Synapse Energy Economics has recently put together a report for NRDC that ought to be required reading for anyone who objects to dirty or expensive power (e.g., coal-fired, central station power). The report, entitled “The Risks of Participating in the AMPGS Coal Plant” (PDF), is ostensibly only about a specific 960MW plant that AMP wants to build in Ohio. But their report speaks volumes about the larger economic and environmental challenges to coal-fired central station power, and provides a wealth of hard data to those who (admittedly, like me) believe that we have vastly cheaper and cleaner options to serve our growing power needs.

It is also notable for its self-restraint, arguing against the plant in purely economic rather than moral terms. For this reason among others, it ought to be mandatory reading for any environmentalist looking for a framework to support cleaner power.

The report is in large part a response to an independent engineering assessment of the plant done by consulting firm RW Beck. (See the public, partially redacted version of that report here (PDF).) The Synapse/NRDC criticism of that report is both harsh and highly specific, but before going to their criticism, it’s worth noting a few rather striking concessions in the original AMP report:

  1. They are estimating total capital costs to build the plant of $3.391 billion, or $3,532/kW. Outside of FutureGen, this would appear to be a new record.
  2. They indicate variable plant costs of $34+/MWh, which is considerably above the retail industrial rates in many historically coal-dominated states. (Read: coal prices are up, and plant efficiencies are down.)
  3. They concede that carbon pricing is coming, estimating a range of $0-20/ton of pollution.
  4. They estimate total retail costs with 90 percent confidence of $75-100/MWh. (Uncertainties in their analysis are explicitly identified and could push the price up to $120/MWh.) For comparison, current delivered electric rates in the U.S. average $85/MWh, and that costs includes wires and other (noncoal) generation.

Synapse/NRDC takes the facts of the AMP filing and draws irrefutable conclusions from them. Specifically:

  1. They point out not only that the high capital costs refute the thesis that “coal is cheap,” but also show rather exhaustive pricing trends that are likely to push new coal plants up even more and virtually ensure cost-overruns. Ergo, an investor who doesn’t factor this risk into their calculus is being irresponsible.
  2. They point out that while all appear to be in agreement that carbon pricing is a question of “when, not if,” most projections are substantially higher than the upper end of the range used in the AMP report. Ergo, even their high-case power price could be pretty low. Ergo, an investor who doesn’t factor this risk into their calculus is being irresponsible.
  3. They point out that in a “least cost” planning model used in the electric sector, one should not approve plants unless there are no lower-cost options available. They helpfully point out how much lower-cost renewables, energy efficiency, and CHP could be deployed to serve the same load.
  4. Finally, they show how that region of the country has lots of existing gas-fired generation, which isn’t running much because of high gas costs. But on the margin, it is cheaper to run the gas plants harder than to build new coal plants. Ergo, an investor who doesn’t factor the risk that cheap gas will drive down their equity returns into their calculus is being irresponsible.

This last point is truly remarkable, and perfectly skewers the whole “coal is cheap” mantra, which so often compares coal to gas. Yes, on the margin coal is cheap. But if you have to pay for the capital, you’re better off running marginal gas.

This is a brief summary, but it is well worth the time to read in some detail. The arguments used in this paper could be used against every coal plant in the country. And while the environmental costs of coal are huge, I think we gain much more traction by pointing out how economically irresponsible these investments are.