WSJ notices coal in flames

July 25th, 2007


Coal continues to go up in flames, proposed coal plants, that is… and given the Wall Street Journal’s noticed, page A1 no less, maybe they’re figuring it out that coal is not acceptable.  We’ll keep holding their lumps to the fire.

Here’s the WSJ article:

Coal’s Doubters Block New Wave Of Power Plants


Wall Street Journal
July 25, 2007; Page A1

From coast to coast, plans for a new generation of coal-fired power plants are falling by the wayside as states conclude that conventional coal plants are too dirty to build and the cost of cleaner plants is too high.

If significant numbers of new coal plants don’t get built in the U.S. in coming years, it will put pressure on officials to clear the path for other power sources, including nuclear power, or trim the nation’s electricity demand, which is expected to grow 1.8% this year. In a time of rising energy costs, officials also worry about the long-term consequences of their decisions, including higher prices or the potential for shortages.


• Dwindling Fleet: A neew generation of power plants is stalling due to concerns over their fuel: coal.
• Cheap and Dirty: Coal is plentiful in the U.S. but is a major source of emissions that contribute to global warming.
• The Long Term: Blocked plants could prompt power officials to try to quell consumption or advance other sources.

As recently as May, U.S. power companies had announced intentions to build as many as 150 new generating plants fueled by coal, which currently supplies about half the nation’s electricity. One reason for the surge of interest in coal was concern over the higher price of natural gas, which has driven up electricity prices in many places. Coal appeared capable of softening the impact since the U.S. has deep coal reserves and prices are low.

But as plans for this fleet of new coal-powered plants move forward, an increasing number are being canceled or development slowed. Coal plants have come under fire because coal is a big source of carbon dioxide, the main gas blamed for global warming, in a time when climate change has become a hot-button political issue.

An early sign of the changing momentum was contained in the $32 billion private-equity deal earlier this year to buy TXU Corp. To gain support for the deal, the buyers decided to trim eight of 11 coal plants TXU had proposed in Texas. Recent reversals in Florida, North Carolina, Oregon and other states have shown coal’s future prospects are dimming. Nearly two dozen coal projects have been canceled since early 2006, according to the National Energy Technology Laboratory in Pittsburgh, a division of the Department of Energy.

It’s hard to say how many proposed plants will never be built. Some projects suffer public deaths when permits are denied. Many more simply wither away, lost in the multiyear process of obtaining permits, fending off court challenges and garnering financing.

In the wake of the fading coal proposals, and others that are expected to follow, Citigroup downgraded the stocks of coal-mining companies last week, noting that “prophesies of a new wave of coal-fired generation have vaporized.” On Monday, Steve Leer, chief executive of Arch Coal Inc., said some of the power plants he had expected to be built “may get stalled due to the uncertainty over climate concerns.”

For now, coal companies haven’t taken steps to ratchet back production or big projects because of coal-plant delays. They believe that in a time of global energy concerns, U.S. coal supplies will be seen as too important to dismiss. The U.S. has the world’s largest coal reserves and is sometimes called “the Saudi Arabia of coal” by energy-industry observers.

“It would be quite foolish and quite unthinkable not to have coal play an important role,” says investor Wilbur Ross, who has increased his coal holdings and is nonexecutive chairman of International Coal Group Inc. He predicts cleaner-coal technology will improve enough to become viable.

Roadblocks for coal put greater attention on other sources. The U.S. power industry is exploring building more nuclear power plants. But those plans are several years away, and nuclear power currently provides only about a fifth of U.S. needs. Other sources, like wind, don’t provide around-the-clock energy, while solar is relatively expensive and isn’t yet capable of producing large amounts of electricity.

That puts the focus on natural gas. “Gas is the bridge fuel” that will step in if coal stumbles, says Marc Spitzer, a member of the Federal Energy Regulatory Commission, regulator of the nation’s wholesale gas and electricity markets.

Currently, clean-burning gas provides roughly a fifth of the nation’s power needs. But the nation’s gas production has been flat, and other industries are increasingly using it as a fuel or raw material. Mr. Spitzer says that the nation needs more facilities to accept liquefied natural gas, which is gas cooled into a liquid that can be imported from overseas.

The rapid shift away from coal shows how quickly and powerfully environmental concerns, and the costs associated with eradicating them, have changed matters for the power industry. One place where sentiment has swung sharply against coal is Florida. Climate change is getting more attention there because the mean elevation is only 100 feet above sea level, so melting ice caps would eat away at both its Atlantic and Gulf of Mexico coasts.

In mid-July, Florida Gov. Charlie Crist convened a climate-change summit to explore ways the state could improve its environmental profile. In June, he signed into law a bill that authorizes the Florida Public Service Commission to give priority to renewable energy and conservation programs before approving construction of conventional coal-fired power plants.

The law was bolstered by a recent report from the nonprofit American Council for an Energy Efficient Economy that found Florida could reduce its need for electricity from conventional sources, like gas and coal, by 29% within 15 years if it implemented aggressive energy efficiency measures.

On the eve of the governor’s summit, backers of a major power-plant proposal said they would suspend development activities for an 800-megawatt coal-fired plant proposed by four city-owned utilities including the one serving the state capital, Tallahassee. (One megawatt can power 500 to 1,000 homes.) The backers cited environmental issues.

That decision followed the rejection by the utility commission of a proposal by Florida Power & Light Co., a unit of FPL Group Inc., to build a 1,960-megawatt coal plant in Glades County, Fla. The commission found that the plant was cost effective in fewer than half the scenarios examined. One reason for its poor showing is uncertainty about the future cost to curb carbon dioxide pollution. Coal plants emit more than twice as much carbon dioxide per unit of electricity produced as natural-gas-fired plants, but there’s no cheap, easy way to capture and dispose of the greenhouse gas.

Even proposals to build so-called “clean coal” plants have been met with skepticism. This new technology, which primarily involves converting coal into a combustible gas for electricity generation, has been touted as a solution to coal’s global-warming problems.

A hearing judge at the Minnesota Public Utilities Commission is urging commissioners to reject a plan for Northern States Power Co., a unit of Xcel Energy Inc., Minneapolis, to buy about 8% of its electricity from a coal-gasification power plant that was proposed by Excelsior Energy Inc., Minnetonka, Minn. The judge concluded the 600-megawatt Excelsior plant wouldn’t be a good deal for consumers.

The judge concluded it would cost an extra $472.3 million, in 2011 dollars, to make the power plant capable of capturing about 30% of its carbon dioxide emissions, and another $635.4 million to build a pipeline to move the greenhouse gas to the nearest deep geologic storage in Alberta, Canada. Thus, $1.1 billion in pollution controls had the potential to inflate the cost of power coming from the plant by $50 a megawatt hour, making electricity from Excelsior twice as costly as power from many older coal-fired plants that simply vent their carbon dioxide. The recommendation will be considered by the commission on Aug. 2.

In the West, Washington has followed California in prohibiting utilities from entering into arrangements to obtain electricity from plants that aren’t as clean as modern gas-burning plants. The intent is to discourage construction of conventional coal-fired plants anywhere in the region.

In January, Oregon utility regulators blocked PacifiCorp., a unit of Berkshire Hathaway Inc., from a plan to charge Oregon consumers for part of the cost of building new coal plants outside the state, saying Oregonians didn’t need the power.

Even in states where coal projects are going forward, they are happening more often with a nod to environmental concerns. Xcel Energy, through its Public Service of Colorado unit, has agreed to obtain 775 megawatts worth of wind power to supplement the power that will come from a 750 megawatt coal plant it is building near Pueblo, Colo. It also has agreed to install more pollution controls at existing units, and to cut energy demand by more than 300 megawatts in coming years.

“It will change their portfolio in a fundamental way,” says Vickie Patton, senior attorney for environmental group Environmental Defense in Colorado.

Rising construction costs are another reason that the future looks murky for big coal burners. Duke Energy Inc. created a stir eight months ago when it announced that the expected cost of a new twin-unit power plant in North Carolina had ballooned to about $3 billion, up 50% from about 18 months earlier. That run up in cost and other factors compelled the North Carolina Utilities Commission to nix one of the two proposed units.

The coal industry is looking for ways to make its product more palatable. Earlier this week, Peabody Energy and ConocoPhillips said they are exploring the possibility of constructing a coal-gasification plant at a mine in Illinois, Indiana or Kentucky that would convert coal into 50 billion to 70 billion cubic feet of pipeline-quality synthetic gas a year. It said it would have its analysis completed in early 2008. It would be cost competitive at $5 to $6 per million British thermal units, which is less than today’s prices. 

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