Coal-fired generation has been left behind as US companies dash to bring gas stations on line. But cleaner, more efficient generation technology is reminding US utilities about coal’s benefits: price stability, a certain amount of flexibility, and best of all, huge domestic resources.

Do Americans realize that more than half of their electricity comes from coal-fired stations? Joe Hunter, senior fellow at the Center for the New West, a Denver-based think tank, isn’t sure they do. “But currently over half of all electricity in the US is from coal-fired generation and some of that capacity is ageing and will need to be replaced soon,” he says. “We are losing ground on resources.”

Coal fired stations are still seen as polluting, Hunter says, and that makes new construction very difficult.

Until the public realizes how much electricity the country needs, he thinks public opinion will block new coal fired capacity. “The crunch is, does the public believe we have an energy shortage?” he asks. “Although most do, if you ask whether there is a shortage in their own state very few people agree – even in California. There is a real distrust of corporations, and you can’t really blame the consumer when the lights go out one day, and the next they read in the paper that the price of electricity has dropped because there is extra energy in the market.”

Public opinion means that pollution control regulations are applied strictly at all levels. “What’s happening in the US is that we are building gas-fired stations as fast as we can, but we can’t keep doing that. The reason is that at the moment gas fired stations are the only ones that can obtain the necessary permits and meet emissions regulations.


Projected coal fired capacity additions
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“If a utility did decide to build a coal-fired station it would have to pass strict town, state and federal regulations, and for most it is just not feasible. Today a couple of utilities are deciding to build coal plants, but the permitting process will take years.”

Hunter says that following the California debacle “emissions regulations were relaxed very quickly to make it easier to bring plants on line, but this has not been translated into significant new coal generation. Attitudes have changed a bit, that’s all.” As of the middle of the year “almost 95 per cent of new planned generation was gas-fired, and almost all the rest was renewables. That is not to say coal fired stations are not being built, but there are so few that they are not statistically significant. But we don’t have enough natural gas in the US to supply all that planned generation, and that is why there is such a furious effort to develop new gas supplies.”

But Hunter is aware that there is simply not enough gas available to supply all the proposed gas-fired stations. In a recent Leadership Forum on Energy Security sponsored by the Center, for example, Texas Railroad Commission chairman Michael Williams said that while Texas was now a significant exporter of natural gas it would soon reach a point at which its production would barely meet its own growing demand. There are 23 new gas-fired stations under construction in Texas, he said, and by 2012 the state would not be exporting “one molecule” of natural gas.

“Our conclusion on electricity is ‘we need to do everything’,” says Hunter. “There is no single source that will meet our long term – or medium term – needs. We can’t ignore ‘out of favour’ resources. Even if we do everything else – solar, wind, conservation – we are still not going to get there. We must look at the hard sources that are so out of favour today.” After all, he says, “The coal-fired plant of today is not my grandmother’s coal fired plant.”

Early moves

In a market the size of the USA a commitment that is ‘not statistically significant’ still translates into nearly 27 GW of new capacity between now and 2013, according to a regular assessment of the US power market published by Arlington-based Energy Ventures Analysis. Although this figure pales beside the more than 340 GW of gas-fired generation identified by the company, the report says “developers of coal-fired power plants have been emboldened by both higher natural gas prices and regional electricity shortages”. But only 12 per cent of that coal capacity is under construction, with some 76 per cent still at the early development stage.

EVA notes that deregulation had slowed down construction of all types of power plants. The market was changing from one in which tightly regulated electric utilities were guaranteed a return in their investment, to one in which developers were unsure about where they would sell electricity, and for what price. But investors are beginning to look again at coal plants, and utilities are willing to be convinced by the economic advantages of coal and the relatively low emissions and high efficiencies provided by new plant designs.

Hunter too identifies some of coal’s economic benefits. “If we could get through the regulatory puzzle then coal would be economic, particularly with the gas price volatility. Unlike gas, you can store coal, and that means you can manage its use and regulate the cost.” This is particularly valuable to utilities that have a mix of generation. “If you have a supply of coal you can use it now, but if the gas price is low it may make sense to use gas, so you might switch. But coal is as useful in six months as it is today.”

“The variable will be when you have to extract more expensive coal to meet your needs,” he says, “but that development will be paralleled in the gas market.”

One utility that is pressing ahead with coal fired generation is Wisconsin Energy Co. Why?

Wisconsin Energy says it has four priorities in developing its power portfolio, and explains that coal meets those aims. They are:

  • Balancing economic, environmental and energy supply goals: new technologies have increased the efficiency and decreased the environmental cost of new coal plants.
  • Maintaining fuel diversity: the company says “a diverse fuel mix helps protect businesses and consumers from fuel shortages, price fluctuations and supply constraints”.
  • Favouring long-term solutions: coal reserves in the US are estimated to last “almost another 500 years”, the company says, and this directly affects fuel prices, maintaining coal prices at a fairly constant level while gas prices are much more volatile. “Fuel costs are 5-10 times less to operate a coal-based plant than a gas-based plant,” the company says.
  • Using domestic resources: coal is plentiful in the US.

Wisconsin’s Megan McCarthy explains that the company already has a diverse energy portfolio: “We have gas, coal, nuclear, hydro and we are adding some renewable energy. At the moment we have enough supply to meet demand, even at times of peak load. But demand is increasing and we will need more capacity. We may be looking ten to 15 years ahead, but we want to maintain a diverse fuel mix and we need to start planning that now.”

She adds, “Coal is more environmentally friendly and efficient than it was in the past. We want to be able to take advantage of new technologies.” The company compares its Port Washington station, which is 25 per cent efficient, with new advanced coal systems that can claim 37-38 per cent efficiencies.

Coal is an integral part of the company’s ‘Power the Future’ programme, released this year.


The variable will be when you have to extract more expensive coal to meet your needs
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“We already have a coal-fired station at Oak Creek, which generates 1065 MW from four units,” says McCarthy. “Our plans are to add three new 600 MW units to that station.” The programme also includes two 500 MW gas-fired units and further investment in renewable energy.

“We are now in the process of filing for approval with our Public Service Commission. We estimate it may take a year to win approval,” McCarthy explains. “We are currently awaiting a declaratory ruling on our preliminary plan, which will allow us to go ahead and present a detailed plan. Our goal is to begin construction by 2003 and for the first station to go into service in 2007.” The additional units would come on-line between 2009 and 2013.

Delivering diversity

Coal’s stable price is an important factor for Wisconsin Energy. “Coal delivers diversity and is generally less expensive than gas, because gas prices are so volatile. Last year natural gas was three times the price it had been the previous year – and three times its highest ever price. What is more, demand for gas is increasing and electricity generation is driving the price up,” says McCarthy. “We have to look forward: although gas is seen as inexpensive and very clean it is very volatile.

“In a year Wisconsin will be served by a new gas pipeline, where previously we had only one. But we still have to think that getting gas will become an issue in future. After all, as well as electricity generation gas is being used more and more by industry for heating and other uses.”

McCarthy says that although renewables are part of the Power for the Future programme, “Lots of utilities would run into trouble if they just had one source of power. After the very high gas prices last year people are more realistic about using fuels like coal. Although we invest in wind and other renewables – we buy 1 MW of methane generation from a cattle farm, for example – we can’t rely on those sources.”

As to emissions, McCarthy says, “New coal plants have 30 per cent less emissions than the ones we have now.”

For its new plants Wisconsin Energy is considering both supercritical pulverized coal firing, using SCR equipment for nitrogen oxides and wet scrubbers to remove SO2 emissions, and integrated combined cycle gasification. Final decisions on plant design will be part of the detailed plan for submission to state and federal authorities.

Developing the plants has required some innovative financing. According to statements by Larry Salustro, Wisconsin Energy’s Senior Vice President and General Counsel, the new plants will be part of a Wisconsin Energy-owned generation subsidiary that will lease the plants to its parent for a 20- to 25-year period. As part of the lease agreement Wisconsin Energy employees would operate and maintain the new plants, and at the end of the period Wisconsin would have the right to renegotiate and continue the lease or acquire the plants outright.

Initially the company had intended to set up a generation subsidiary that would own its existing and planned generating plants, which would contract power to Wisconsin Energy.

“In our first proposal, that subsidiary would have used long-term contracts in selling power from its merchant plants to the utility. We changed the plan so existing plants remain with the utility and new plants are leased to the utility,” according to Salustro’s statement. “This approach eliminates issues involving transfer of employees, transfer of assets and state versus federal jurisdiction. The other significant area we changed was in the amount of generation to add. This was done to meet the recently expressed needs of some of our wholesale customers who either want to invest in new generation or continue to contract with us for power purchases.

“This structure would allow us to finance the plants as an IPP would, and to attract investors interested in the generation business but not in the integrated utility business. This approach also provides customer and investor certainty for the full term of the 20- to 25-year term of the lease, instead of relying on a biennial rate case process. All things considered, there are advantages to financing and building the plants outside the utility.”

An attractive resource

Other utilities are also going back to coal. Tri-States Generation and Transmission, for example, serves a number of utilities in the Denver and Colorado area. It has been 20 years since the last coal fired station was built in the company’s service area, according to Tri-States spokesman Jim van Someren, and the company has followed the gas trend, with one 140 MW gas turbine due to start up later this year and another in 2002.

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Nevertheless, van Someren says, the company is now planning to build coal stations. “For major size, baseload plants, in this part of the country coal in the most attractive source. We threw a proposal out to our utilities and we had enough support from them to go ahead,” van Someren says, adding that in fact utility response was good enough to suggest that the planned plant, currently sized at 3 x 400 MW, could be extended.

“All the load-serving utilities in this state are serving areas with past and projected demand growing at an alarming rate,” van Someren says. “One utility in the metropolitan Denver area sees an incremental growth of over six per cent a year.” The increase is partly due to people moving into the area and partly increased electricity use, for air conditioning, heating, computers, etc., he says, adding “Smaller municipalities are looking at slightly lower increases.”

For Tri-States diversity is not so important in its decision as the ready availability of coal. It is building its two gas fired states because “gas was available,” van Someren says, “and a gas fired plant of that size is much quicker to bring on line.” But he says, “We continue to explore various options and we see that our primary source now and in the future will be coal. Here in Colorado and in Wyoming coal is very abundant and very high quality, so it burns efficiently and cleanly. So until other sources like solar or wind are better developed it will be our major source.”

The new plant will be sited in a rural part of southeastern Colorado, with the exact site to be determined by optimizing the availability of coal, transmission facilities and cooling water. The permitting process will begin once feasibility studies on the generation and transmission aspects of the project have been completed – van Someren estimates this will be at the end of this year. If so, an optimistic schedule could see the first new unit start up in 2007.

Unlike Wisconsin Energy, Tri-States will be developing a new site, but van Someren says that there has been enthusiasm from the local area and from the Colorado state governor. For these parties the conjunction of coal mining and power operation jobs, plus more baseload power are important ones.

In supporting the Tri-States station the Governor of Colorado notes that the state does not want to find itself in the position of California. So maybe the US is heeding the warning of 2000 and 2001, and considering seriously whether ‘out of favour’ sources should come back into the fold.