Mar 25, 2010
By Mark Peters, A DOW JONES NEWSWIRES COLUMN
NEW YORK -(Dow Jones)- Nearly two-dozen coal-fired power plants are scheduled to start up in the next three years, but plans for new projects have all but dried up amid falling power demand and efforts to limit carbon dioxide emissions.
Last year brought the largest annual addition of coal-fired generation in nearly two decades as projects planned several years ago were finished. Still to come are major plants under construction by Duke Energy Corp. (DUK), American Electric Power Co. Inc. (AEP) and Dominion Resources Inc. (D).
However, development of additional units faces serious threats from natural gas, which is being touted by many as the preferred fuel for power plants amid a surge in supply and lower emissions, expected stricter regulations on mercury and other air pollutants, and federal action on climate change.
Looking ahead, "you're only building one kind of [central station] power plant, and that's natural gas," said Kevin Book, managing director of Clearview Energy Partners, a Washington D.C. consulting firm.
The Sierra Club says developers haven't broken ground on a new unit in more than a year, and the list of canceled plants continues to grow. The Blackstone Group L.P.'s (BX) Sithe Global Power is the latest, announcing this week the cancellation of a coal-fired plant under development in Nevada in favor of a natural gas generation facility.
The near-term challenge for all new plant construction is electricity demand, which fell 5% in the last two years. Power use is beginning to recover, but is climbing back from sales levels not seen since 2004.
Many of the coal projects under construction were planned before the recession hit and demand dropped. The National Energy Technology Laboratory, or NETL, in a presentation earlier this year listed 22 coal-fired plants under construction in the U.S. The plants will provide nearly 14,000 megawatts of generating capacity, or enough electricity to power 10 million or more homes. Some of the new plants under development will replace older coal-fired ones scheduled for retirement, and further plant closures are expected as the U.S. Environmental Protection Agency puts in place anticipated stricter rules for mercury, sulfur dioxide and other pollutants.
Federal regulations on heat-trapping, greenhouse gases linked to climate change loom large over plant development, especially since units built today will be spinning for decades to come. Burning coal is the most carbon intensive way to generate electricity, and the eight plants completed last year in the U.S. would emit an estimated 170 tons of CO2 a day, according to NETL capacity estimates and EPA average emission rates.
Proposed federal limits on CO2 are stalled in the U.S. Senate, but the EPA is moving forward on regulations under the Clean Air Act. The rules would hit new plant proposals first starting in January, with the EPA requiring proposed units to be permitted to emit CO2.
The process is still being developed, but environmental and industry officials say a new coal-fired unit would be required to install the best available technologies to control CO2 emissions.
Where the issue becomes complex is, What is meant by technologies?
While coal units can become more efficient, there isn't a commercially available technology to make major cuts in their CO2 emissions.
Several sectors of the energy industry, state regulators, the EPA and environmental groups are in a heated debate around what should be considered the best technology to reduce emissions. The questions include, Should coal plants instead run on natural gas? Should they be required to capture CO2 and store it underground? That option presents its own challenges.
Many involved in the debate want Congress to step in and write new regulations instead.
"This is the biggest challenge I have ever seen in any industry," said Theresa Pugh, director of environmental services for the American Public Power Association, a trade group for community-owned electric utilities.
(Mark Peters covers the U.S. power and coal industries and environmental markets and can be reached at 212-416-2457 or mark.peters@dowjones.com.)
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Source: http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201003251414dowjonesdjonline000701&title=emission-criticalus-coal-fired-generation-boomsand-busts
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