Coal: getting expensiver

Posted by Sean Casten (Guest Contributor) at 9:41 AM on 11 Mar 2008

Read more about: coal | energy | carbon sequestration | climate | West Virginia

More details on the new, really-really-expensive AEP coal plant in West Virginia.

It seems like just yesterday that I wrote that the 17 percent rate increase announced by AEP would not be the last one, given the cost of this plant. Two days later, here they come.

Specifically, "Customers could start paying as early as next year with rate hikes starting at $1 per month in 2009 and eventually climbing to $7.70 per month. AEP customers could pay nearly $160 million during construction and $116.23 million per year after that to fund the new plant."

And why do we need those rates? Because this plant will be "the single most expensive utility project in the state's history."

And why do we need the coal plant? Because ... [drum roll] ... coal is cheap!

Full story from Greenwire ($ub. req'd) below the fold.

State officials in West Virginia signed off on plans for a $2.2 billion coal-fired plant late last week, angering environmentalists and consumer advocates who say the plant should incorporate carbon-capture technology.

The American Electric Power plant, the single most expensive utility project in the state's history, was approved by the Public Service Commission. In an 85-page decision, the PSC gave AEP a stream of cash -- through customer rate hikes -- to pay off debt incurred from building the plant.

Customers could start paying as early as next year with rate hikes starting at $1 per month in 2009 and eventually climbing to $7.70 per month. AEP customers could pay nearly $160 million during construction and $116.23 million per year after that to fund the new plant.

The PSC rejected calls that would force AEP subsidiary Appalachian Power Co. to add plant equipment to capture carbon dioxide emissions and "sequester" them underground.

"Uncertainties regarding CO2 legislation and regulation make it more reasonable to wait until such requirements are certain," the PSC said. "By the time CO2 regulation is effective, the advances may change the specific design of the preferred CO2 capture retrofit."

The PSC also made its support for increasing coal-generated power clear.

"While coal has recently become the whipping boy for environmental ills (and there are clearly some problems in that regard), the fact is that coal reserves are estimated at 250 years, and rail and river transportation systems in this state make coal a reliable and stable source of energy for generating capacity for the project," the PSC ruling said (Ken Ward Jr., Charleston Gazette, March 9).

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11 Comments | Post a Comment

Coal Plants and Living In Reality

Good post, crucial topic. Coal, like gasoline, needs to become several times more 'expensiver' than it currently is if we are going to start living, i.e. consuming, in reality. We're living in a dream world with the current prices . . . it's similar to when we were all teenagers still at home with our parents thinking it didn't cost anything to live. Moving out and paying for rent and groceries was a rude awakening -- and paying real costs of fossil fuels will be the same. I still think we can have a happy quality of life consuming less . . . . come visit my blog, Diamond-Cut Life, at http://alison97215.wordpress.com/ to see why I think that.
best regards,
Alison

by Alison Wiley at 10:37 AM on 11 Mar 2008

Gee, that's pricey -

but since the costs of solar and wind power are rising faster than coal, how is that development a good thing, without a price for carbon?

http://www.reuters.com/article/idUSN1339129420080214?page ...

Nuclear power construction costs -- mostly materials, labor and engineering -- have gone up 185 percent as shown by the index, followed by wind power costs up 95 percent, natural gas plants up 90 percent and coal-fired plants up 70 percent.

I'm not surprised AEP won't be sequestering CO2 as yet. They are probably running a corporation, not a charity. More informative articles mention AEP will run a CO2 separation process at the plant on a pilot scale.

by Jay Alt at 12:27 PM on 11 Mar 2008

Jay

They are increasing in part because of the rising costs of all power plant capital, which - as you note - is affecting solar and wind (not to mention biomass, cogen and anything else that makes electricity). But when you look at the cost breakdown for coal plants about half of the capital is for pollution control - which are also increasing rapidly. In other words, if you were only dealing with general upward trends in power plant costs, you'd be looking at something like $1500 - $2000/kW. Still quite a bit higher than the $800 - 1000/kW that you used to be able to build these for, but that still leaves a lot of capex for all the pollution control. And remember that pollution control on a coal plant drives the efficiency down for all the parasitic loads, meaning that they not only add capex, but also add operating expense. And, perversely, mean that those plants are mandated to emit more CO2 per MWh in the name of environmental protection.

by Sean Casten at 12:37 PM on 11 Mar 2008
[ Parent ]

Graph

I wish I could find the graphical representation of the relative cost of competing power generation schemes. It listed wind, coal, natural gas, and nuclear. It was from a few years ago and wind was just coming down to meet the rising cost of the others, due to rising fuel costs.

With coal, gas, and nuclear fuel prices all spiking, this has got to be looking even better for wind now. Not to mention the artificially low cost of nuclear power construction now rising to reflect current construction cost realities.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 9:57 AM on 12 Mar 2008

Dr. X

It's about a tie. Click here for our version of the slide. (Scroll down to "Recent Publications", click on the "Chicago Mensa" presentation and go to slide #26. Sorry so cumbersome, by my html skills are crummy.

Bottom line though is that there are a whole slew of power generation technologies now that all check in at 10 - 11 cents/kWh delivered - coal, nat gas and wind are all about the same. They all get there for different reasons though. All three have to pay for transmission costs, which aren't insignificant (by comparison with solar or cogen that typically serves behind-the-meter loads and doesn't need all the wires to connect up with.) Beyond that, the reasons they're expensive differ though. For coal, it's because of all the capex, especially for pollution control. For gas, it's because of the high cost of natural gas (which means that it's variable costs are much higher, but capital costs are lower - oddly enough making natural gas a lower risk option from an equity perspective, which is why it's the only option anyone's building right now of any significance.) For wind, it is really about capacity factor, since it's hard to get wind sites that are going to run at full load for more than 30 - 40% of the year. Which means that you've got capital out there not working the majority of the time. (Solar obviously has similar challenges.) All else equal, this means that wind has to be 1/3rd of the cost of other techs to break even.

But to your point, it is about even - and that's without factoring in the externalities - which means that in a rational world, we'd be deploying a lot of wind before we built any more coal.

by Sean Casten at 11:37 AM on 12 Mar 2008
[ Parent ]

Thanks Sean

I wonder if a site comparing total cost of sources (construction capital, maintenance, fuel, waste disposal, pollution)including the latest prices and price trends of gas and coal could be useful? Something that would show how and when wind, solar thermal, biogas, and finally solar PV will pull ahead.

And where conservation with different systems compares in this cost picture. Cogeneration, geo heat exchange, heat pump industrial heat recovery, plugin hybrids, and so forth.

Payback periods for renewables and conservation would be good too.

Maybe a logo for this and other enviro websites that would track cost comparisons as daily energy price fluctuations and trends come in from markets? A simple graph with bars that represent the present time, then ghost bars that show the present trend projected into the future.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 1:48 PM on 12 Mar 2008

Dr. X - make one!

I'm not aware, but certainly have done the math plenty of times internally. Bear in mind that in a world where construction costs are skyrocketing, fuel prices are volatile and debt markets are in flux, it's pretty tough to make any kind of chart that isn't out of date by the time you publish. (The debt market bit is important because - like it or not - central station power has much lower capital recovery requirements, since it is guaranteed by the state. So an honest look needs to charge a higher level of capex recovery to solar/wind/cogen and other private stuff: something like 15 - 20% in today's market, as compared to 9 - 11% for central station coal.)

That said, it would be fairly easy for someone with halfway decent HTML skills to build a website that lets you input the current #s and update in real-time... volunteers? I'll build the spreadsheet if someone else can figure out how to post it.

by Sean Casten at 6:03 AM on 13 Mar 2008

Actually, there is one source

And I should have remembered it, since my dad led the effort. The World Alliance for Decentralized Energy has built a model that they have applied to a number of different country's electricity grids to figure out the least cost plan for future load. It factors in wires costs, fuels costs, T&D losses, capital costs, etc. - all on a country-specific basis. It has consistently shown that local power is vastly cheaper than any central alternative, and moreover that when you look back historically, the most cost-effective generation has always been built by unregulated parties. They've got a pretty impressive list of countries they've run the model on so far, and all with consistent results.

To see a report about their model, click here, and scroll down to the report labeled "The Wade Economic Model". (You'll have to enter some info about yourself to get the PDF.) Unfortunately, this is just a report about the model though - to actually get the model and run it, they want some $ for their efforts. But it is pretty robust - and a big part of the reason for their work was because they wanted to have a model out there that forced people to ask the right questions. Specifically, they wanted to counter the incessant apples:oranges comparisons that get made (like when a coal advocate says that wind should be burdened with T&D costs and capital recovery, but his costs are only fuel). Thus, their basic message was "we'll give you the model, and we'll let you specify values for all the inputs - but we specify the inputs. Don't tell us that wires are free in your country."

by Sean Casten at 6:12 AM on 13 Mar 2008

Great stuff!

That's real competitive capitalism in action Sean. Great family tradition.

I thought of one more factor that favors renewables and conservation, mass production manufacturing and installation cost reduction. that would be a trend, just as higher fuel prices are a trend.

And as we know, successful investors, from homeonwers all the way up to the Oracle of Omaha himself, depend on the trend.

I think some internet savvy grist writer like Ashley should do the hard work, we can criticize and kibbutz! Hehehey.

Then we can all put links to it on our blogs.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 7:32 AM on 13 Mar 2008

Yeah, yeah, yeah.

But in our defense, our family doesn't get any of that $ for the model. All goes to those greedy fatcats at WADE. : )

by Sean Casten at 8:40 AM on 13 Mar 2008

WV rates

Most of the above discussion is over my head. I'm even more challenged by economics than by technology talk. But as a citizen of West Virginia, I can add some information to the story: our state currently exports 3/4 of the power it generates (99% of which is from coal). So clearly 100% of the need for this new plant is not for us but on the east coast--yet OUR rates go up to construct a plant we mostly opposed. We also pay the price by having our mountains blown up and our hardwoods and streams buried, and we pay by having to rebuild roads stressed by coal trucks which alone have the right to carry 120,000 pound loads, thanks to the power of the coal lobby in our legislature. And we have one of the highest rates of premature death from power plant emissions in the country. This piece doesn't say which plant it's talking about, but if it's Longview, that one is the 9th coal-fired plant within a 30-mile radius of Morgantown. West Virginia electric rates are going up to pay for new scrubbers, which is fair, but this is not.

by mwildfire at 9:25 AM on 19 Mar 2008

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