U.S. coal power boom suddenly wanes

Worries about global warming and rising construction costs give the edge to natural-gas and renewable-energy plants.

from the March 4, 2008 edition

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After years in the doldrums, the natural-gas industry is surging, with 170 power plants being planned (although, as with coal, many will never be built).

"The shift to natural gas is still only beginning at this point," says Mr. Piper of Platts. "As utilities cancel coal, they're turning to natural gas – so we expect a further move in this direction."

Move to gas could mean higher prices

But that big shift from coal to natural gas may ultimately cost consumers more and could even weaken the reliability of the electric grid, some analysts say.

Natural-gas prices that soared after hurricane Katrina have fallen back. Yet rising use of gas for power generation could make America reliant on imported liquefied natural gas (LNG), pushing domestic natural-gas prices up perhaps 20 percent in a decade, warns Mr. Linden of Pace Global. This raises energy-security concerns, since many of the nations supplying LNG are in politically unstable parts of the world, he adds.

Some in the power industry also say gas-fired turbines are less reliable when used for "base load" power – the turbines that spin day and night and not just for peak loads.

"There's a serious crunch with respect to having enough generating capacity coming in the next 10 years," says Rick Sergel, chief executive officer of North American Electric Reliability Corp., which serves the federal government as chief overseer of the US electric grid. "If coal doesn't play its role, it's going to be a major issue."

But his warnings that the nation will need 135,000 watts of new generating capacity by 2016 aren't something experts agree on. The federal Energy Information Administration forecasts a need for only 4,000 megawatts of additional capacity by the same date. Bruce Nilles, who organizes grass-roots opposition to coal power plants for the Sierra Club, an environmental group, says power-demand projections are soft.

"There's not going to be a big need for more coal," he says. "There are plenty of alternatives coming."

In fast-growing areas of the country like Texas, regulators worry that demand will outstrip power supplies. The big Texas utility TXU last year canceled eight of 11 coal-fired power plants it had on the drawing boards.

Yet Texas now leads the nation in wind-power generation and is aggressively building more. The state also holds potential to lead the nation in sequestering carbon emissions from power plants in old oil fields and saline aquifers. Tenaska Inc., a power company based in Omaha, Neb., announced last month it was planning the nation's first new conventional coal-fired power plant to capture 90 percent of its carbon-dioxide emissions. It aims to sell the CO2 to oil companies, who would pump it underground to boost oil production.

Mr. Sergel's organization has warned Texas it could have reliability problems if it doesn't build more power soon. Others in the coal-power industry are adamant, too.

"If they don't start building coal plants, it's going to be an economic prosperity problem for the country," says Richard Storm, CEO of Storm Technologies, an Albemarle, N.C., company that specializes in optimizing coal-fired power plants. "We need coal. Coal is a national treasure."

•Staff writer Ben Arnoldy contributed to this article from Palm Springs, Calif.

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