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Subject: Two Coal Plants Announced In the Past Two Weeks
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----- Forwarded by Mark E Haedicke/HOU/ECT on 03/27/2001 02:49 PM -----

=09"SCIENTECH IssueAlert" <IssueAlert@scientech.com>
=0903/27/2001 06:23 AM
=09=09=20
=09=09 To:=20
=09=09 cc:=20
=09=09 Subject: Two Coal Plants Announced In the Past Two Weeks







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IssueAlert for  March 27, 2001=20

Two Coal Plants Announced In the Past Two Weeks

by Bob Bellemare=20
Vice President, Utility Services

U.S. Electric Power of Point Lookout, New York, announced plans to construc=
t=20
a 249 megawatt (MW) coal fired power plant at Cherry Point in Whatcom Count=
y,=20
Washington.  Just last week, Reliant Energy Seward LLC, a subsidiary of=20
Reliant Energy, announced it is planning on constructing a 520 MW circulati=
ng=20
fluidized bed (CFB) clean-coal power plant in Indiana County, Pennsylvania.=
=20

Analysis:  As the United States awakes from its energy policy slumber, it i=
s=20
becoming increasingly apparent that the days of near complete reliance on=
=20
natural-gas-fired generation to meet our growing energy needs is coming to =
an=20
end.  According to EIA statistics, natural gas prices have risen to histori=
c=20
highs with January 2001 utility deliveries exceeding $10/MMBtu, compared to=
=20
1998 and 1999 prices which floated between $2 and $3/MMBtu.  Virtually=20
overnight, natural gas has gone from one of the least expensive generation=
=20
fuels to one of the most expensive.  Since the January price spike, prices=
=20
have settled back down to the $4 to $5.5 /MMBtu level for Henry Hub futures=
=20
prices, but even these prices would have been considered high just twelve=
=20
months ago.=20

Coal, by comparison, is the United States most abundant fuel source,=20
constituting 95 percent of our nation's fossil energy reserves.  Coal price=
s=20
have actually dropped for utility deliveries over the past several years=20
according to EIA statistics.  In 1994, coal prices averaged $28.03/short-to=
n=20
($1.37/MMbtu) compared to $24.68/short-ton ($1.21/MMbtu) for second quarter=
=20
2000.  Although coal generation currently represents over 51 percent of U.S=
.=20
generation production, few plants have recently been built because of the=
=20
environmental concerns associated with coal generation and the relatively l=
ow=20
price for natural gas throughout the 1990s.  In 1999, U.S. coal production=
=20
actually declined by 2.1 percent which was primarily attributable to a larg=
e=20
drop in coal exports coupled by smaller than usual growth in coal consumpti=
on=20
for power generation.=20

But brighter days may lie ahead for the coal industry.  New, so-called=20
"clean-coal" technologies are being tested and developed. In the 1970s and=
=20
80s the pressurized fluidized bed coal combustor (PFBC) was developed,=20
removing sulfur (SO2) pollutants and limiting the formation of nitrogen oxi=
de=20
(NOx) pollutants inside the boiler.  The need for scrubbers or other=20
post-combustion controls was eliminated by technology.  Texas New Mexico=20
Power (TNP) constructed two 150 MW lignite-fired units that went operationa=
l=20
in 1990 and 1991 based on the circulating fluidized bed (CFB) technology th=
at=20
Reliant is proposing for its 520 MW facility in Pennsylvania.  The TNP One=
=20
power plant was, however, extremely costly to build.  Unit 1 cost $357=20
million ($2,380/kW) and Unit 2 cost $282.9 million ($1,886/kW) to construct=
. =20

Another technology being developed is the integrated gasification-combined=
=20
cycle (IGCC) technology that first converts coal into a combustible gas,=20
cleans the gas of virtually all pollutants, then burns the gas in a turbine=
=20
much like natural gas.  More than 99 percent of sulfur, nitrogen, and=20
particulate pollutants can be removed in the process.  Three gasification=
=20
power plants have been built in Florida, Indiana, and Nevada.  In the early=
=20
1990s, PSI Energy and Destec teamed up to construct a 262 MW IGCC generatin=
g=20
unit at the Wabash River Project in Indiana for a total installation cost o=
f=20
$592 million ($2,260/kW).  In 1996, TECO completed the construction of its=
=20
250 MW IGCC generating unit at Polk Power station in Florida for a total=20
installation cost of $508 million ($2,032/kW).=20

Japan has also experimented with clean-coal technologies.  In 1998, Hokkaid=
o=20
Electric Power Co. Inc. started commercial operation of a 75 MW PFBC power=
=20
plant.  Test operations are being carried out at two other plants, the 250 =
MW=20
unit of Chugoku Electric Power Co. and the 350 MW unit of Kyushu Electric=
=20
Power Co.  Japan is also testing a pilot scale (1 MW) molten carbonate fuel=
=20
cell (MCFC) at a Chubu Electric Power Co. site.=20

It is interesting to note that these advanced technologies have historicall=
y=20
approached the installation cost of a nuclear plant, but have all the=20
operational costs of a coal plant.  Now market conditions have changed, and=
=20
despite the high capital and operating costs, clean-coal technologies can=
=20
economically compete with natural-gas-fired generation, if gas prices=20
continue to remain high.  Additionally, expectations are that the next=20
generation of clean-coal power plants will cost significantly less than the=
=20
early pioneers' cost.  The Department of Energy (DOE) for example, assumes =
an=20
IGGC power plant can be built for $1,315/kW with an average heat rate of=20
8,470 Btu/kWh in its "Annual Energy Outlook 2000" report.  =20

The DOE deserves a great deal of credit for bringing clean-coal technology =
to=20
the point of commercialization.  In 1984, the clean-coal experiment began i=
n=20
response to the U.S./Canadian transboundary problem of acid rain.  In March=
=20
of 1987, President Reagan agreed to a new $5 billion public-private=20
initiative to make clean-coal technologies a reality.  The program led to 4=
0=20
projects in 18 states, including co-funding demonstration projects such as=
=20
the PSI/Destec and TECO facilities.  In the mid-1980s the only options for=
=20
reducing NOx pollution cost $3,000 per ton; today's low NOx burners have=20
reduced this cost to under $200/ton.  These low NOx burners have also reduc=
ed=20
emission levels from 700 parts per million (ppm) in the early 1970s to 100=
=20
ppm today.  Furthermore, the Selective Catalytic Reduction (SCR) process=20
reduces more than 80% of the NOx contained in coal combustion gas. The DOE=
=20
reports that 75 percent of all coal-fired capacity in this country is now=
=20
outfitted with low-NOx burners.  Similarly, the cost for scrubbing=20
technology, which removes sulfur pollutants, has been reduced 75 percent=20
since the 1970s. =20

The improvement of power generation efficiency will be one of the most=20
important technical issues for coal power plants because of its high carbon=
=20
content.  The latest commercial plant has achieved a thermal efficiency of =
43=20
percent by increasing steam temperature and pressure.  Even with these=20
improved efficiencies, the coal power plant of the future may still be unab=
le=20
to achieve the substantial greenhouse gas reductions that could be necessar=
y=20
to address global climate change concerns.  There are other existing=20
environmental regulations that may also limit the adoption of new coal=20
generation.  The SIP Call rule requires 22 Eastern states and the District =
of=20
Columbia to reduce NOx emission by a specified amount by May 2003, with muc=
h=20
of the reductions expected to come from coal-fired power plants.  In 1997,=
=20
the National Ambient Air Quality Standards for particulate matter and ozone=
=20
were adopted with an anticipated compliance cost for full attainment=20
estimated at $37 billion per year (particulate) and $10 billion per year=20
(ozone) respectively.  The Supreme Court is reviewing these EPA rules, and=
=20
recently supported the EPA's right to regulate these emissions [see 3/1/01=
=20
IssueAlert at www.ConsultRCI.com].  These rules are significant since they=
=20
will lead to additional NOx and SO2 emission reductions, the two precursors=
=20
to fine airborne particles.  Mercury reductions are also being contemplated=
. =20
In November 1999 the EPA filed lawsuits against seven utility companies for=
=20
Clean Air Act violations.  In a settlement with TECO, TECO agreed to cut NO=
x=20
and SO2 emissions by 85 percent by 2010 and pay a $3.5 million civil=20
penalty.  =20

But in the end, the nation will likely turn to coal to help meet its growin=
g=20
energy demands.  Great strides have been made to reduce the environmental=
=20
impact of this abundant fuel source.  Since 1970, the use of coal has more=
=20
than doubled while emissions of sulfur and nitrogen pollutants have decline=
d=20
by 70 percent and 40 percent, respectively.  If we can continue to achieve=
=20
even greater emission reductions, coal may well help provide the energy=20
bridge to the future.=20

An archive list of previous IssueAlerts is available at
www.ConsultRCI.com




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