Although few Americans would characterize the affair this way, the U.S. has a love-hate relationship with coal-fired power plants. Fifty percent of the electricity generation in this country begins with a shovel full of coal and ends with a commodity that everyone depends on but takes for granted.
Natural gas contended with coal for a few years recently, and it still competes well in selected regions. But today's average capacity factors confirm that high and volatile prices have knocked gas to the canvas: Gas-fired combined-cycle plant capacity factors average around 30%, whereas coal plants still rule at more than 80%. However, the price of coal—supplies of which are less susceptible than gas to curtailment during cold winter months—is slowly inching up, largely in response to increased demand for the low-sulfur variety from the Powder River Basin (PRB) of Wyoming.
Another indicator of the continued hegemony of coal-fired generation is the rush by developers and utilities to make it their preferred option for near-term baseload capacity. According to the U.S. National Energy Technology Laboratory, 153 proposed new coal plants totaling 93 GW are in some stage of development in 40 states. Industrial Info Resources Inc. (www.industrialinfo.com) puts the total even higher, saying it is tracking 180 coal projects. Conspicuous by their absence from the list are the six New England states, which generally oppose building just about anything that makes a kilowatt.
If the past is in any way predictive of the future, not all of those projects will be built. But it's generally agreed that the pulse is getting stronger in an industry segment that has been on life support for a generation.
Nevertheless, there are plenty of land mines remaining if building a new coal plant is on your to-do list. One is potentially unreliable fuel supply. The two mid-May 2005 derailments on the southern rail line out of the Powder River Basin jointly operated by Burlington Northern Santa Fe and Union Pacific, and ongoing coal transportation constraints, are facts of life that potential PRB users must consider. Another risk is a consequence of the law of supply and demand. There's nothing to stop railroads from raising their coal shipment fees as more PRB-firing plants come on-line—including more than a few in eastern markets.
In his May 25, 2006, remarks to the U.S. Senate's Committee on Energy and Natural Resources, David Wilks, president of energy supply for Xcel Energy (and speaking on behalf of the Edison Electric Institute) skillfully used the "R" word to lobby the federal government to ride herd on the railroads. Noting that it is "critical that electric utilities be able to depend on reliable, affordable coal deliveries," Wilks added that "reliable rail coal movement . . . is integral [to] . . . electric reliability [and] . . . inextricably linked to the economic health of the nation." Wilks went on to testify that "The North American Electric Reliability Council (NERC) is taking very seriously the potential impact that coal delivery problems could have on electric reliability," explaining that "NERC has placed the PRB issue on its 'Watch List.' "
Reservations about coal
Building a coal plant in western states, and especially on or near the Colorado Plateau, is becoming very problematic. Case in point: The 1,900-MW Intermountain Power Plant (IPP) in western Utah—which sells 45% of its output to the City of Los Angeles—announced in 2002 its intention to join a partnership to add a third 950-MW unit. In August 2004, then-Mayor James K. Hahn pulled the plug on L.A.'s participation in the project and directed the city's Department of Water and Power to spend the money instead on purchases of renewable energy for the city. How do you anticipate a curveball like that? IPP 3 now looks to break ground in 2008 and be commissioned in 2012—a full decade after the original project announcement.
To accelerate the development of the $2.5 billion, two-unit, 1,500-MW Desert Rock Energy Project it hopes to build in northwest New Mexico, Houston-based Sithe Global Power has taken a different approach: short-circuiting lengthy state and local project reviews. Because the site proposed for Desert Rock is on the Navajo Reservation, EPA Region 9 and the Bureau of Indian Affairs are the lead agencies in the permitting process.
Sithe's co-developer, the Navajo Nation's Diné Power Authority, is quick to note that the coal-fired plant will contribute $50 million a year in taxes and royalties to the tribe—or about one-third of its annual budget. Significantly, Desert Rock won't have to depend on rail deliveries for its fuel: Coal will come from BHP Navajo Coal Co.'s mine adjacent to the 560-acre project site. Permit applications began in 2004, and commercial operation is slated for 2010, although that seems a bit optimistic.
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