From a reader, apropos of this just-announced decision from the Supremes; more analysis here:
War on Coal
I actually stumbled into the information on the BLM and solar. I wasn’t really looking for it, but I could connect the dots and figure out how it integrated and what the long term goal was/is.
So let’s talk now about the War on Coal. I present this not as an expert on coal plants, on environmental regulation, or the history behind them.
Just someone who can put it together.
If I had but one sentence that I could plant in your mind it is this:
Environmental Control is not about the environment – it’s about control.
Just the same as “Gun Control”.
For decades, coal plants were built and there were few, if any, back-end pollution controls. Same for cars and trucks. To me, one of the prettiest sights in the world is a thick cloud of black smoke from a locomotive engine or that beautiful Kenworth in ‘Smokey and The Bandit’.
The Clean Air Act was the camel’s nose in the tent. Utilities started installing electrostatic precipitators to capture a great deal of particulates and prevent them from being put into the atmosphere. They worked with ways to better control the combustion process and the mixture of air and pulverized coal that were burned. And then in 1999, something happened. The Clinton administration launched a lawsuit against basically every coal fired power generator accusing them of violating New Source Review (NSR) clauses in the Clean Air Act. The idea behind NSR is that if you make really big improvements to your plant, then you are supposed to likewise improve the environmental controls on your plant to the best available technology.
I had some hopes at the time that when a Republican president got into office, this lawsuit would be dropped and common sense might prevail. Silly me. George Bush did nothing to slow or stop this lawsuit and so it proceeded. And it was a dark cloud hanging over all of coal fired generation. When you consider the cost of compliance, the fines, and penalties, NSR had the potential to kill coal.
From about 1999 forward, coal fired plants began adding on a number of environmental controls. For example, Selective Catalytic Reduction (SCRs) – basically like the catalytic converter on your car. Some plants then made a fuel switch to use Powder River Basin (PRB) coal which primarily comes from the area around Gillette, Wyoming. The advantage to PRB coal is that it has a much lower sulfur content and can help you meet compliance requirements with respect to sulfur dioxide (SOX). The disadvantages are that you can really only get it from one place, you have to pay transport it from Wyoming to wherever your plant is in the Eastern US (a problem that’s even worse because rail is your only option and they know it.), even better is that there are only a few rail lines they use. Even better is that PRB coal can spontaneously combust much easier than eastern (Appalachian or Illinois Basin) coal.
Utilities installed Flue Gas Desulfurization (FGD) or “scrubbers” designed to remove NOX from flue gas. Unlike a simple catalytic converter or SCR added onto the back end of the plant, a scrubber is basically a chemical plant added to the back end of the existing coal plant. One of the hidden costs of the scrubber is that it consumes a ton of power to run. At one plant I know of, I think the station service load from the scrubber alone is something like 7% of the total output of the plant. And those are megawatts that you’ll never get back. Some scrubbers will produce gypsum as a byproduct of the chemical reaction which can be sold for use as drywall. Some unfortunate utilities probably had gypsum sales incorporated into their business model for the scrubbers. This hasn’t worked well for two reasons:
One, the economy has gone all Mugabe on us.
Two, you guessed it – the potential for lawsuits over drywall that might include gypsum created using coal plant flue gas.
The latest craze is for Baghouses, Activated Carbon Injection, or Bromine Injection to capture mercury from flue gasses. To put this in perspective, the amount of mercury captured is about the size of a sugar cube per ton of coal.
All told, some utilities spent as much on environmental controls as they did for the original construction of the plant itself.
But the war on coal is not just fought over stack emissions. It is also fought at the mine mouth-which no doubt helps to put miners in tiny coal mining communities in the hills of Kentucky, Virginia, and West Virginia out of a job. (I’m less familiar with these regulations, but you could go look them up and find the outcomes for yourself.)
The war on coal is also fought at the water’s edge. Water is key because nearly all power plants of any size use a steam turbine to turn a generator. Most of them also use cooling towers to condense that steam back to liquid form and therefore must draw a lot of water from whatever body of water they are near. Remember this phrase, “316b”. The EPA is looking to require industrial facilities to use enormous screens to prevent drawing in poor helpless, defenseless baby desert tortoise-like fish and wildlife that may or may not be endangered.
The war on coal is also fought at the ash pile. Coal fired plants produce ash from the bottom of their boilers. In December of 2008, the Kingston Steam Plant had what might be considered the Three Mile Island of ash pile accidents. You can look up the stories and results for yourself. In regulatory space, what we all knew was coming was a new tsunami of regulation. The potential exists for the EPA to declare coal combustion byproducts (CCBs) as hazardous waste. If they do this, then might mean that all coal fired plants would have to dig up all of that ash, then store it somewhere that it would be “safe”. Which may mean transporting it to somewhere that it would be safe. Which would mean transporting hazardous waste. Even better, many utilities sold their drier, higher quality ash (commonly called top ash) to places that mixed concrete. So if all those CCBs are hazardous waste – which is a largely arbitrary call by the EPA, then would it mean that all that concrete would have to be dug up and buried somewhere else? Again, consider how many roads are made with concrete. Consider that there’s probably a century of coal ash piled up at some plants and consider what this would cost. Thank you so much, TVA and Kingston Steam Plant for providing the EPA one more thing they could do.
The war on coal is very long on environmental regulations. All those serve to increase the cost of compliance and by extension, the cost/kWh for electricity generated at coal plants.
But the war on coal is not limited to just the environmental control aspect. Consider what has been happening in the last several years with respect to natural gas. In the world of natural gas, hydraulic fracturing (fracking) has allowed us to get to an enormous quantity of gas that previously was inaccessible or impossible to get.
Some background: Electricity generated from coal plants was always cheaper than electricity generated from natural gas. Why? Because the cost of compliance was low for both, coal was cheaper than natural gas on fuel costs, and much more abundant than natural gas. For this reason, coal plants were traditionally built to be baseloaded (Run at or near 100% all the time) units. Natural gas units were combustion turbine (think jet engine with a generator on the other end of the shaft) or combined cycle units (jet engine with heat recovery steam generator to increase output and thermal efficiency) and they were designed to run as “peaking” units. When the price of power was high enough, you run the peakers.
The relationship between coal and natural gas prices became inverted somewhere around 2009 and suddenly, the combined cycle units-originally designed as peaking units were running all the time, non-stop. Meanwhile, the coal units-designed to be baseloaded sat on reserve shutdown. Even better is that many of those coal units which had already applied the latest and greatest technologies at a cost of billions (which again increased their cost/kWh to generate electricity) were now put on reserve shutdown.
Think about it – you just spent billions to put environmental controls on these units and now they hardly run. At one high-end coal plant where these controls were installed, they are projecting a capacity factor of somewhere around ~25% for the next decade. In other words, they might run 3 months out of the year. And if that’s happening at the Cadillac, flagship coal units, what do you think is happening at the older units where the age and output simply could not provide enough benefit to offset the cost of those controls? Right, they’re toast. You need only look at the news releases in state after state to see how many coal units are being closed.
Consider also that once the old “clunker” coal plants are gone, the Cadillacs of coal will be the only remaining targets left in the war on coal. Utilities have been closing the older coal plants-feeding them to the alligator in an effort to satisfy the appetite of that alligator and hopefully prevent the Cadillacs from being eaten also. Seems like Winston Churchill had a quote about that or something…
Right now, natural gas is doing great. But when enough coal units are retired, the EPA will begin to destroy natural gas as well. Bank on it. As an aside, a key difference in natural gas and coal is that you cannot easily stockpile natural gas.
With respect to wind and solar, where did all of this come from? Those two power sources were never cost-effective enough to warrant development on a large scale. Ah, but if you drive the cost of compliance up for coal-then by comparison to coal, it becomes more economical. Subsidies help too. So do ridiculous mandates for renewable energy in utilities’ portfolios.
It would be really easy at this point to simply blame the government for all our ills in the war on coal. But I’m going to tell you something that may jolt you. When it comes to onerous environmental regulation, utilities are only now starting to raise any serious protest. It’s true. For the last decade or so, they had absolutely no problem in spending billions on back-end controls to control this pollutant or that molecule.
There are two types of money in the budget – Operations and Maintenance (O&M) and Capital. Capital dollars are used to build new plants, back-end controls, transmission lines, etc. In order to get that capital, regulated utilities can go to the state public service commission (or equivalent) with the project that needs to be implemented. They’ll present an overall scope, schedule, and cost-which will be passed along to the ratepayers over long term-like 20-30 years. The beauty of capital spending is that once you have completed the asset and placed it into service, you can roll those costs into the rate base for your customers, thereby increasing your revenues.
Oh, and increasing your power bills.
So for many utilities, even the huge cost of the back-end environmental controls hasn’t been a really big problem until the coal/gas cost inversion that we’re in right now. Though they should have fought this crap tooth and nail 25 years ago, they went along with it. They “worked closely” with the regulators so that they could get some certainty about where the regulation was heading and thus, where they needed to be heading with their environmental controls programs. So long as they had decent relationships with the PSCs, they could get the SCRs, the FGDs, and the Baghouses approved without a lot of trouble.
I perceive that right now though, many utilities are in big trouble. Remember how I told you that even some Cadillac coal plants are looking at capacity factors of ~25% over the next decade? That’s if nothing else gets worse. But remember also that CCBs (ash) and 316b (water) have yet to be finalized.
So rest assured, it will get worse for coal.
What happens when those utilities figure out that sacrificing the clunker coal units wasn’t enough to satisfy the appetite of the alligator?
What happens when they have to sacrifice even the Cadillacs that they just poured billions into (and have not yet fully recovered their investment)?
Why. . . it’s almost like it’s part of an intentional scheme to crash an entire industry and set the stage for more government oversight/regulation/intrusion/control.