Will lean on coal in Texas, firm says

BY MATTHEW L. WALD THE NEW YORK TIMES

Posted on Sunday, November 12, 2006

FAIRFIELD, Texas — In a huge pit, gigantic bulldozers and earth-moving machines are removing two layers of coal, the last shavings in a monumental task that has dug 200 feet down and expanded across 20 square miles over the past 35 years.

The coal feeds two plants nearby that help keep the lights on and the air conditioners humming throughout Texas. But in doing so, the operation has released hundreds of millions of tons of carbon dioxide — the main contributor to global warming, many scientists say.

Now, the pit’s owner, the TXU Corp., is embarking on its next monumental task: the nation’s single largest coal-oriented construction campaign, with a plan to add more than 9, 000 megawatts of new capacity, the equivalent of 3. 5 percent of the nation’s current coal-fired capacity. That is enough to power millions of homes, using coal from other giant pits and still more in Wyoming.

Even as some utility executives are joining environmentalists in seeing future controls on carbon emissions as inevitable, TXU is betting that it can beat the consensus, placing a $ 10 billion wager on 11 new coal power plants that will produce copious amounts of carbon dioxide for decades to come.

Last week, TXU announced that in addition to 9, 000 megawatts of capacity in Texas, it is considering 7, 000 to 14, 000 more megawatts of capacity in other parts of the country, possibly including the Northeast and Midwest, which would make it a national player in the industry.

Maybe that is good energysystem planning, or maybe it is environmental brinksmanship, outsiders say.

For people who want to limit emissions, the moves by Dallas-based TXU are a reminder that outside the laboratories and hearing rooms where scientists and policymakers talk about limiting carbon emissions, some power companies are racing to build the infrastructure that will last into the middle of this century or longer.

It could be an immensely profitable bet. Company executives say the plants will provide cheap electricity for Texas, make lots of money for shareholders, conserve more valuable natural gas and reduce the pollutants that make smog.

Perhaps in recognition of the growing concern over emissions, TXU also said last week that the new plants would have room for construction of additions intended to capture carbon dioxide. Moreover, it said it was conducting research on oxygen firing, chilled ammonia and other technologies to capture carbon.

But outside groups, including Public Citizen, the Pew Center on Global Climate Change and the Natural Resources Defense Council, say TXU is embarking on its immense construction campaign without taking account of its role in the environment.

Unlike California, which has long taken the lead among states in advancing energy efficiency and is now moving to curb carbon emissions by those supplying electricity to the state, Texas has no goals for cutting carbon emissions. Texas Gov. Rick Perry — a Republican who was re-elected Tuesday — has received campaign support from companies that burn or ship coal and has fast-tracked coal permit applications from TXU and other companies.

Kathy Walt, a spokesman for Perry, said all permit applications were subject to the same environmental standards. If donors were trying to seek favor in official decisions, she said, “they’d be better off sending their money elsewhere.” RELIABLE AND ECONOMICAL

TXU is not building natural gas plants, which would throw off half as much in carbon emissions as coal plants, or significantly adding to nuclear production, with zero emissions. Nor is it pushing energy efficiency, which many see as the cheapest way to satisfy the needs of business and consumers.

Instead, company executives insist the only technology that is reliable, economical and can be built fast enough to keep the lights from going out on hot summer nights is old-fashioned pulverized coal.

Some independent experts, like Ernest Moniz, co-chairman of the Energy Research Council at the Massachusetts Institute of Technology and a former undersecretary of energy in President Clinton’s administration, agree that coal is the most attractive fuel for now. And the traditional pulverized coal-burning plant may be the best way to make electricity — adding carbon capture later on — instead of coal gasification, which is favored by environmentalists.

If new rules ultimately impose controls on emissions, environmentalists say, TXU seems to be betting that restrictions will not apply to plants that are already up and running; environmental groups say TXU’s ambitious coal construction plan is intended to be built and running before any new rules go into effect.

“Either it is plain old denial,” said Ralph Cavanagh, an electricity specialist for the Natural Resources Defense Council, “or they think they can be grandfathered” so that any regulation does not apply to their existing plants.

If it won such an exemption, then not only would TXU be able to operate carbon-dioxide-emitting plants, but it might eventually close the plants or clean up their emissions and sell its rights to produce emissions to other companies for cash.

It is not a wild theory, electricity experts say, and they point to the regulations that took effect in the 1990 s on emissions of sulfur dioxide, which causes acid rain. The federal government handed out allowances, or permission to emit a certain amount of the chemical, in proportion to how much the plants produced before the law took effect.

The government also put a cap on total emissions and set it progressively lower in future years, permitting companies to trade their allowances so that the goal was achieved most efficiently. By installing scrubbers that captured the sulfur, companies could free the allowances they were given and then sell them. One result was to give existing polluters an advantage over new-plant builders, who often had to pay cash for the right to pollute.

TXU executives deny any such calculation.

“There’s not some game theory here around carbon,” said Mike McCall, the chief executive of TXU Wholesale, which is planning the company’s construction campaign.

McCall said building extra coal plants to get in ahead of a new rule was impractical. No one wants to build plants that will sit idle if there is too much capacity. Not that he worries much that any new plant in Texas will sit idle. The population of Texas is booming, and the average new house is 2, 500 square feet, often with 11-foot ceilings, in a climate where air-conditioners run around the clock for at least three and a half months a year. Nationally, the industry expects 19 percent growth over the next decade; in Texas, it is 25 percent. The state’s peak electric demand grew 5 percent last summer, compared with the summer before. Environmentalists are fighting TXU’s plans, and some elected officials have echoed their concerns. But the builders are plowing ahead and raising the specter of rotating blackouts in 100-degree heat unless the plants are built. “It wouldn’t be the regulator or politician that would have egg on their face if this market failed,” McCall said, “it would be us.”

ALTERNATIVE SOURCES TXU says it is also adding wind power and has tentative plans for nuclear reactors. But it dismisses a newer variant, gasified coal, as untested and too expensive despite the view of many experts that it would be easier to adapt later to capture carbon emissions. Indeed, for the most part, TXU is choosing the technology that will produce the cheapest power consistent with existing environmental regulations. The new plants planned by TXU and others operate at higher temperatures and pressures, and thus wring a few more kilowatt-hours of electricity from each ton of coal. With scrubbers, filters and catalytic converters, the new plants will be a lot cleaner than the smog-producing conventional ones.

In fact, at the plant in Fairfield, a city of about 3, 500 people roughly 80 miles south of Dallas, the twin stacks called Big Brown are so filtered already that it is difficult to tell if the boilers are running from a distance.

To sweeten the deal, TXU has promised that it will cut its overall emissions of smog-forming pollutants and soot by 20 percent. That means a 70 percent cut from existing plants, although it would eventually have had to make some of those improvements anyway.

Part of the motivation for coal is that the new plants will do more than meet new demand; they will also displace old plants that run on natural gas. With Texas far more gas-dependent than other states, it was hit hard by the tripling of natural gas prices in recent years.

Wind is an even cleaner alternative than natural gas. Texas recently surpassed California as the nation’s No. 1 producer of wind energy. And wind sells well here, said Gillan Taddune, the chief environmental officer for the Green Mountain Energy Co., which sells electricity from wind to homeowners.

But all the windmills in Texas amount to only one-third the capacity of one midsized coal boiler. Windmills do not run as many hours of the year as coal boilers, either, and they tend to be particularly lackluster on hot summer afternoons, when electricity is needed the most.

Coal plants, on the other hand, are available to meet load more than 90 percent of the time when needed. The result is that wind can be used to save fuel in fossil-fired plants, but the coalor natural gas-fired plants have to be built anyway, system planners say.

With costly natural gas, long construction times for nuclear plants (and some uncertainty about their costs ), and the unpredictable wind, that leaves mostly coal, utility officials say.

“We seem to have a good case for it,” said William Bojorquez, director of system planning for the Electric Reliability Council of Texas. The council operates Texas’ power grid.

But environmentalists point to other motives as well. Tom Smith, the director of Public Citizen in Texas and a longtime activist on electricity issues, noted that under Texas’ competitive power system, all producers get paid the price set by the most expensive generator on the system, which in Texas means gas.

As a result, coal plants get to burn cheap fuel but charge high prices.

Smith said Texas was missing an opportunity, however, both to save money and help protect the environment.

“There’s cheaper, cleaner and cooler ways to provide the energy,” he said. If Texas householders used electricity as efficiently as those in New York and California, he said, the need for new power plants could be cut by half.