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Released January 02, 2013 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The future of North American new-build coal-fired generation is not as bleak as some analysts have claimed, according to Brock Ramey, North American Power manager for Industrial Info. Exactly how bright the future might be depends in large part on natural gas prices, he said in an interview.
"When gas prices in some regional markets were about $3.25 or less per million British thermal units (MMBtu), utilities increased their dispatch of gas-fired power, and coal generation was temporarily idled," Ramey said. "But now that gas prices have risen to $3.75 or more per MMBtu in some regional markets, coal generation is being more frequently dispatched."
Looking farther down the road, Ramey said when gas rises to $4.75 or more per MMBtu, around 2015, that would help support the economics of several planned new-build coal-fired generators.
The Industrial Info Industry Manager said there is a list of 15 new-build, coal-fired generators that were grandfathered from the greenhouse gas New Source Performance Standards (NSPS) proposed earlier this year by the U.S. Environmental Protection Agency (EPA) (Washington, D.C.). For more on that draft rule, see March 30, 2012, article -EPA Strikes Again With 'New Source Performance Standard.' That draft rule, which is not yet finalized, calls for new coal- and oil-fired assets that generate more than 25 megawatts of power and emit more than 1,000 tons of carbon dioxide (CO2) emissions per megawatt-hour to be fitted with carbon capture and sequestration (CCS) technology. Operating and already under construction plants are exempt from the NSPS rule and its CCS requirement. The CO2 emissions level in the draft rule is about the level of emissions from a high-efficiency gas-fired generator.
The agency's proposal did not apply to plants currently operating or new permitted plants that begin construction by April 2013. Specifically, the EPA grandfathered about 15 new-build coal units that were under development at the time the draft rule was issued.
"There are a lot of activities at a power plant site that could qualify for it being under construction," Ramey said. Developers could enter into contracts for major pieces of equipment, such as turbines, or they could enter into contracts with architect & engineering firms or equipment, procurement & construction (EPC) firms. In some cases, running bulldozers across a plant site to remove trees and level the ground could be enough for a site to be considered "under construction," he added. "The term, 'began construction,' is a term of interpretation requiring a project by project review," he said.
Ramey did not address the potential impact that EPA Administrator's, Lisa Jackson, departure from the Obama administration could have on the scope and timeline of various EPA rules, including the CO2 NSPS. In a December 27 statement, Jackson said she would depart the Obama administration after the president's State of the Union address in late January.
"New-build coal generation will come back as a player in the 2015-16 timeframe," Ramey said. "Not only that, but by that time we think it's possible that the cost of wind generation could decline to the point where it is economic without the federal Production Tax Credit. When natural gas is priced at $4.75 or more per MMBtu, a lot of other generation becomes economic."
Many of the 15 new-build coal generators on that grandfathered list are integrated gasification combined cycle (IGCC) units, which are notoriously expensive to build, Ramey noted. Two IGCC projects under construction now, Edwardsport in Indiana and Kemper County in Mississippi, have experienced significant cost overruns.
"Because a lot of the 15 grandfathered coal projects are IGCCs, we believe many of them will not move forward according to schedule," Ramey said. "Some will have difficulty convincing financiers to invest money. We expect some others will be converted to burn gas. We see about one grassroot IGCC project pop up each year, and we expect some of the grandfathered coal plants will begin turning dirt in the 2015-16 timeframe."
Although Ramey said he was not giving odds, he did mention the Holcomb Unit 2 project, the Texas Clean Energy IGCC and the Washington County Generating Station project in Georgia as three of the grandfathered projects that could move forward in the next few years. For more on the Texas Clean Energy Project, see March 1, 2012, article -Texas Clean Energy Project Selects EPC Firms, Assesses Water Issues.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
"When gas prices in some regional markets were about $3.25 or less per million British thermal units (MMBtu), utilities increased their dispatch of gas-fired power, and coal generation was temporarily idled," Ramey said. "But now that gas prices have risen to $3.75 or more per MMBtu in some regional markets, coal generation is being more frequently dispatched."
Looking farther down the road, Ramey said when gas rises to $4.75 or more per MMBtu, around 2015, that would help support the economics of several planned new-build coal-fired generators.
The Industrial Info Industry Manager said there is a list of 15 new-build, coal-fired generators that were grandfathered from the greenhouse gas New Source Performance Standards (NSPS) proposed earlier this year by the U.S. Environmental Protection Agency (EPA) (Washington, D.C.). For more on that draft rule, see March 30, 2012, article -EPA Strikes Again With 'New Source Performance Standard.' That draft rule, which is not yet finalized, calls for new coal- and oil-fired assets that generate more than 25 megawatts of power and emit more than 1,000 tons of carbon dioxide (CO2) emissions per megawatt-hour to be fitted with carbon capture and sequestration (CCS) technology. Operating and already under construction plants are exempt from the NSPS rule and its CCS requirement. The CO2 emissions level in the draft rule is about the level of emissions from a high-efficiency gas-fired generator.
The agency's proposal did not apply to plants currently operating or new permitted plants that begin construction by April 2013. Specifically, the EPA grandfathered about 15 new-build coal units that were under development at the time the draft rule was issued.
"There are a lot of activities at a power plant site that could qualify for it being under construction," Ramey said. Developers could enter into contracts for major pieces of equipment, such as turbines, or they could enter into contracts with architect & engineering firms or equipment, procurement & construction (EPC) firms. In some cases, running bulldozers across a plant site to remove trees and level the ground could be enough for a site to be considered "under construction," he added. "The term, 'began construction,' is a term of interpretation requiring a project by project review," he said.
Ramey did not address the potential impact that EPA Administrator's, Lisa Jackson, departure from the Obama administration could have on the scope and timeline of various EPA rules, including the CO2 NSPS. In a December 27 statement, Jackson said she would depart the Obama administration after the president's State of the Union address in late January.
"New-build coal generation will come back as a player in the 2015-16 timeframe," Ramey said. "Not only that, but by that time we think it's possible that the cost of wind generation could decline to the point where it is economic without the federal Production Tax Credit. When natural gas is priced at $4.75 or more per MMBtu, a lot of other generation becomes economic."
Many of the 15 new-build coal generators on that grandfathered list are integrated gasification combined cycle (IGCC) units, which are notoriously expensive to build, Ramey noted. Two IGCC projects under construction now, Edwardsport in Indiana and Kemper County in Mississippi, have experienced significant cost overruns.
"Because a lot of the 15 grandfathered coal projects are IGCCs, we believe many of them will not move forward according to schedule," Ramey said. "Some will have difficulty convincing financiers to invest money. We expect some others will be converted to burn gas. We see about one grassroot IGCC project pop up each year, and we expect some of the grandfathered coal plants will begin turning dirt in the 2015-16 timeframe."
Although Ramey said he was not giving odds, he did mention the Holcomb Unit 2 project, the Texas Clean Energy IGCC and the Washington County Generating Station project in Georgia as three of the grandfathered projects that could move forward in the next few years. For more on the Texas Clean Energy Project, see March 1, 2012, article -Texas Clean Energy Project Selects EPC Firms, Assesses Water Issues.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
