Not one new power plant broke ground in 2010. Have in­vestors moved on to cleaner en­ergy sources?

The Washington Post Sunday - - BUSINESS - BY STEVEN MUF­SON

The head­line news for the coal in­dus­try in 2010 was what didn’t hap­pen: Con­struc­tion did not be­gin on a sin­gle new­coal-fired power plant in the United States for the sec­ond straight year.

This in a nation where a fleet of coal-fired plants gen­er­ates nearly half the elec­tric­ity used.

But a com­bi­na­tion of low nat­u­ral gas prices, shale gas dis­cov­er­ies, the eco­nomic slow­down and lit­i­ga­tion by en­vi­ron­men­tal groups has stopped— at least for now — ground­break­ing on new ones.

“Coal is a dead man walkin’,” says Kevin Parker, global head of as­set man­age­ment and a mem­ber of the ex­ec­u­tive com­mit­tee at Deutsche Bank. “Banks won’t fi­nance them. In­surance com­pa­nies won’t in­sure them. The EPA is com­ing af­ter them. . . . And the eco­nom­ics to make it clean don’t work.”

From 2000 to 2008, con­struc­tion started on 20 units in 19 plants, ac­cord­ing to Edi­son Elec­tric In­sti­tute. Last year, util­i­ties and power-gen­er­at­ing com­pa­nies dropped plans to build 38 coal plants while an­nounc­ing that they would re­tire 48 ag­ing, in­ef­fi­cient ones, ac­cord­ing to the en­vi­ron­men­tal group Sierra Club.

Al­though 2010 saw the col­lapse of cli­mate leg­is­la­tion in the Se­nate, the Sierra Club is trum­pet­ing such statis­tics as a sign that “coal is a fuel of the past.”

The bat­tle over coal plants could sharpen in 2011, as the En­vi­ron­men­tal Pro­tec­tion Agency de­ploys reg­u­la­tions to im­prove the ef­fi­ciency — and lower the green­house gas emis­sions — of big power plants.

Start­ing Sun­day, the EPA will re­quire builders of plants big enough to emit 75,000 tons of car­bon diox­ide a year to use the “ best avail­able con­trol technology” in or­der to ob­tain air per­mits, needed be­fore con­struc­tion. Util­i­ties, oil re­fin­ers and other in­dus­tries ar­gue that this will add pro­hib­i­tive costs, and many Repub­li­can law­mak­ers have vowed to hand­cuff the EPA, which is also plan­ning to is­sue broader guide­lines later in the year.

In the wake of the midterm elec­tions, Pres­i­dent Obama iden­ti­fied pro­mo­tion of nat­u­ral gas use as an area of po­ten­tial bi­par­ti­san ac­tion. He hopes to

prod util­i­ties and man­u­fac­tur­ers into switch­ing from coal to nat­u­ral gas, which emits half the amount of green­house gases. The choice looms large given that the av­er­age age of theU.S. coal fleet is 43 years, with more than half the plants built be­fore 1967.

Word of coal’s death might be pre­ma­ture, says Luke Popovich, spokesman for the Na­tional Min­ing As­so­ci­a­tion. He said that sev­eral coal-fired plants be­gun ear­lier are still un­der con­struc­tion. Duke En­ergy, for ex­am­ple, is ex­pect­ing to fin­ish its Cliff­side and Ed­ward­sport coal plants in 2012.

Other com­pa­nies have scram­bled to get per­mits be­fore the EPA reg­u­la­tions take ef­fect, and projects in Texas, Kansas and Illi­nois have suc­ceeded. A project in Mis­sis­sippi is poised to break ground, though the Sierra Club is still fight­ing in court to re­voke the plant’s per­mits.

More­over, Popovich adds, the fed­eral En­ergy In­for­ma­tion Ad­min­is­tra­tion ex­pects that the nation will need to build 30 to 40 new plants to sup­ply the 21 gi­gawatts of new elec­tric­ity de­mand ex­pected by 2035.

“Coal will re­main the dom­i­nant source for elec­tric­ity gen­er­a­tion for the fore­see­able fu­ture,” he says. “So the big prob­lem with the ‘death of coal’ mes­sage is that it is not, as we say, re­al­ity-based.”

It’s the econ­omy

Even if coal is not dead, de­vel­op­ments of the past two years have dimmed its fu­ture.

The fate of the long-planned Smith Unit No. 1 coal plant in Ken­tucky is one ex­am­ple. The EastKen­tucky Power Co­op­er­a­tive an­nounced plans five years ago to build the 278-megawatt plant, and it ob­tained per­mits from the Ken­tucky Pub­lic Ser­vice Com­mis­sion. But en­vi­ron­men­tal groups, joined by crit­ics of fed­er­ally sub­si­dized loans to ru­ral elec­tric co­op­er­a­tives, fought the project.

Then the re­ces­sion hit and tipped the scales. A cou­ple of months ago, the co­op­er­a­tive slashed 9 per­cent from its fore­cast of elec­tric­ity de­mand among the half-mil­lion cus­tomers it serves.

As a re­sult, EastKen­tucky Power can­celed the Smith coal plant con­struc­tion on Nov. 18, even though it has spent about $150 mil­lion stock­pil­ing steel and parts. “And that’s al­most en­tirely due to the econ­omy,” says Nick Comer, the co­op­er­a­tive’s man­ager of ex­ter­nal af­fairs. Fin­ish­ing the plant would have cost an es­ti­mated $819 mil­lion more.

“Back in 2006-07, the econ­omy was roar­ing. In our ser­vice ter­ri­tory we were see­ing growth at about twice the na­tional rate,” Comer says. “ There were a lot of new houses, new busi­nesses; even man­u­fac­tur­ing was ex­pand­ing.”

But, Comer adds, “a lot of that has changed to­day. Hous­ing starts are down. Man­u­fac­tur­ers have cut back. So we ex­pect de­mand for elec­tric­ity is go­ing to be down from what we had pro­jected for a while.”

The story is the same across the nation. Coal con­sump­tion in the elec­tric power sec­tor dur­ing the first nine months of 2010 was up from 2009, but still down 5.7 per­cent from 2008’s near-record lev­els, ac­cord­ing to EIA fig­ures.

East Ken­tucky Power also signed a set­tle­ment with en­vi­ron­men­tal groups un­der which it will in­stall ad­di­tional pol­lu­tion con­trol de­vices and fur­ther ex­plore re­new­able en­ergy op­tions.

Cheap nat­u­ral gas

Amer­i­can Elec­tric Power, the nation’s largest generator of elec­tric­ity, is also tak­ing a cau­tious ap­proach. The only plant AEP has un­der con­struc­tion is the high­est ef­fi­ciency model, known as “ul­tra su­per­crit­i­cal.” Un­der the newEPA guide­lines, these high-ef­fi­ciency plants could be­come the stan­dard, re­duc­ing coal use.

“We have no other coal-fu­eled gen­er­a­tion planned at this time,” says Pat D. Hem­lepp, a spokesman for AEP. “ The de­cline in de­mand has de­layed the need for ad­di­tional new gen­er­a­tion.”

If AEP does need new gen­er­a­tion ca­pac­ity, it will turn to nat­u­ral gas. In 2010, the well­head price of nat­u­ral gas has av­er­aged $4.25 a thou­sand cu­bic feet, about 40 per­cent be­low the av­er­age price from 2005 to 2009 and well un­der half the peak price.

Dis­cov­er­ies of new ways to tap nat­u­ral gas trapped in shale rock have un­locked sup­plies that could keep prices in check for years to come.

“When we do need new ca­pac­ity, it is highly likely that we will look to nat­u­ral gas plants in­stead of coal, es­pe­cially if nat­u­ral gas prices re­main as low as pro­jected,” Hem­lepp says. “ The plants are less ex­pen­sive to build, and cur­rent for­ward price pro­jec­tions fa­vor gas over coal.”

It’s a de­ci­sion be­ing made by util­i­ties across the coun­try. A re­cent Deutsche Bank re­port says that if gas prices re­main be­tween $4 and $6 a thou­sand cu­bic feet, “we be­lieve that a coal-to-gas switch makes sense.”

States have their plans

Even though Congress failed to en­act cli­mate leg­is­la­tion, more than half the states have adopted mea­sures re­quir­ing util­i­ties to use more re­new­able en­ergy. To meet those tar­gets, most in­vest­ment will prob­a­bly go into so­lar, wind, nu­clear and en­ergy ef­fi­ciency projects.

En­vi­ron­men­tal groups are gear­ing up to chal­lenge coal plants state by state. The Sierra Club is ex­pand­ing its ranks this year so that 100 full-time staffers will be work­ing on the is­sue, and the En­vi­ron­men­tal De­fense Fund is hir­ing ad­di­tional lawyers to wage bat­tle against coal.

Given the age of the coal fleet, many of the old­est plants also run afoul of clean air guide­lines on tra­di­tional pol­lu­tants.

As a re­sult, the Colorado Pub­lic Util­i­ties Com­mis­sion re­cently adopted a $1.4 bil­lion plan that will end coal-fired elec­tric­ity gen­er­a­tion in the Den­ver area. It calls for Xcel En­ergy to close four coal­fired units in the re­gion, switch an­other to nat­u­ral gas and build a new gas-fired plant to help meet fed­eral clean-air stan­dards. The units are all more than 40 years old.

The plan was re­quired un­der the Colorado Clean Air-Clean Jobs Act, signed byGov. Bill Rit­ter (D) in April.

“Coloradans across the state made it clear that they did not want coal in their stock­ings this year,” said Pam Kiely of En­vi­ron­ment Colorado. “ The PUC de­liv­ered an early Christ­mas present by de­cid­ing to stop burn­ing dirty coal in the metro area.”

Ac­tion with­out leg­is­la­tion

The Obama ad­min­is­tra­tion might also tar­get coal-fired power plants as away to meet its goals for re­duc­ing green­house gas emis­sions, even if leg­is­la­tion re­mains be­yond its grasp. Ad­min­is­tra­tion of­fi­cials have spo­ken of ne­go­ti­at­ing guide­lines with big util­i­ties, sim­i­lar to au­to­mo­bile fuel ef­fi­ciency stan­dards, but util­ity ex­ec­u­tives say such talks are not yet tak­ing place.

Deutsche Bank’s Parker thinks that a path to lower coal use not only makes fi­nan­cial sense but cli­mate sense as well.

“Switch­ing coal to nat­u­ral gas and re­new­able en­ergy with a mod­est buildup of nu­clear en­ergy is achiev­able and could lead to a 29 per­cent re­duc­tion in CO2 emis­sions from the U.S. power sec­tor by 2020 and a 44 per­cent re­duc­tion by 2030 com­pared to a 2005 base­line,” the bank wrote in its Novem­ber re­port on a low-car­bon en­ergy plan for the United States.

At in­ter­na­tional cli­mate talks, ne­go­tia­tors of­ten use the year 2005 as a base­line. At the Copen­hagen cli­mate talks a year ago, the Obama ad­min­is­tra­tion pledged a 17 per­cent re­duc­tion in over­all U.S. emis­sions by 2020.

In 2002, there were plans to in­stall 36,000 megawatts of new coal-fired power by 2007. Only one-eighth of that was com­pleted.

Deutsche Bank pre­dicts coal’s share of elec­tric power gen­er­a­tion will tum­ble fur­ther, from 47 per­cent in 2009 to 34 per­cent in 2020 and 22 per­cent in 2030.

It put it this way in its re­port: “Based on to­day’s en­ergy fun­da­men­tals, the ra­tio­nal eco­nomic de­ci­sion is to shut­ter in­ef­fi­cient coal plants and re­place them with nat­u­ral gas com­bined-cy­cle power plants.”



In the bat­tle over coal’s place in U.S. en­ergy pol­icy, Pres­i­dent Obama hopes to prod util­i­ties and man­u­fac­tur­ers to switch to nat­u­ral gas to lower green­house gas emis­sions.


Duke En­ergy ex­pects to fin­ish work on two new coal plants next year, in­clud­ing one in Ed­ward­sport, Ind. Com­pa­nies have scram­bled to get per­mits ap­proved be­fore new EPA rules take ef­fect Sun­day.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.