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Coal Rush

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By SEAN MUSSENDEN Media General News Service

The Tampa Tribune

Published: April 20, 2008

WASHINGTON - Of the fuels commonly used to run power plants, none releases more carbon dioxide than coal - an unfortunate reality for utilities hoping to build a new generation of coal plants.

With Congress set to pass strict controls on climate-changing gases such as carbon dioxide, perhaps as soon as next year, a nationwide push by utility companies for new coal-fired plants in recent years has begun to soften.

Global warming fears have led to the cancellation or indefinite delay of dozens of proposed coal plants in recent months in almost every corner of the country. But with a few notable exceptions, the debate over coal's role in global warming has had much less of an impact on development of new coal plants in the Southeast.

New or expanded coal plants are in the works in Southwest Virginia, South Carolina, North Carolina and Georgia, which could collectively pump tens of millions of tons of carbon dioxide into the atmosphere.

In Florida, plans for two plants have been shelved as Gov. Charlie Crist pushes for solutions to the state's future energy needs that won't have big environmental impacts.

"We're in a position of flux," said Cale Jaffe, an attorney for the Southern Environmental Law Center, which has brought several lawsuits against new coal plants in the Southeast.

"People are just beginning to clue into the fact that carbon regulation is coming. But, for now, it means we have new coal plants with no plans whatsoever to address global warming emissions" in much of the region.

Recent Boom

After two decades in which few new coal plants were built in the United States, the energy industry's interest in coal began to swell in the past few years.

Rising costs of natural gas, another popular power-plant fuel, provided utilities incentives to consider coal more strongly. Regulatory hurdles that made new nuclear plants virtually impossible to build provided another. And more environmentally friendly energy sources, such as wind and solar, were too expensive and not reliable enough to provide a constant supply of power, the utilities argued.

According to the Energy Department and the Sierra Club, plans for about 170 new coal plants have been announced since 2005. Utilities argue that unless more plants are built, the country will face disastrous energy shortfalls within a few years.

In South Carolina, the quasi-public utility Santee Cooper is obtaining permits to build a new coal-fired plant near Florence. The utility projects that population growth will leave the state with a shortfall of 525 megawatts by 2013, enough to power more than 250,000 homes, unless the new plant in the Pee Dee region is built.

"If we had our druthers, we'd much rather be building a nuclear plant at Pee Dee. The biggest thing we know is that we can't get a nuclear plant by 2013," said Laura Varn, a Santee Cooper spokeswoman.

Environmental groups are critical of the industry's rationale for the coal boom. The Sierra Club, which is waging a nationwide legal battle with other groups to stop the construction of coal plants, has termed this boom period a new "coal rush."

The group and others charge that the industry is rushing to build coal plants before new carbon controls under debate in Congress are put in place. Under current law, power plants in most states are under no obligation to restrict carbon emissions.

Although federal regulations are still under development, they likely will require utilities to pay for carbon emissions under a "cap-and-trade" system, eventually install technology to capture carbon or a combination of both.

Coal is a much cheaper fuel if the carbon costs are ignored. Factor in the cost of capturing carbon, which is not yet possible on a commercial scale, or paying to offset the environmental impact, and the cost jumps markedly.

A recent report by Synapse Energy Economics, a Massachusetts firm, estimated that electricity rates from coal plants would rise about 75 percent under a mandate for carbon-capture technology.

And an analysis by Duke Energy in Charlotte, N.C., of one of the leading climate-change proposals in Congress found that it would raise the utility's electricity rates between 10 percent and 60 percent by 2020.

The legislation, America's Climate Security Act of 2007, sponsored by Sen. John Warner, R-Va., and Sen. Joe Lieberman, I-Conn., is expected to reach the Senate floor in June. It would set up a national cap-and-trade system to reduce greenhouse gas emissions and provide financial incentives to switch to low-carbon power sources.

Legislation Threats

For that reason, environmentalists, energy analysts and some in the industry say the outlook for new coal facilities is is in question.

Though Congress has not yet regulated carbon emissions, several states have raised the possibility of future regulation in blocking plant construction.

The uncertainty over the scope of legislation to address the impact of energy use on climate change in Congress and state regulation has dampened enthusiasm on Wall Street to bankroll new coal plants.

For example, in February, three leading investment banks - Citi, JP Morgan Chase, and Morgan Stanley - said they would put more emphasis on the costs of regulating carbon emissions in financing future energy projects. And in a January report on crucial financial challenges facing utilities, the credit rating firm Standard & Poor's said the No. 1 issue it would consider is the financial impact of carbon regulations on coal plants.

"It seems likely that the new administration in Washington will try to make its mark on greenhouse gas sometime in 2009," the report forecast.

For now, funding is still available for new coal plants. But the likelihood of added future costs to control carbon has made the plants a riskier bet for lenders. More risk generally means higher borrowing costs.

And it isn't just Wall Street that's wary of funding new coal plants. The federal Rural Utility Service revealed this year that it had stopped providing government-backed low-interest loans for coal facilities until it could better account for carbon emission risks.

"Funding from the street has not dried up. But has it become more expensive? Yes. Every indication is that borrowing will be more expensive in the future," said Patrick Lavigne, a spokesman for the National Rural Electric Cooperative Association.

"It's not necessarily if, it's when we'll have carbon regulation. Look at the positions of the three major presidential candidates. It will be a priority," he said.

Crist's Goals Stifle Coal Plans

In 2007, lawsuits, permit denials and the uncertainty over future regulation led to the cancellation or delay of 59 new coal plants nationwide, according to the Sierra Club.

In Florida, which is vulnerable to rising sea levels, Crist has made reducing global-warming emissions a priority, squelching interest in new coal plants.

Last year, the state Public Service Commission blocked plans by Florida Power & Light to build a coal-fired plant near the Everglades because of greenhouse gas emissions, and Tampa Electric Co., a subsidiary of TECO Energy Inc., shelved plans to construct a coal-fired unit in Polk County, in part because of uncertainty over future government regulations.

Most states in the Southeast get half their electricity from coal. Environmentalists and those in the industry say that dependence has helped prevent the carbon-emission argument from gaining much traction in the region other than in Florida.

While most scientists are convinced global warming is a real phenomenon worsened by rising carbon levels, some regulators in the Southeast remain skeptical that the positives of restricting carbon emissions outweigh the negatives.

During a hearing this year on a new coal-fired plant in Wise County, Va., proposed by Dominion Virginia Power, the Richmond-based utility, a top utility regulator on the State Corporation Commission complained that "this country will go back to the Dark Ages if this carbon hysteria takes over."

Unlike California and four other states that have set binding carbon-reduction targets, the targets in Florida and Virginia are not mandatory.

Utilities building plants in the Southeast refer to their new facilities as "clean coal" plants But environmentalists complain they will utilize outdated pollution-control technology instead of newer - and more expensive - methods of reducing emissions of mercury, sulfur dioxide, carbon dioxide and other pollutants.

For example, none of the plants under way in Virginia, South Carolina or Georgia will make use of a newer coal-plant technology called Integrated Gasification Combined Cycle, or IGCC, that energy analysts predict will be the most cost-effective type to retrofit with carbon capture technology when it becomes commercially available.

Reporter Sean Mussenden can be reached at smussenden@mediageneral.com or (202) 662.7668.

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