this decade, and maybe two," Rowe said.

Cheap gas allows the market to work relatively free of distortions, he said. "I can't guarantee that we'll never see another spike," Rowe said, "but neither can I find a forecast from any reputable follower of the business that projects we're going to have high prices on a consistent basis anytime in the next several decades."

Rowe's Exelon has struggled some because of the low price of natural gas. Nuclear power plants in competitive electricity markets in Illinois and Pennsylvania end up selling power at cut rates tied to the price of natural gas.

"I've never met a nuclear plant I didn't like," Rowe said, "but we have to spend about twice what China spends to build new nuclear."

Rowe is a longtime supporter of efforts in Congress to pass a cap-and-trade climate program, but yesterday he urged Congress to "do nothing" on energy policy.

"I'm not here to ask Congress to do something about energy. I'm actually here to ask that it do nothing," he said. "Fortunately, doing nothing just might be an area where a divided Congress can excel."

U.S. EPA has been ordered by federal courts to enforce the Clean Air Act, he noted. "We at Exelon support their doing so," he said. "The thrust is that it's time to clean up the nation's energy fleet, and it's time to enforce the existing laws."

'Betting on the '59 Cadillac'

Further, he rejected the notion that the regulations will kill the coal industry, do grave damage to utilities with older coal plants or cause the United States to be less competitive because of higher energy prices.

"Betting on the coal plants built in the late '40s, '50s and early 60s without requiring them to clean up is like betting on the '59 Cadillac for your competitive position in electricity," he said. "It simply won't work."

William Massey, an energy attorney and former member of the Federal Energy Regulatory Commission, said Rowe's conclusion is realistic. Congress is not likely to take up legislation to deal with carbon emissions, so the best policy is to allow market forces to attract gas demand.

"With all the turmoil in the Middle East, there seems to be an almost total decoupling of natural gas prices and oil prices," Massey said.

But he and other analysts say gas isn't out of the woods yet. Concerns about the life-cycle environmental impact of a gas drilling boom, and how the hydraulic fracturing process affects drinking water supplies, loom large.

Joe Romm, a fellow at the Center for American Progress, said Rowe's support for gas, in part because of inaction by Congress to put a price on carbon that helps nuclear power plants, is ironic. "The Republican Congress has killed the nuclear industry," he asserts. "As much as they love the coal industry, they have ended any hopes of a nuclear renaissance."

Click here for E&ETV coverage of the American Enterprise Institute event.