Future unsure, 3 power plants stick with coal

Energy companies in Arkansas are working to upgrade environmental controls at three of the state’s five coal fired power plants, while the officials who operate them are already concerned about how much it’s going to cost to meet undefined future greenhouse gas emission limits.

The need to upgrade the state’s three older coal plants led utilities to take a hard look at natural gas power generation in Arkansas. They decided to stick with coal, they said, because of the high price to retrofit facilities to burn natural gas and the uncertainty surrounding future greenhouse gas emissions standards.

Just over half of the state’s electricity in 2011 was produced from burning coal.

The three plants are being upgraded now to comply with established regulations designed to improve visibility and limit emissions of hazardous air pollutants such as mercury, lead and hydrochloric acid.

“Looking at what we know about greenhouse gas standards, based on bills that have been tossed out there, coal is still the most economical choice,” said Jonathan Oliver, vice president of power production and delivery for Arkansas Electric Cooperative Corporation. “It’s in the public interest, but there’s obviously risk going forward.”

The risk for those betting on the future of cheap coal-fired power generation comes from President Barack Obama’s June 25 executive order instructing the Environmental Protection Agency to develop carbon emissions standards for new and existing power plants.

Obama wrote in the order that the standards should incorporate “market-based instruments, performance standards and other regulatory flexibilities” and enable “continued reliance on a range of energy sources and technologies.”

Coal plants will be most affected by the standards because they emit more greenhouse gases than other power generation methods, including double the emissions of equivalent natural gas-fired plants.

The proposed greenhouse gas standards for operating plants must be finalized by June 1, 2015, according to the order. Utilities are supposed to comply with EPA rules that limit mercury, arsenic and acid emissions from coal-fired plants and improve visibility by April 2015, though extensions that delay compliance by a year have been granted.

The timeline means that utilities are currently making plans about what to do with older coal-fired power plants without knowing the cost of complying with future carbon standards.

ENVIRONMENTAL UPGRADES

Earlier this month, the Arkansas Public Service Commission decided that plans to upgrade the environmental controls at the Flint Creek plant near Gentry to be in the public’s interest. Flint Creek is the state’s oldest coal-fired power plant.

Plans to retrofit the plant to burn natural gas or to purchase or build a new natural gas-fired plant were also considered.

Though the costs were similar for each of the options, Oliver said upgrading environmental controls at the coal plant ensured the reliability of northwest Arkansas electricity while keeping prices stable.

Oliver said obtaining permits and designing and building a new plant would take too long and there are no natural gas plants in the area available for purchase. Retrofitting Flint Creek to run on natural gas would make it about 40 percent less efficient than a completely new natural gas plant.

“Do I want to take my F-350, which gets 10 mpg, or my Prius to drive into town?” Oliver said. “It wasn’t a good choice.”

Still, he said future carbon regulations are a wild-card that could affect the accuracy of the model that power companies use to predict costs.

“You can’t stick your head in the sand and say since there’s no regulation today, we shouldn’t take it into account,” Oliver said.

SWEPCO customers will see their bills rise about $3 a month beginning in 2017 because of the environmental controls added to the Flint Creek plant. The project will cost $408 million. Construction will begin in 2014 and end in 2016.

The 1,678-megawatt Independence plant near Newport and the 1,659-megawatt White Bluff plant near Pine Buff, both built in the early 1980s and owned by Entergy, will also be upgraded to comply with environmental regulations.

The 670-megawatt Plum Point and 600-megawatt John W. Turk power plants, both built in the last four years, will not require additional pollution controls under the current rules.

Chuck Barlow, vice president of environmental policy and strategy for Entergy Corp., said the upgrades at the company’s two plants will not be as extensive as what is needed at Flint Creek, but he did not have a final cost estimate for the controls.

Barlow said knowing the cost of emitting carbon dioxide would provide clarity as the company upgrades and designs new power plants.

“What our company would prefer to see is national legislative action,” Barlow said. “We would like to see something out of Congress.”

CARBON’S COST

Power companies don’t know what form or how strict the new regulations will be, but they can get some idea from the administration’s measure of the “social cost of carbon.”

In 2010, a federal group averaged different climate change models to determine what it’s worth to avoid releasing one ton of carbon dioxide into the atmosphere - commonly called the social cost of carbon. The group calculated four costs - $5, $22, $36 and $67.

The first three estimates, which average the cost of carbon across various models and scenarios, differ depending on the rate at which future costs and benefits are discounted, according to the Economic Report to the President. The fourth value, $67, comes from focusing on the worst 5 percent of modeled outcomes.

The cost covers health, property damage, agricultural impact, the value of ecosystem services and other welfare implications from climate change.

The government used the $22 per ton estimate until May 31, a month before Obama’s executive order. It adopted the $36 per ton estimate after analyzing the effects of sea level rise, according to a news release.

According to the EPA, Flint Creek released 3.8 million pounds of carbon dioxide in 2011. Using the government’s measure of the social cost of carbon, capturing or avoiding the release of that amount of carbon is worth around $137 million.

“The $36 will impact the decisions, but until there’s some certainty as to how it will be a applied … we can’t really use it to evaluate and see if the decision to retrofit makes sense,” Oliver said.

The larger Independence and White Bluff plants owned by Entergy both released more than 10 million tons of carbon in 2011. The price of capturing or avoiding the release of carbon from each of the three older plants totals more than $360 million.

Coal-fired plants accounted for 81 percent of the electric power industry’s total greenhouse gas emissions in 2009, according to the Congressional Research Service.

The price of natural gas has traditionally been less stable than coal. For plants opening in 2018, the Federal Energy Information Administration expects coal will cost about $123 per megawatt hour of electricity and natural gas will cost about $66 per megawatt hour.

“I think the carbon standard could certainly have an impact more on coal than natural gas, but a greater impact would be the price of the fuel to begin with,” said Kevin Teichman, senior adviser in the EPA’s office of research and development. “Though, if coal is priced more cheaply than natural gas, people will look for ways to continue to use it under the regulation.”

Coal-powered plants generated more energy in 2001 than in 2011, and coal as a percentage of the total energy mix decreased from 55 percent to 51 percent. Over the same period of time, natural gas plants went from supplying 6 percent of Arkansas’ electricity to 19 percent, according to the Energy Information Agency.

Though new environmental controls reduce releases of dangerous toxins from coal fired plants, a cost-effective method for capturing carbon before it has been released to the atmosphere has not been demonstrated in the United States.

“Coal is primarily composed of carbon,” Teichman said. “CO2 is an indication of complete combustion, which is what you’re trying to do.”

The article was published in The Arkansas Democrat-Gazette on June 2, 2013. To access the article from the newspaper’s website, click here. For a .pdf, click here.