ACEEE'S GRAPEVINE ONLINE

January 8, 2007

PAST AS PROLOGUE: PROPOSED COAL-FIRED POWER PLANTS ARE NEITHER CLEAN NOR EFFICIENT

Faced with growing concerns about electricity generation due to growing demand, the U.S. is on the verge of a coal-fired power plant building boom. However, tight coal markets due to infrastructure constraints and soaring pulverized coal plant costs look too much like past "binges" that have benefited neither consumers nor the environment. A cleaner and more cost-effective alternative would be to "mine" energy efficiency resources as the "first fuel" in the race for clean energy. ACEEE's analysis for RGGI (Northeast Regional Greenhouse Gas Initiative) has shown that efficiency and CHP (combined heat and power) can sharply reduce and flatten electric load growth.

The release of the NERC (North American Electric Reliability Council) 2006 Long-Term Reliability Assessment in mid-October brought into sharp relief the looming electric capacity crisis that has been emerging over the past few years. The crisis results from a combination of growing electricity demand and the soaring cost of natural gas that has made many natural gas power plants uneconomic to operate. The electric power industry's response has been to begin a building boom of new coal-fired power plants. Many sources, including USA Today, report that over 150 power plants are in the planning or permitting process across the county—a stunning 75,000 MW of new capacity. While much of the public discussion has been of the new, integrated-gasification combined-cycle technology that offers improved efficiency and low emissions—including the prospects for carbon capture and storage—the vast majority of the plants would be super-critical pulverized coal (SCPC) plants, 1970s technology that is neither clean nor efficient.

While the plants' proponents have been touting the low cost of power from these plants, it is becoming increasingly clear that these plants run the risk of locking in a high-cost, dirty technology for a generation. Our colleagues at the Union of Concerned Scientists have been tracking the cost of new SCPC power plants, and find that they have increased by 50% to 100% over the past year due to increased global material costs and surging demand (coupled with what might be viewed historically as a general level of optimism on construction costs among many in the power industry). Coupled with the increased price for coal due to soaring demand and limited rail and mining infrastructure as shown in ACEEE's America's Energy Straitjacket report published in the spring of 2006, power from these new plants is likely to be significantly more costly than historic levels—perhaps in the 8-12¢ per kWh range.

Further complicating the outlook is demand for electricity that is increasing more on-peak, making the problem not one of base-load capacity, but of peak capacity. Because of their technology, SCPC plants are not particularly good at meeting peak loads; thus, we are likely to continue to rely on natural gas power plants to meet our peak loads as the NERC report suggests. Therefore, these new coal plants may contribute to raising the prices of base-load power—particularly in unrestructured markets where utilities are allowed cost recovery for plants that will be depreciated over a generation.

In contrast, ACEEE has found that there are bountiful energy efficiency resources available which are not being realized at a cost of less than 3.5¢ per kWh. An advantage to energy efficiency resources is that they come in variable increments, unlike coal plants which are typically 400-800 MW, so that efficiency resources can be deployed where and when they are most needed. In our analysis of the role of energy efficiency in meeting the RGGI goals, ACEEE showed that we could flatten load growth through energy efficiency and CHP resources. Using energy efficiency as a strategy to slow load growth has experienced significant success through the concept of an energy efficiency resource standard (EERS), which was pioneered in Texas in the late 1990s. Expanded EERS's at the individual state level can slow the rate of load growth while keeping a check on rising electricity prices, and as ACEEE research has shown, moderate the price of natural gas.

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