Coal Plant Cancellations: Janet Gellici in Power Engineering magazine

Janet Gellici, American Coal Council CEO was recently published in Power Engineering magazine. In her article, Janet considers the notion that now is not the time to panic over the recent spate of coal plant cancellations. (If, however, we continue to demand more and more inexpensive electricty without allowing for upgrades and new construction of generation and transmission capacity, that time could come soon enough.)

The full text of the article is included below. You can also access the article through the Power Engineering Magazine website.

Coal Plant Cancellations: Don’t Panic … Yet
Janet Gellici, CAE – Chief Executive Officer, American Coal Council
Published June 6th, 2008 – Power Engineering Magazine

Douglas Adams’ science fiction classic, The Hitchhiker’s Guide to the Galaxy, features the fictional intergalactic travel guide of the book title as a manual for planet-hoppers interested in seeing the Universe on less than $30 a day. The words “DON’T PANIC” are printed in capital letters on the cover of the Guide “in large friendly letters.”

We might use this same advice – DON’T PANIC – and apply it to our thinking about the recent spate of coal-fueled plant deferrals and cancellations. Then again … while intergalactic travelers reportedly favored the Hitchhiker’s Guide to the Galaxy over the alternative Encyclopedia Galactica because it included the reassuring words DON’T PANIC on the cover, it turns out the Guide had many glaring and occasionally fatal inaccuracies.

There are many potentially fatal inaccuracies, as well, in the “logic” and revelry with which many are greeting announcements of coal plant cancellations. What appears to some as a quick-fix victory for managing global climate change challenges may, in fact, have significant repercussions in the future. Coal is an abundant, economic resource that we in the U.S. and those in developing nations will rely on for years to come to meet our ever-growing energy needs. We may not experience the negative impacts of coal plant cancellations in the short term, but we would be wise to amend the Hitchhiker’s Guide cover text to read – DON’T PANIC … YET.

The Energy Information Administration (EIA) projects strong growth for worldwide energy demand from 2004 to 2030. Total world consumption of energy is projected to increase from 447 quadrillion Btu in 2004 to 559 quadrillion Btu in 2015 and then to 702 quadrillion Btu in 2030 – a 57% increase over the projection period. Global demand for energy continues to grow. In the U.S., EIA projects annual electricity demand will increase 1.1-1.5% through 2030, increasing overall by upwards of 40%.

While our demand for energy continues to increase, however, our ability to meet that demand is a growing concern. In a recent poll of utility CEOs, only 53% of respondents indicated they were confident they will be able to provide the needed electric power supply in their region in the next 5 years. In its annual Long-Term Reliability Assessment, the North American Electric Reliability Corporation (NERC) projects inadequate peak summer capacity margins in several regions of the U.S. as early as 2009.

The U.S. has 27% of the world’s coal reserves – an estimated recoverable coal reserve base of 275 billion short tons. EIA projects total resources of nearly 4 trillion short tons. We have a lot of coal. As with other energy resources, prices for coal have been rising, fueled, in large part, by increasing world market demand for U.S. coal as a result of global supply disruptions. Between 1999 and November 2007, the cost of coal increased 45%, versus a 175% increase for natural gas and a staggering 270% for oil. In spite of recent price increases, our nation’s most affordable energy resource is still coal.

So if we have plenty of affordable coal resources here in the U.S., why are we seeing an increase in the number of coal power plant cancellations and deferrals? The primary reasons are:

  • Uncertainty associated with the cost and requirements of pending CO2 emissions regulations.
  • Escalating EPC costs.
  • Increasing emphasis on energy efficiency, demand response and the use of renewables.

Should we be concerned or panicked about the increasing number of coal plant cancellations and deferrals? In responding to that question, it’s important to understand the difference between “announced” projects and “progressing” projects. In fact, it’s not unusual for “announced” projects to be cancelled before or during the permitting phase; announced projects are not necessarily strong indicators of capacity additions. Progressing projects – those under construction, near construction or permitted – reflect a developer’s financial commitment to completion and offer a better perspective of the new generation capacity that may be forthcoming.

Actual plant capacity commissioned since 2000, for example, has been far less than new capacity announced. In the year 2002, 36,000 MW of new coal plants were announced to be installed by 2007. In actuality, only 4,500 MW or 12% of those announced plants were actually built.

In the past few years, there has been a significant amount of new coal plants announced in response to utilities’ efforts to meet growing demand for baseload generation at reasonable costs for their customers. A greater number of coal plants have been announced, therefore more are likely to be delayed or cancelled. Additionally, because of the primary reasons noted above, many announced project developments have been shifted out in time. The combination of new announcements and delayed projects has increased the backlog of plants. We’ll likely continue to see more and more projects cancelled as prospects for completing all projects in the “deferred” queue become impractical.

A significant amount of coal generation is still scheduled to come on line in the near term (2009-2011). As of the end of 2007, 47 plants with a capacity of 23,000 MW are progressing; an additional 67 plants (43,000 MW) had been announced as of that date. While not everyone agrees with EIA’s projected electric power demand, coal generation development activity presently exceeds EIA’s estimate of need. In this more immediate period, it’s projected that new gas, renewable capacity and energy efficiency initiatives will help bridge the shortfall in near-term demand.

What about longer term (2012-2017? This is where the caution – DON’T PANIC … YET – applies.

We should be concerned with the significant disparity between electric demand forecasts, a history of growth exceeding projections and the unknowns associated with how much and when we can count on savings from energy efficiency and conservation. Low demand electricity growth forecasts enhance demand uncertainty. Larger houses with flat screens TVs and computerized technology in every room, coupled with the pending advent of Plug-in Hybrid Electric Vehicles (PHEVs) suggest we’ll be using more and more electricity in the years to come.

We should also be concerned that the capability to install and commission plants is already being constrained by limited skilled resources. By 2015, demand for utility industry workers is expected to increase 25%; 40% of senior electrical engineers and shift supervisors will be eligible for retirement in 2009.

We should be concerned with the ability of non-coal resources to meet our electric generation needs and what it will cost our economy and consumers. Projections for 2030 for additional capacity from new renewables ranges from 16 GW to 176 GW and for new nuclear capacity from 3.5 GW to 117 GW. Which projections are right? Wind and solar are increasingly attractive resource options but will be expensive and require new transmission and special operating considerations. Large nuclear units require transmission grid expansion and integration.

We should be concerned that continued coal plant permit denials and increased demand for natural gas will put pressure on gas/LNG supplies and prices. Energy analysts forecast that the deferral of coal and nuclear plants will result in too little generation and too much reliance on Natural Gas Combined Cycles (NGCC). We can expect increased competition for gas and decreased imports from our largest supplier, Canada. LNG may be an option, but has its own challenges with siting and construction. Some are projecting we will not have sufficient gas at any price to satisfy residential, industrial and electricity generation needs in 2014.

Above all, we should be concerned with the increasingly anti-coal environment in which our electric power planners and providers are forced to operate. Efforts to remove coal as a viable generation option hamper our ability to develop clean coal technologies and to provide our citizens with an affordable, secure power source. Over the past 30 years, the coal industry has invested more than $50 billion in technologies to reduce emissions. As a result, today’s coal-based generation is 70% cleaner. The industry is committed to advancing this record in terms of reducing CO2 emissions.

We have a good foundation on which to build an increasingly clean coal energy industry. Let’s figure it out now so we won’t need to panic later.

10. June 2008 by Jason Hayes
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