utilities

Legislature approves 'Clean Coal Portfolio Standards,' green-lights new coal plant

OK, we've got Obama in the plus column for the state of Illinois. But in addition to the gubernatorial craziness going on in my home state, we've now got this: Tenaska, an independent power company, has been seeking to build a coal plant in Illinois. The problem being of course, that new, coal-fired power plants are really, really, really, really lousy investments. Tenaska tried to change government rules to ensure they made money.

That in and of itself isn't inherently bad. Every company has a vested interest in tweaking laws to benefit their shareholders. But to ask is nobler than to receive. I wouldn't be a bad person if I asked the state to give me $1 million a year to support my crack habit, but if the state gave me that money and I accepted, we would both be complicit.

So how did the Illinois legislature respond? "Clean Coal Portfolio Standards." Seriously.

Parsing Section 451 of the House stimulus package

Here are some thoughts on the American Recovery and Reinvestment Act recently unveiled by House leaders -- specifically, the appropriation of Section 451 (aka "Subtitle E") from the 2007 Energy Bill.

For obvious reasons, we've been following this bill very closely, which not only provides $10 per MWh to waste heat recovery and high-efficiency cogeneration projects, but it also provides a nice suite of carrots to induce the states to reform their paleolithic electricity regulatory laws. Often these laws have long been perhaps the biggest barrier to reducing the carbon footprint of U.S. electricity generation and distribution.

For less obvious reasons, it's hard to get programs like this through the Congress. This is the result of some peculiarities of the way the federal government makes decisions to spend money:

1. Tax bills require one vote to enact (OK, technically three, since they have to be approved by both houses and then signed by the President, but it is a single vote on a single decision throughout). All other fiscal bills require two votes: the first authorizes the funding, and the second appropriates the money through the budget process. Since no vote is certain, this makes it much easier for regulators to get things done by tinkering with tax policy than through any other measure. In no small part, this is why the tax code is so full of complexity, loopholes, and social-engineering run amok. But I digress.


2. Any appropriation process must be "scored." This is the process by which the Congressional Budget Office estimates the cost of the legislation to the Treasury for the purpose of figuring out whether we can afford it. That's quite reasonable, but the nature of the process is such that it tends to ignore most of the upside because it does not readily differentiate between good and bad investments. (It is as if you made a decision to buy a stock based on the price per share without any consideration of whether it was likely to rise or sink in the future.) This becomes especially problematic when the economy sours, as the stimulative effects of investments are not readily quantified or evaluated precisely at the time when they are most needed.

Frustrating as this may be, the good news is that the limitations are well-understood by those inside the Beltway. Setting aside what the scoring rules say, here is what Section 451 will actually do for the U.S. economy ... with lessons broadly applicable to investments in all flavors of enhanced resource efficiency.

Upgrade freight rail: Save 12 percent of oil, 4 percent of emissions, and jumpstart renewable grid

On the theory that many people who encounter Alan Drake's own words on greening freight end up overwhelmed by the details, I have presented a very simplified version of Drake's proposal with my own opinions. This is a deliberate attempt to focus on the most important points, and then steer people to read the whole thing. [Update: The Washington Monthly has a long article on this as well.] Obviously the disagreement with Drake, as well as the political analysis at the end, is my own judgment. In addition Drake does not know me, though we've corresponded briefly, and he has no responsibility for anything I wrote.

Grist has discussed Alan Drake's proposal for greening freight before, but somehow it's always mentioned in passing and without real recognition that it's such a game changer. By switching 85 percent of long-haul trucking to rail, we could reduce U.S. oil use by about 12 percent and total U.S. emissions by about 4 percent.

In addition, it would add long-distance power transmission across the lines of regional grids, creating a true U.S. national grid to share power from coast to coast and from north to south, and it would add-high speed passenger travel. Since it would depend almost entirely on existing rail rights-of-way, the environmental impact is small compared to transmission projects and transit projects that use new rights-of-way.

Drake starts with the fact that long-distance freight trucking consumes about half as much oil as passenger transport, and that unlike passenger transport, we have an existing heavy rail system that can move goods with about eight times the energy efficiency of trucking. That system already reaches most destinations where we want to move goods. If we switched to rail, we would still need to use trucks to move goods to and from freight yards, but containerization makes that simple.

That is the good news. The bad news is that our existing rail system won't let us make this switch on a large scale. Today's freight rail operates near capacity now, and existing rail freight is slow and unreliable as compared to trucking.

Drake proposes that we upgrade our system, add various new controls and infrastructure, build second tracks besides existing rail runs, and electrify the most heavily trafficked routes, which allows trains to run at higher speeds, giving a capacity boost over and above that provided by additional tracks. These modifications provide vastly improved capacity, speed, and reliability, and they reduce energy requirements per freight-ton. Moreover, this transformation requires only standard technology in use today throughout the world.

Another rate increase in the name of cheap coal

Duke Energy just got approval to raise rates 18 percent to cover the continued rising price tag for its 630-MW planned coal plant in southwestern Indiana.

The new price tag? $2.35 billion, or $3,730/kW.

By my highly unscientific but quixotically regular analysis, that's a new record, just topping AEP's $3,700/kW proposed facility in Virginia. Way to go, Duke!

One note: This plant will not sequester its CO2, and $2.35 billion does not represent the full cost being borne by Indiana ratepayers:

On Wednesday, the commission also approved Duke Energy's $17 million plan to study the plant's potential to capture a portion of its carbon dioxide emissions as part of the company's proposal to possibly store the gas permanently deep underground.

So not only is it expensive, but it's also environmentally dangerous. But if we throw a few million ratepayer dollars at "studying" CO2 sequestration, maybe we can put a nice report together showing that someday in the future, it will only be expensive.

This apparently was insufficient to appease the environmental community:

Environmental and government watchdog groups oppose the plant and have sued to try to halt it, calling the project a huge waste of money that would be better spent on renewable energy such as wind farms. They also warn that its price tag could go even higher if Congress acts to impose caps on carbon dioxide emissions linked to global warming.

Crazy hippies. When will they learn? We need to burn more coal and raise power prices because coal is cheap. Why is that so hard to understand?

New study: Efficiency investment better for Virginia economy and ratepayers than coal plant

You may or may not be aware of the huge ongoing fight in Virginia over the proposed Dominion coal-fired power plant in Wise County. Suffice to say, it's huge. And ongoing.

Into the fight drops a new report by ABT Associates, an independent research firm, which finds that -- surprise surprise -- efficiency is a far smarter investment:

The report compares the economic effects of building Dominion Power's Wise County coal plant with investing in energy efficiency measures that would meet the same electricity demand. The study finds that avoiding construction of the coal plant by investing in efficiency would save the average household in Dominion's service territory between $52 and $91 per year in 2012.

The report goes on to find that efficiency investments would also add far more revenue to the state economy and create thousands more jobs.

Got that? Better for the state economy, for ratepayers, and for jobs.

Now check out the first comment under this story about the report in a Virginia newspaper:

Nukes may become troubled assets, ruin credit ratings

Part 1 presented a new study that puts the generation costs for power from new nuclear plants at from 25 to 30 cents per kilowatt-hour -- triple current U.S. electricity rates!

Nuclear plants with such incredibly expensive electricity and "out of control" capital costs, as Time put it, obviously create large risks for utilities, their investors, and, ultimately taxpayers. Congress extended huge loan guarantees to new nukes in 2005, and the American people will be stuck with another huge bill if those plants join the growing rank of troubled assets.

The risk to utilities who start down the new nuke path is also great. A June 2008 report [PDF] by Moody's Investor Services Global Credit Research, "New Nuclear Generating Capacity: Potential Credit Implications for U.S. Investor Owned Utilities" (PR here [PDF]), warned that "nuclear plant construction poses risks to credit metrics, ratings," concluding:

The cost and complexity of building a new nuclear power plant could weaken the credit metrics of an electric utility and potentially pressure its credit ratings several years into the project, according to a new report from Moody's Investors Service ...

Moody's suggests that a utility that builds a new nuclear power plant may experience an approximately 25% to 30% deterioration in cash-flow-related credit metrics.

And this would likely result in a sharp downgrading of the utility's credit rating.

The application by Florida Power & Light for a large nuclear plant came in at a stunning $12 to $18 billion, and the utility concedes that new reactors present "unique risks and uncertainties," with "every six-month delay adding as much as $500 million in interest costs."

The report Climate Progress published this week, Business Risks and Costs of New Nuclear Power [PDF] by power-plant cost expert Craig Severance, has an extended discussion of the business risks to utilities and hence investors:

Rewarding utilities for conservation success through ‘decoupling’

Utilities are among the few remaining large companies that are relatively solvent and profitable. Harnessing their might to offer retrofits for all would be a powerful step toward economic stimulus. But most utilities in Cascadia are conflicted about helping their customers save energy. On the one hand, they’re legally obligated to do it. On the […]

Mysteries of on-bill financing revealed!

In my last post, I described a nonprofit bank’s program for financing building energy retrofits, as a way to speed the green-collar recovery. Here, I describe two new, innovative approaches to financing efficiency upgrades in buildings — meter loans and local improvement districts — and one old-school, utility-run approach that may be the best bet […]

Falling commodity prices unlikely to reduce power costs

I find this E&E story on the costs of building power plants troubling ($ub. req’d). The lead is accurate, but dangerously and deeply misleading: The cost of building power plants and transmission lines have begun falling after years of steep increases, promising to temper electricity rate spikes for consumers, according to a new report. Are […]