Coal Plant Boom

Associated Press 14:00 PM Oct, 15, 2006

DALLAS -- A building boom that would add scores of new coal-fired power plants to the nation's power grid is creating a new dilemma for politicians, environmentalists and utility companies across the United States.

Should power companies be permitted to build new plants that pollute more but are reliable and less expensive? Or should regulators push utilities toward cleaner burning coal plants, even if it means they will cost more and are based on newer, yet still unproven, technology?

How those questions are answered will have huge implications over the next few decades. It could determine how Americans light, heat and cool their homes and business, the rate of return on utility investments and the potential environmental impact of the new plants.

Nowhere do these competing interests play out with such force as in Texas, where 16 new coal-fired plants are proposed -- 11 of them by Dallas-based TXU, the state's biggest power company.

The scope of TXU's 5-year, $10 billion plan is considered bellwether and being closely watched by industry analysts, lawmakers, competitors and environmentalists across the United States.

"TXU put its stake in the ground and said it will (build the plants) faster and cheaper than anyone else," said Daniele M. Seitz, analyst with investment firm Dahlman Rose. "So they have something to prove."

The company is hardly alone, however.

Some 154 new coal-fired plants are on the drawing board in 42 states. Texas and Illinois are the only states where 10 or more plants are planned, according to the National Energy Technology Laboratory.

Energy analysts say factors driving coal's resurgence are soaring power demands, volatile natural gas prices and a favorable investment market.

Coal now accounts for about 50 percent of the power generated in the U.S. By the year 2030, that share will increase to 57 percent, according to Energy Department forecasts. The U.S. has the world's largest coal reserves, enough to last for the next 200 to 250 years, analysts believe.

Larry Makovich, managing director for consulting group Cambridge Energy Research Associates, said the urgency to bring more power-generating plants online cannot be understated.

"A fundamental reality of the power business is there is no single fuel of choice, so if you are going to survive in the long run, you need to have a good mix of fuels and technologies," he said. "If we are going to keep supply and demand in balance, you're looking at a five-year lead time, so you have to get started building these plants now."

The argument over how TXU should build power-generating plants plays out almost daily with critics and proponents weighing in on the potential merits and drawbacks of the company's plans.

TXU says the proposed plants will meet the state's growing demand for power, give a sorely needed economic boost to nearby small towns and will reduce toxic emissions by replacing older, less efficient plants.

"The coal plant of today is so much cleaner; it makes so much less emissions than what most Americans and Texans can conjure," said Mike McCall, chief executive of TXU's wholesale division. "It can be a good viable resource without really harming the environment."

Critics, however, counter the company is driven by profits and is rushing to beat more stringent federal restrictions on carbon dioxide emissions in an era of escalating concerns over global warming. Texas already produces more carbon dioxide than any other state, a fact that worries big city mayors downwind of the proposed plants.

The debate soon could end up in federal court. Dallas attorney Rick Addison recently announced plans to sue TXU, alleging potential violations of the federal Clean Air Act.

"It's remarkable and unnecessary the amount of pollutants they are going to put in the air," said Addison, a member of the Houston-based Locke Liddell and Sapp law firm. "The only way to get these issues resolved is at the highest level and reviewed under the appropriate law."

The battle lines were drawn April 20, when TXU Chief Executive John Wilder announced the company's plans shortly after much of Texas underwent a rolling power blackout. Since then, each side has assembled a team of backers comprised of affected residents, lawmakers, and lawyers.

In Colorado City, Texas, a town of 4,100 about 10 miles from where TXU wants to place one of the plants, civic leaders and lawmakers support the venture. They believe it will be an economic boon to the sleepy West Texas town, said Mayor Jim Baum.

But Dallas Mayor Laura Miller and Houston Mayor Bill White recently formed a coalition of 17 mayors opposing the TXU's 11 proposed plants and five others being considered by other Texas companies. The group has lined up law firms statewide bracing for a courtroom battle.

Miller recently spent a week visiting existing TXU plants, as well as a coal gasification plant in Tampa, Florida, that turns coal into gas and removes the pollutants before the fuel is burned.

Coal gasification plants can cost up to 20 percent more to build than a conventional plant. But they also can be more efficient to operate and save utilities the hassle and expense of adding pollution-control devices.

Already, American Electric Power, of Columbus, Ohio, Minneapolis-based Xcel Energy and Charlotte-based Duke Energy are reviewing plans to implement this technology.

Mike Morris, chairman for American Electric Power, said the pressures on power companies to burn fuel in the cleanest way possible will only gain momentum in coming years.

"From our vantage point we think the technology for clean coal is there," he said. "It can be done, but there is a challenge."

For it's part, TXU says turning the coal into synthetic gas remains an unproven technology and not as reliable as burning pulverized coal -- the process the company's new plants would be designed to use.

Several analysts agree. "For purposes of generating electricity, a pulverized system is well-proven," said John Mead, who heads the Southern Illinois University Coal Research Center in Carbondale, Illinois. "Gasification has much more limited commercial experience.There are still some unknowns as to just what the operating costs would be and how reliable would such a system be."