March 20, 2008
New Coal Plants: At What Cost?
by Anne Moore Odell
Uncertainties abound around the 100-plus proposed US coal-burning power plants contends a report
from the Interfaith Center on Corporate Responsibility.
Americans' hunger for cheap electricity certainly isn't abating. However, their love affair with
coal-burning power plants, which currently produce half of the nation's electricity, might be
ending. Coal, once a predictable investment, is now viewed as a risk asserts a new report from the
Interfaith Center on Corporate Responsibility (ICCR).
Prepared for the ICCR by Synapse Energy Economics, "Don't Get
Burned: The Risks of Investing in New Coal-Fired Generating Facilities," by lead author David
Schlissel, outlines why coal-burning electrical plants are risky long-term investments, from
anticipated federal and state regulations of greenhouses gases to the unknown costs of carbon
capture and storage, to the rising costs of constructing new coal-burning power plants.
Over 130 coal-burning power plants have been proposed over the next 10 to 20 years. However,
the report pulls no punches: "The costs of constructing and operating these plants are highly
uncertain due to multiple factors in the industry, and the owners will face significant financial,
economic and environmental risks. In particular, investments in these plants will be at risk if
the utilities and/or companies are unable to recover all of the costs from customers and earn
Schlissel draws parallels between the failure of the nuclear power
industry in the 1970s and today's uncertainties around constructing new coal power plants. When
the costs of building new nuclear power plants became difficult to predict, many nuclear plants
were cancelled and investors were left out in the cold.
The US is competing with the
global construction market when building new coal-burning power plants, with costs of materials
like steel and concrete growing extremely fast the report adds. Leslie Lowe, Energy and Environment
Program Director for ICCR, told SocialFunds.com that China alone is building the equivalence of the
UK's power infrastructure every year.
Alongside the uncertainties of construction costs,
changes in federal and state regulations make the building of new coal burning plants a risky bet,
the report puts forth. Concerns regarding the dangers of climate change are causing national and
state regulatory commissions to reject plans for new coal-fired power plants. Policies will most
certainly be written regarding greenhouse gases reductions by the US Congress and state governments
in the near future. Coal, which is the most carbon intensive fuel, will face the highest scrutiny
the report asserts.
Proposed national carbon cap-and-trade programs likewise create
unknowns for the coal-burning power plant industry. The report concludes: "Paying for CO2 emission
allowances is likely to have a very significant impact on the variable costs of operating new
coal-fired power plants."
Proponents of building new coal-burning power plants point to
the possibility of capturing and sequestering (CCS) CO2 emissions from new plants. Yet questions
around CCS abound. According to the report: "Although many are confident that CO2 can be captured
in the pre-combustion CCS technologies used in IGCC [Integrated Gasification Combined Cycle]
facilities, there currently is no commercially viable technology for carbon capture and
sequestration from utility scale pulverized coal plants."
To store the compressed carbon
from power plants, coal-burning power plants either have to be built on or near the geologic rock
formations that support storage, or the CO2 will have to be shipped in a huge pipe system to
"Storing CO2 in the ground acidifies the rock and causes the rock to be
more porous," said Lowe. "When we are talking about storing CO2 it is forever, not just one
Besides CO2 emissions, more stringent regulations of non-greenhouse gas
emissions are being contemplated, for example, restrictions on NO2, SO2 and mercury. These
regulations will further impact the cost of coal-burning power plants.
Several of ICCR's
members have filed shareholder resolutions this proxy voting season with Bank of America and
Citigroup, asking the banks not to finance technology that is CO2 emitting.
subprime loan debacle, the banks can no longer just say trust us," said Lowe. "It is not about
trust any, more it's about show me."
Lowe concluded that ICCR sees the building of new
coal-burning power plants as a mistake, for reasons beyond the many covered in the report. Lowe
mentioned the environmental impact of coal mining, and the costs and problems of delivering coal to
the power plants on bottlenecked railroads. One of largest issues of building more coal-burning
power plants for ICCR is that large centralized power plants are no longer the answer to the need
for more electricity.
Instead of rushing to build more power plants, US utilities should
seriously explore energy efficiency and conservation. Lowe suggested looking at the energy
efficiency policies already in place in California.
"We have a wasteful energy system in
this country." Lowe said. "If you look at the US, we waste more energy than most countries
produce. If you are looking for the easiest and cheapest way to create new energy, look at using
the energy we are producing now, reach for the low hanging fruit."
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