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Bill Opalka
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With carbon
cap-and-trade legislation wending its way through Congress in the early
part of the year, many electric power companies were taking a wait-and-see attitude
toward new plant construction. And wait. And wait.
That
doesn't tell the whole story, though, as many producers are doing more than
wait -- they are canceling coal plants outright. According to the Edison
Electric Institute, at least nine coal plants representing 6,650 megawatts
have been canceled by May 2009, joining 24 plants that were scuttled in
2008.
But
cap-and-trade tells only a part of the story. When the financial crisis hit
the markets last year, wavering executives wondering about the fallout
after a crucial presidential election had even more reasons to stop, slow
down or even halt new plant construction. Climate and energy legislation,
as well as a profound shift in environmental policy from the previous eight
years, have made power companies that rely on fossil fuel generation to
serve their load even more reticent to pursue projects that are now deemed
risky. Overlaid on this is an economic recession that has slowed the demand
for additional generation capacity, at least in the short run.
According
to the Sierra Club, only 59 of the 220 coal-fired plants planned and in
various stages of permitting since 2001 remain actively under development,
which means trends well under way a year ago have only accelerated in
recent months. Major cancelations include:
- The Navajo Nation in New Mexico planned to build the Desert Rock
1,500 megawatt coal-fired power plant on its reservation in New Mexico but
its permit was revoked by the EPA.
- NV Energy is postponing plans
for a $5 billion, 1,500 megawatt Ely
Energy Center
in eastern Nevada.
- LS Power subsidiary
Mid-Michigan Energy cited "regulatory and economic
uncertainty" when it cancelled the 750-megawatt Midland Power
Plant in Michigan.
- Alliant Energy subsidiary
Interstate Power and Light Company canceled plans to construct the
Sutherland Generating Station Unit 4 in Marshalltown, Iowa, due to the
"financial climate and ... regulatory uncertainty."
Other
cancelations or delays have included: Entergy Louisiana was ordered by the
Louisiana Public Service Commission to suspend the Little Gypsy Repowering
project; LS Power withdrew its application to build the White Pine Energy
Station in Nevada and the Elk run project in Iowa; and AES has withdrawn
its air permit application for a new 650-megawatt unit at Shady Point in
Oklahoma.
"The
development landscape has changed significantly since we agreed to enter
into the development joint venture with LS Power in the fall of 2006,"
Bruce Williamson, chief executive of Dynegy Inc., LS's
partner, said at the time of the Michigan announcement. "Today, the
development of new generation is increasingly marked by barriers to entry
including external credit and regulatory factors that make development much
more uncertain."
Capital
Spending
Economic
uncertainty late last year created a massive rethinking of building plans
for one of the nation's largest utilities, American Electric Power, said
Nick Atkins, executive vice president for generation. Last fall the company
not only slammed the brakes on its current projects but made decisions
impacting billions of dollars in capital spending over three years.
"We
were forced to reduce our capital spending to $1.8 billion from what has
planned to be $3.5 billion for the year when we saw 15 percent of the load
drop off," Atkins said. So going forward, AEP will keep spending flat
through 2011, committing to $1.8 billion yearly, just about a 50 percent
drop-off from its previous long-term plans. The company will concentrate on
allocating its existing asset base instead of adding substantially to its
base-load portfolio. But long-term, "you have to include coal. That
has to be part of the base-load and you need a balance."
Even
previously permitted plans were not immune from the slowdown. The EPA
rejected South Dakota's
approval of the Big Stone II coal-fired power plant in that state because
it found the inconsistencies with the Clean Water Act. EPA Administrator
Lisa Jackson moved to block construction of the plant as part of the new
overall strategy to combat global warming. Jackson made an endangerment finding
indicating that human health and welfare are threatened by CO2 emissions
under the Clean Air Act.
Not all
coal projects have been put on hold, especially if there is a carbon
capture and sequestration potential. If the 20-megawatt trial at the
Mountaineer Plant in New Haven, W.V., is
deemed successful, then American Electric Power (AEP) will implement the
same technology in 2011 at another facility in Oklahoma in a 200-megawatt project.
That W.V.
project might influence FutureGen. That zero
emissions project was revived in the economic stimulus package passed
earlier this year. U.S. Energy Secretary Steven Chu said President Obama
would support the plant with "some modifications." FutureGen is aimed at producing 275 megawatts of
electricity.
New
construction is one of the more visible aspects of resource planning, but
there have also been effects on maintenance and retrofits. For much of the
past couple years, an expensive program in the eastern half of the U.S. has
been ongoing. The on-again, off-again, and now
on-again Clean Air Interstate Rule case has accounted for much of the
capital expense of utilities. CAIR is a mandate in 27 states and the District of Columbia
to reduce NOx emissions.
Peter
Spinney, Director of Market and Technology Assessment at NeuCo, Inc., a provider of optimization technology for
the electric power industry, said spending on this issue has not been
adversely affected. "The industry as a whole is shying away from big
ticket items and is concentrating on operational efficiency as it is
waiting to see what kind of a price signal it will get on carbon."
The trend
toward reducing greenhouse gas emission is getting stronger. The same is
true for all other types of emissions. Utilities are undoubtedly affected
by all this and their future blueprints are reflecting this.
More
information is available from Energy Central:
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