 Coal Generators Clean Up Their Act - By Ken Silverstein Daily IssueAlert 10/1/2004 Free Copyright 2004. All rights reserved. “Clean coal” has gained a place at the table. Now that both presidential candidates have openly embraced the idea, the voters will want to know more. The nation must pursue a pragmatic energy policy. A real question exists as to whether natural gas producers will gain more access to restricted lands and whether the wells they drill will satisfy America's long-term, growing energy needs. Given that dilemma and given that the United States has vast coal reserves, many energy analysts are endorsing the advancement of clean coal technologies. "In order to become less dependent on foreign sources of energy, we've got to find and produce more energy at home, including coal," says President Bush. "I believe that we can have coal production and enhanced technologies in order to make sure the coal burns cleaner. I believe we can have both." The Democratic nominee, Sen. John Kerry of Massachusetts, agrees that “clean coal” is essential to the country’s energy picture. He would commit $10 billion over 10 years to the effort. Some clean coal technologies offer the potential for giving even high-sulfur "dirty" coals many of the same environmental qualities of natural gas. Others also greatly reduce greenhouse gas emissions by boosting power plant efficiencies and releasing carbon gases in a form that can be more easily captured and prevented from entering the atmosphere. The Clean Air Act of 1990 requires that sulfur dioxide emissions be capped at 8.9 million tons a year and that nitrogen oxide emissions be limited to 2 million tons annually starting in 2008, which is about an 85 percent reduction over what is currently allowable. Altogether, between 1970 and 1998, sulfur dioxide emissions dropped by 76 percent, nitrogen oxide emissions fell by 58 percent and particulate matter declined by 96 percent, says the Environmental Protection Agency. The new technologies now available hold out even more promise. Take Reliant Energy’s Seward plant, which is located 80 miles east of Pittsburgh. It is the largest waste coal-fired generating plant in the world and is the only merchant plant of its kind in the U.S. The plant is currently undergoing pre-operational testing, with commercial operation expected this fall. When it is commercial, Seward is projected to be one of the lowest cost generating plants in the PJM Interconnection. The new 521 megawatt facility produces two and one-half times as much electricity as the plant it replaces, while significantly reducing emissions. In addition, Seward uses low-grade refuse from coal mines, which is abundant in western Pennsylvania, as fuel. Removing this waste coal improves the environment, while removing a significant source of acid discharge from the local watershed. In all, more than 100 million tons of waste coal will be removed from the landscape during the life of the plant. "This plant has environmental benefits, creates jobs and provides a reliable, low-cost supply of power for Pennsylvania and the broader PJM market," said Joel Staff, CEO of Reliant Energy. New Facilities Altogether, the Bush administration has committed $2 billion over 10 years to its Clean Coal Power Initiative. In the last round of bids, 13 companies submitted proposals to the administration valued at $6 billion. Winners will be selected by January. In the first round, the administration chose eight projects to help fund. Among the current competitors: Basin Electric Power Cooperative, Southern Co. Services and Minnesota Power. Coal may be controversial. but it’s here to stay. Coal, at about a third of the cost of natural gas, has 200 years worth of reserves. The Energy Information Administration now projects that coal will actually increase its share of the U.S. electricity generation market from 50 percent in 2002 to 52 percent by 2025, because of the expected increased in demand for electricity. This year, as the economy gathers steam, the demand for power is anticipated to rise 2.4 percent annually. Meantime, UtiliPoint International research finds that there are more than 90 coal plants with a total capacity of 50 gigawatts now under consideration. American Electric Power, for example, said it expects to construct the largest clean coal facility in the country. It announced this month that it wants to build a 1,000 megawatt plant in the next six years that runs on “integrated gasification combined cycle” technology. Basically, that facility would convert coal to synthetic natural gas – an investment that would cost $1.6 billion, or 20 percent more per kilowatt than other modern coal-fired plants. Xcel Energy, furthermore, says that it expects a “significant portion” of its new generation to be coal-fired, all to combat the high price of natural gas and to grow its asset base that will help improve its credit ratings. The Wisconsin Public Service Commission has given final approval to Wisconsin Energy Corp. to build two 615 megawatt coal plants at a cost of $2.15 billion. The regulated plants are guaranteed a 12.7 percent return on equity. A third plant—one that would run cleaner than conventional plants and also be in included in the rate base—was rejected. The commission noted that those technologies are expensive and unproven. Not only does Wisconsin Energy say that it will pursue the third plant but it also says that without the coal alternative, it would be unable to economically meet future demand that is expected to be 2-3 percent a year. Opponents, however, are trying to stop construction of the coal plants—even though Wisconsin Energy says that it will retire two older coal facilities that are embroiled in federal lawsuits. The state's department of natural resources must still approve the plan. Effective Solutions Today's coal-fired plants have a fuel to efficiency rate of 33-35 percent. With the new technologies, such as gasification, however, that efficiency rate is said to increase to 40-50 percent, and potentially as much as 60 percent. The cost to build: about $1,200 to $1,600 per kilowatt compared to $900 with conventional coal plants. Many utilities are looking closely at other types of modern devices that can make coal cleaner. Right now, about 140 scrubbers that cleanse coal of harmful pollutants are located at the 540 coal plants. AEP says that it will spend $1.2 billion over three years to install scrubbers that will reduce its sulfur dioxide emissions. Meanwhile, Duke is retrofitting an existing coal-fired facility that will reduce such emissions by 90 percent. Altogether, the company will spend $1.5 billion to update its technologies. Environmentalists argue that the most effective solution is to phase out existing coal plants that cause most of the pollutants and to emphasize green power such as wind, solar and hydrogen. To that end, the current president has emphasized fossil fuel production while his opponent argues that a far greater emphasis ought to be placed on finding newer, cleaner and more sustainable energy forms. Both candidates, however, want to see new clean coal technologies reach the commercial stages. Pragmatically speaking, coal will continue to be an integral energy source. Improving and developing the tools to make it cleaner do not contradict the efforts to bring more renewable power to the fore. Indeed, the overall trend toward cleaning the environment places coal generators under more pressure to clean up their act. UtiliPoint's IssueAlerts are compiled based on the independent analysis of UtiliPoint consultants. The opinions expressed in UtiliPoint's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. UtiliPoint's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues. Copyright 2004. UtiliPoint International, Inc. All rights reserved. |
