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----- Forwarded by Mark E Haedicke/HOU/ECT on 03/27/2001 02:49 PM -----
=09"SCIENTECH IssueAlert" <IssueAlert@scientech.com< =0903/27/2001 06:23 AM =09=09=20 =09=09 To:=20 =09=09 cc:=20 =09=09 Subject: Two Coal Plants Announced In the Past Two Weeks Today's IssueAlert Sponsors:=20 [IMAGE] The IBM e-Energy Executive Forum =01) "Personalization, Partnership, and=20 Profitability" Designed for executives in the utility industry looking to leverage Custome= r=20 Relationship Management in the competitive marketplace. Topics will focus o= n=20 how process and technology can be leveraged to gain competitive advantage.= =20 Featured speakers will include IT analysts, solution partners, IBM=20 executives, and customers including: John Goodman, President of e-Satisfy;= =20 Richard Grimes, Director of CRM Energy Services; David Bonnett, Global=20 e-Energy Sales Executive, Siebel Systems.=20 www.ibm.com=20 In an exclusive SCIENTECH PowerHitters Interview, Pat Wood, Chairman of the= =20 Texas Public Utility Commission, discusses the issues surrounding Texas and= =20 California deregulation, as Texas announces its Texas Electric Choice Pilot= =20 Program. See the questions Wood was asked at: www.ConsultRCI.com=20 [IMAGE] The most comprehensive, up-to-date map of the North American Power System b= y=20 RDI/FT Energy is now available from SCIENTECH. =20 [IMAGE] IssueAlert for March 27, 2001=20 Two Coal Plants Announced In the Past Two Weeks by Bob Bellemare=20 Vice President, Utility Services U.S. Electric Power of Point Lookout, New York, announced plans to construc= t=20 a 249 megawatt (MW) coal fired power plant at Cherry Point in Whatcom Count= y,=20 Washington. Just last week, Reliant Energy Seward LLC, a subsidiary of=20 Reliant Energy, announced it is planning on constructing a 520 MW circulati= ng=20 fluidized bed (CFB) clean-coal power plant in Indiana County, Pennsylvania.= =20 Analysis: As the United States awakes from its energy policy slumber, it i= s=20 becoming increasingly apparent that the days of near complete reliance on= =20 natural-gas-fired generation to meet our growing energy needs is coming to = an=20 end. According to EIA statistics, natural gas prices have risen to histori= c=20 highs with January 2001 utility deliveries exceeding $10/MMBtu, compared to= =20 1998 and 1999 prices which floated between $2 and $3/MMBtu. Virtually=20 overnight, natural gas has gone from one of the least expensive generation= =20 fuels to one of the most expensive. Since the January price spike, prices= =20 have settled back down to the $4 to $5.5 /MMBtu level for Henry Hub futures= =20 prices, but even these prices would have been considered high just twelve= =20 months ago.=20 Coal, by comparison, is the United States most abundant fuel source,=20 constituting 95 percent of our nation's fossil energy reserves. Coal price= s=20 have actually dropped for utility deliveries over the past several years=20 according to EIA statistics. In 1994, coal prices averaged $28.03/short-to= n=20 ($1.37/MMbtu) compared to $24.68/short-ton ($1.21/MMbtu) for second quarter= =20 2000. Although coal generation currently represents over 51 percent of U.S= .=20 generation production, few plants have recently been built because of the= =20 environmental concerns associated with coal generation and the relatively l= ow=20 price for natural gas throughout the 1990s. In 1999, U.S. coal production= =20 actually declined by 2.1 percent which was primarily attributable to a larg= e=20 drop in coal exports coupled by smaller than usual growth in coal consumpti= on=20 for power generation.=20 But brighter days may lie ahead for the coal industry. New, so-called=20 "clean-coal" technologies are being tested and developed. In the 1970s and= =20 80s the pressurized fluidized bed coal combustor (PFBC) was developed,=20 removing sulfur (SO2) pollutants and limiting the formation of nitrogen oxi= de=20 (NOx) pollutants inside the boiler. The need for scrubbers or other=20 post-combustion controls was eliminated by technology. Texas New Mexico=20 Power (TNP) constructed two 150 MW lignite-fired units that went operationa= l=20 in 1990 and 1991 based on the circulating fluidized bed (CFB) technology th= at=20 Reliant is proposing for its 520 MW facility in Pennsylvania. The TNP One= =20 power plant was, however, extremely costly to build. Unit 1 cost $357=20 million ($2,380/kW) and Unit 2 cost $282.9 million ($1,886/kW) to construct= . =20 Another technology being developed is the integrated gasification-combined= =20 cycle (IGCC) technology that first converts coal into a combustible gas,=20 cleans the gas of virtually all pollutants, then burns the gas in a turbine= =20 much like natural gas. More than 99 percent of sulfur, nitrogen, and=20 particulate pollutants can be removed in the process. Three gasification= =20 power plants have been built in Florida, Indiana, and Nevada. In the early= =20 1990s, PSI Energy and Destec teamed up to construct a 262 MW IGCC generatin= g=20 unit at the Wabash River Project in Indiana for a total installation cost o= f=20 $592 million ($2,260/kW). In 1996, TECO completed the construction of its= =20 250 MW IGCC generating unit at Polk Power station in Florida for a total=20 installation cost of $508 million ($2,032/kW).=20 Japan has also experimented with clean-coal technologies. In 1998, Hokkaid= o=20 Electric Power Co. Inc. started commercial operation of a 75 MW PFBC power= =20 plant. Test operations are being carried out at two other plants, the 250 = MW=20 unit of Chugoku Electric Power Co. and the 350 MW unit of Kyushu Electric= =20 Power Co. Japan is also testing a pilot scale (1 MW) molten carbonate fuel= =20 cell (MCFC) at a Chubu Electric Power Co. site.=20 It is interesting to note that these advanced technologies have historicall= y=20 approached the installation cost of a nuclear plant, but have all the=20 operational costs of a coal plant. Now market conditions have changed, and= =20 despite the high capital and operating costs, clean-coal technologies can= =20 economically compete with natural-gas-fired generation, if gas prices=20 continue to remain high. Additionally, expectations are that the next=20 generation of clean-coal power plants will cost significantly less than the= =20 early pioneers' cost. The Department of Energy (DOE) for example, assumes = an=20 IGGC power plant can be built for $1,315/kW with an average heat rate of=20 8,470 Btu/kWh in its "Annual Energy Outlook 2000" report. =20 The DOE deserves a great deal of credit for bringing clean-coal technology = to=20 the point of commercialization. In 1984, the clean-coal experiment began i= n=20 response to the U.S./Canadian transboundary problem of acid rain. In March= =20 of 1987, President Reagan agreed to a new $5 billion public-private=20 initiative to make clean-coal technologies a reality. The program led to 4= 0=20 projects in 18 states, including co-funding demonstration projects such as= =20 the PSI/Destec and TECO facilities. In the mid-1980s the only options for= =20 reducing NOx pollution cost $3,000 per ton; today's low NOx burners have=20 reduced this cost to under $200/ton. These low NOx burners have also reduc= ed=20 emission levels from 700 parts per million (ppm) in the early 1970s to 100= =20 ppm today. Furthermore, the Selective Catalytic Reduction (SCR) process=20 reduces more than 80% of the NOx contained in coal combustion gas. The DOE= =20 reports that 75 percent of all coal-fired capacity in this country is now= =20 outfitted with low-NOx burners. Similarly, the cost for scrubbing=20 technology, which removes sulfur pollutants, has been reduced 75 percent=20 since the 1970s. =20 The improvement of power generation efficiency will be one of the most=20 important technical issues for coal power plants because of its high carbon= =20 content. The latest commercial plant has achieved a thermal efficiency of = 43=20 percent by increasing steam temperature and pressure. Even with these=20 improved efficiencies, the coal power plant of the future may still be unab= le=20 to achieve the substantial greenhouse gas reductions that could be necessar= y=20 to address global climate change concerns. There are other existing=20 environmental regulations that may also limit the adoption of new coal=20 generation. The SIP Call rule requires 22 Eastern states and the District = of=20 Columbia to reduce NOx emission by a specified amount by May 2003, with muc= h=20 of the reductions expected to come from coal-fired power plants. In 1997,= =20 the National Ambient Air Quality Standards for particulate matter and ozone= =20 were adopted with an anticipated compliance cost for full attainment=20 estimated at $37 billion per year (particulate) and $10 billion per year=20 (ozone) respectively. The Supreme Court is reviewing these EPA rules, and= =20 recently supported the EPA's right to regulate these emissions [see 3/1/01= =20 IssueAlert at www.ConsultRCI.com]. These rules are significant since they= =20 will lead to additional NOx and SO2 emission reductions, the two precursors= =20 to fine airborne particles. Mercury reductions are also being contemplated= . =20 In November 1999 the EPA filed lawsuits against seven utility companies for= =20 Clean Air Act violations. In a settlement with TECO, TECO agreed to cut NO= x=20 and SO2 emissions by 85 percent by 2010 and pay a $3.5 million civil=20 penalty. =20 But in the end, the nation will likely turn to coal to help meet its growin= g=20 energy demands. Great strides have been made to reduce the environmental= =20 impact of this abundant fuel source. Since 1970, the use of coal has more= =20 than doubled while emissions of sulfur and nitrogen pollutants have decline= d=20 by 70 percent and 40 percent, respectively. If we can continue to achieve= =20 even greater emission reductions, coal may well help provide the energy=20 bridge to the future.=20 An archive list of previous IssueAlerts is available at www.ConsultRCI.com Reach thousands of utility analysts and decision makers every day. Your=20 company can schedule a sponsorship of IssueAlert by contacting Nancy Spring= =20 via e-mail or calling (505)244-7613. Advertising opportunities are also=20 available on our website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let = us=20 know if we can help you with in-depth analyses or any other SCIENTECH=20 information products. If you would like to refer a colleague to receive ou= r=20 free, daily IssueAlerts, please reply to this email and include their ful= l=20 name and email address or register directly on our site. =20 If you no longer wish to receive this daily email, send a message to=20 IssueAlert, and include the word "delete" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis= =20 of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlert= s=20 are not intended to predict financial performance of companies discussed, = or=20 to be the basis for investment decisions of any kind. SCIENTECH's sole=20 purpose in publishing its IssueAlerts is to offer an independent perspecti= ve=20 regarding the key events occurring in the energy industry, based on its=20 long-standing reputation as an expert on energy issues. =20 Copyright 2001. SCIENTECH, Inc. All rights reserved.
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