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Policy May Render State Coal-Fired Plants Infeasible

Posted on: Monday, 5 December 2005, 18:00 CST

By John G. Edwards, Las Vegas Review-Journal

Dec. 3--A proposed California policy that would prohibit the state's investor-owned electric utilities from using power from conventional coal fired-power plants may make it financially infeasible to build conventional coal plants in Nevada, analysts say.

That's good news for people who fear that coal plants are contributing to global warming by producing large quantities of carbon dioxide. But it's bad news for advocates of using coal as a low-cost, domestically available alternative to more expensive natural gas in power generation plants.

The California Energy Commission on Nov. 23 approved an energy policy report that calls for that state to ban investor-owned utilities from entering contracts of three years or longer for electricity from coal-fired plants that produce more greenhouse gases than natural gas-fired plants. The greenhouse gases ban would apply whether the coal-fired plant was inside or outside of California.

"It now goes to the governor for his concurrence before being the official policy of the state of California," California Energy Commission Chairman Joseph Desmond said. "(Gov. Arnold Schwarzenegger) is clearly on record supporting some very aggressive greenhouse reduction target."

He expects the California Public Utilities Commission to direct investor-owned utilities to file applications for long-term power supply contracts that meet the new standard.

"Any plants that are being proposed in Nevada that have any hope to sell into the California market are going to meet these requirements," said Jon Wellinghoff, an energy attorney.

Desmond suggested Nevada would benefit from the policy because the policy could force coal plants in Nevada to meet California's strict environmental standards.

Support for the policy came Thursday from the Center for Energy Efficiency and Renewable Technologies in California, Western Resource Advocates and Environmental Defense. In a press conference by telephone Thursday, officials expressed concern that California was becoming more dependent on coal-fired plants that they said are polluting Western cities and national parks such as the Grand Canyon and Yellowstone.

They counted 20 to 30 proposed coal-fired power plants in noncoastal states of the West, including Nevada.

Wellinghoff opposes the 1,200-megawatt, coal-fired Granite Fox power plant that Sempra Generation plans to build north of Reno, and he thinks the new policy may doom that project. The Sempra project depends on being able to sell power primarily into California, he said.

Art Larson, a Sempra spokesman, disagreed that the project would be doomed. However, he conceded the policy will make it more difficult for Granite Fox to sell power to investor-owned utilities in California.

Nevertheless, Granite Fox may sell to municipal power authorities in California and could sell power to California utilities for periods of less than three years, Larson said. He suggested that power-supply contracts for less than three years would not be classified as long-term contracts.

Coal-fired power plants require relatively large investments compared with gas-fired power plants and they take several years to complete. Therefore, institutions are reluctant to finance coal-fired plants unless the developer has long-term power contracts, analysts say.

New technology plants that convert coal into gas and then capture carbon dioxide would satisfy the new policy, Desmond said. Also, energy companies could satisfy the requirement by using a combination of biomass gases, such as methane from a landfill.

The California policy could benefit renewable-power producers who operate geothermal plants, solar power plants and wind power plants, Wellinghoff said. Geothermal plants use hot underground water to generate electricity.

Rebecca Wagner, Gov. Kenny Guinn's energy adviser, suggested the California policy could hamper renewable energy projects by limiting transmission lines. New coal-fired power plants are needed to make it feasible to build new transmission lines that would provide a way for renewable power to reach utilities, she said.

"So many of our renewable locations throughout the state are having trouble getting to market, because of the lack of transmission," Wagner said. "I don't know if there's enough renewables to develop that (transmission) market alone."

Added Wellinghoff: "California is leading the nation with standards for power generation. What we're seeing California do here is going to be a trend (among other states)."

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Source: Las Vegas Review-Journal

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