Beating the Heat on Climate Change
Needing to build new power plants, electric co-ops look to inject a dose of “what's possible right now” reality into the global warming debate

Photo by José Gregorio Sánchez Duarte

During the next 10 years, the nation’s generation and transmission (G&T) co-ops plan to invest an estimated $35 billion in new power plants, transmission facilities, and pollution-control equipment to meet fast-growing demand for electricity as well as to comply with new regulations. In keeping with the not-for-profit co-op business model of providing co-op consumers with a reliable supply of power at a competitive price, G&T boards—as they consider options for providing an additional 15,000 MW of new generation, an increase of nearly one-third over existing capacity—will likely focus on the most cost-efficient, time-tested, and low-risk option available: building coal-fired power plants.

According to the U.S. Energy Information Administration, “King Coal” still reigns as the least expensive and most abundant fuel used to produce electricity—some 1 billion tons are burned annually. The black rock accounts for 50 percent of the nation’s power supply and a whopping 80 percent of the electricity generated by electric co-ops.

“The United States remains the Saudi Arabia of coal—we boast a 250-year domestic supply,” reports Joe Lucas, executive director of Americans for Balanced Energy Choices, an Alexandria, Va.-based advocacy group that supports the viability of coal-fired generation. “In fact, there’s more coal in the U.S. than oil in the Middle East. From a national security standpoint alone, coal must play a key role in our energy future.”

But coal increasingly has become “target one” on most political radar screens. Coal-fired power plants emit 40 percent of the nation’s carbon dioxide, a common element of life, yet one increasingly viewed as a “pollutant.” (In comparison, automobiles and transportation are responsible for 29 percent of U.S. carbon dioxide emissions; factories and large industry, 18 percent; and homes and small businesses, 13 percent.) The United States leads the world in emitting carbon dioxide, although China—which fires up a coal-fueled generating station big enough to power San Diego every 10 days, and plans to add 2,200 such plants by 2030—will take over the top spot in a few years.

For better or worse, most scientists now accept that human activities—chiefly the burning of fossil fuels such as coal and oil—boost carbon dioxide in the atmosphere. Too much of the gas, the consensus holds, kick-starts a greenhouse effect by thickening a heat-trapping blanket around the planet that has begun to alter climate patterns.

In addition, a vast majority of Americans see global warming as a threat—85 percent according to a March 2006 Time/ABC News/Stanford University survey. And the belief has gained tremendous traction across all parts of the nation. A January 2007 opinion poll conducted by Walton Electric Membership Corporation in Monroe, Ga., found 57 percent of its consumers felt climate change was occurring.

“I don’t believe the science behind global warming is conclusive, but Americans believe it to be real, and that perception makes it real to media, lawmakers, and regulators,” observes Richard Midulla, executive vice president & general manager of Seminole Electric Cooperative, a G&T co-op based in Tampa, Fla.

Sensing enormous public concern, Shell Oil Company President John Hofmeister, in a speech last winter before the National Press Club in Washington, D.C., mused that when 90-plus percent of the world’s leading figures say greenhouse gases have affected the climate, who is Shell to argue, “Let’s debate the science”?

Other businesses are going a step further and advocating for carbon dioxide emissions limits. In January, three major investor-owned utilities, Duke Energy—the nation’s third-leading user of coal—FPL Group, and PG&E Corporation, as well as seven industry giants including DuPont, Alcoa, and BP America, banded together with leading environmental groups like the National Resources Defense Council and the Pew Center on Global Climate Change to form the U.S. Climate Action Partnership (USCAP) and push for mandatory carbon dioxide emissions limits. To the big companies, any added expense resulting from climate change regulation simply becomes “a cost of doing business.”

A month later, many of these same corporate powerhouses, joined by dozens of international firms and giant investor-owned utility American Electric Power Company, a heavy coal user, called on the world governments to “set scientifically informed targets” to trim carbon emissions.

“Perception has indeed become reality,” adds Lucas. “Nearly 80 percent of Americans claim to have had a personal experience they associate with global warming. From hurricanes in Florida to a freeze in southern California to a balmy January with New Yorkers jogging in shorts through Central Park, people attribute these unusual weather phenomena to long-term climate change.”

The political response

Public clamor over the issue has now stirred up a steady drumbeat for legislative action. On Capitol Hill, a flurry of bills aimed at cutting greenhouse gases from smokestacks and tailpipes are under consideration.

“There’s been a substantial shifting in political grounds,” U.S. Senate Energy Committee Chairman Jeff Bingaman (D-N.M.) said recently before a global forum on climate change. He was joined by Maryland Republican U.S. Rep. Wayne Gilchrest, who added, “The United States is beginning to grasp that the scientific data is overwhelming,” alluding to the February announcement by an international panel pegging human activities as the main cause (“at least a 90 percent chance”) of global warming during the past 50 years.

On the West Coast, California has started implementing its bold Global Warming Solutions Act of 2006 that seeks to reduce the Golden State’s contribution to climate change 25 percent by 2020. (The measure essentially blocks imports of wholesale power from coal-burning facilities.) Governors in several other states have signed executive orders to aggressively shrink greenhouse gas emissions. And President Bush, whose administration has opposed mandatory carbon dioxide reductions, mentioned the subject in his State of the Union address on the same day that former Vice President Al Gore’s documentary about global warming, An Inconvenient Truth, was nominated for two Academy Awards (which it eventually won).

Then in late February—in a move that demonstrated the increasing influence of “green groups” on Wall Street—a $45 billion buyout of Texas-based investor-owned utility TXU Corporation by private equity interests came with a huge caveat: TXU, which had proposed building 11 coal-fired generation plants, announced it would scuttle eight of them, make up the generation difference through demand-response programs, and support USCAP. The action won support for the deal from two major environmental groups, even though it opened the door to having one of the nation’s largest utilities being controlled by private investors in a deregulated market with virtually no restrictions on profits.

Horns of a dilemma

The changing political landscape presents huge challenges for electric co-ops—serving 40 million people in 47 states and experiencing strong average consumer growth of 2.6 percent annually—as they tackle tough power supply choices. New baseload coal-fired power plants cost $750 million to $2 billion and take up to 10 years to site and construct.

But that investment can seem like a real gamble in an environment where “NOPE” (Not On Planet Earth) groups fight tooth-and-nail against any kind of power plant development, where leading NASA climate change scientist James Hansen calls for halting new coal plants and bulldozing old ones, where Congress may soon regulate carbon dioxide and thereby increase costs for operating a coal-burning generating facility, and where near-zero emissions clean coal with carbon capture and geologic sequestration technology may be available within a decade after conventional coal plants being permitted today come on-line.

“There are inherent risks associated with any type of new baseload facility,” admits John Holt, NRECA senior principal for generation & fuel. “Yet what are the alternatives? Co-op load is growing faster than investor-owned utilities and municipal electric systems. As consumer-owned utilities, we have an obligation to serve, to act on long-term strategies that sustain long-term economic growth.”

Holt notes that baseload nuclear power, while producing energy that’s relatively low-cost and clean from an emissions standpoint, still faces heavy political opposition in many circles (making a plant difficult to license), carries large liability risks, and has no long-term solution in place for disposing of high-level radioactive waste. In a February 2007 report, Standard & Poor’s Rating Services commented that nuclear, “is realistically only available to those G&Ts that are participants in an existing plant considering unit expansion.”

“Lenders are wary of nuclear, period,” Holt says. “There are reasons no new nuclear plants have been ordered for a quarter century.”

Natural gas, once the fuel of choice for generating electricity, faces supply bottlenecks, upward pressure on prices, and the same carbon dioxide issues as coal plants, although on a smaller scale. Because of this, and the co-op desire for rate stability, new gas plants coming on-line have largely been designed as “peakers.”

Renewable energy resources, like wind and solar, have roles to play as well in addressing rural development, climate change, and energy security concerns.

“As long as the government provides tax incentives, wind can be competitive with other fuels,” Holt asserts. “Otherwise, you’re looking at a 50-year payback. And wind realistically is only available about 30 percent of the time. The same thing rings true for solar and other alternative energy projects. The bottom line with renewables is that you still need baseload generation to maintain a reliable supply of power flowing across the grid at all times of the day.”
Of course, co-ops can buy power off the wholesale market to meet their needs. But market prices keep climbing—and reasonably priced supplies are becoming hard to find in many regions—unless more generation comes on-line. Because of this, 7,000 MW of planned new co-op generation will replace wholesale energy purchases.

“To secure a reliable and affordable supply of power for our consumers and to provide the means for rural areas to grow economically and create jobs, co-ops need to move ahead on constructing baseload plants,” Holt continues. “In most cases, these plants will burn coal. G&Ts have a very successful track record of owning and operating coal-fired plants. But rural electric systems also need to keep incorporating renewables to diversify their generation mix while promoting energy conservation and efficiency programs. We need to use all of our resources—there is no one magic bullet.”

“If co-ops don’t build, we could quickly find ourselves in a situation where we have a shortage of electricity,” contends Robert Bryant, president & general manager of Golden Spread Electric Cooperative, a G&T in Amarillo, Texas, that supplies energy to 16 distribution members serving more than 185,000 consumers in the Lone Star State and the Oklahoma Panhandle. “A shortage of power will create a real reliability crisis. To cope, people who can afford it will install backup generators. But that could produce more total greenhouse gases than depending on centrally dispatched and controlled power plants.”

Eric Larson, vice president of marketing services at ACES Power Marketing, an electric cooperative-owned energy trading, hedging, and risk management firm headquartered in Carmel, Ind., feels that G&Ts and distribution members must commit some resources to generation plants as part of a diversified supply portfolio to control their power supply destiny. “The only reliable way to get electrons onto wires is to put iron in the ground,” he says.

However, President Bush’s proposed fiscal year 2008 federal budget threw a monkey wrench into co-op power plant financing efforts. The blueprint “announced” a unilateral executive decision that eliminates the ability of G&Ts to use federal Rural Utilities Service (RUS) guaranteed loans to pay for new baseload facilities—such funding would instead need to come primarily through commercial banks and Wall Street, entities that are jittery about prospects for large-scale generation.

“The White House action ignores the intent of Congress,” declares NRECA CEO Glenn English. “There is no question that this move, if allowed to stand, will end up raising rural electric rates substantially in some of the most economically disadvantaged areas of our nation.”

In addition, a coalition of “green” groups has begun pressing banks to reject loan requests for coal-fired electric plants. So far, one U.S.-based financier, Bank of America, has committed to withholding funds for energy projects that emit large amounts of greenhouse gases, although 45 other financial institutions have signed on to a set of guidelines used to determine social and environmental risks of any investment.

Tech check

U.S. House Speaker Nancy Pelosi (D-Calif.) announced in January that she wants the full House to vote on a climate change measure by Independence Day. The U.S. Senate also has been holding hearings on greenhouse gas reduction bills. Leading proposals call for a mandatory carbon dioxide cap-and-trade system to stabilize and then reduce emissions.

“Electric co-ops support the development of responsible policies to address climate change but believe any effort must cover all sectors of the economy [not just coal-based generation]; must include provisions that encourage developing nations like China, India, and Mexico to address carbon dioxide emissions; and must accelerate spending on research and deployment of cost-effective new technologies that can capture and sequester carbon dioxide from power plants,” points out Kirk Johnson, NRECA vice president of environmental policy.

“Co-ops should also be allowed to offset carbon emissions using forest or agricultural sequestration [such as planting trees or buying ‘credits’ from farmers who use no-till soil conservation methods] and be given a level playing field with investor-owned utilities on any tax breaks provided for emissions reductions or energy-efficiency measures.”

Seminole Electric’s Midulla agrees. “It’s in our best interest as electric co-ops to be proactive in addressing what is widely viewed as a significant carbon dioxide problem.”
Jim Jura, CEO & general manager of Associated Electric Cooperative, a G&T in Springfield, Mo., urges co-ops to pay close attention to congressional deliberations on the issue and evaluate how proposals to curb global warming will affect rural consumers. “We need to be part of the discussion,” he insists. “The stakes are huge.”

Education will also take center stage, as electric co-ops prepare to inject a large dose of reality into the debate over what is and isn’t viable concerning coal-fired generation.
“Policymakers and consumers must understand utilities have to make ‘build or buy’ decisions based on the technology that exists now,” remarks Stu Dalton, director for generation at the non-profit Electric Power Research Institute in Palo Alto, Calif.

“They have to look at the risks and costs of applying first-of-a-kind technology and weigh that uncertainty against potential gains such as improved efficiency or reduced emissions. For example, clean coal technology with carbon capture is being developed, but choosing what form it will take and what will produce the best economics for any one coal type or site condition is like betting at the racetrack—it’s not clear right now which horse will win.”

Promising clean coal generation now available includes circulating fluidized bed (CFB) technology, developed by the U.S. Department of Energy (DOE) Clean Coal Technology Program, and coal-fired Integrated Gasification Combined Cycle (IGCC). Unlike conventional coal plants that burn powdered coal at temperatures ranging from 2,200 degrees to 2,400 degrees Fahrenheit, CFB units consume crushed coal—less than three-eighths of an inch thick—at between 1,500 degrees and 1,650 degrees Fahrenheit and mix in limestone; air blown into the boiler suspends the mixture as it burns (referred to as fluidizing). IGCC turns coal into a gas and then removes impurities before it combusts. However, neither CFB nor IGCC by themselves result in lower carbon dioxide emissions.
“IGCC plants also don’t have a strong track record on reliability unless they add an additional gasifier chain at a cost of at least 20 percent more,” cautions Holt. Only two IGCC plants are currently operating in the U.S., although several are being evaluated.
DOE, meanwhile, has launched the $900 million FutureGen project to erect the world’s first zero-emissions coal-fired power plant. The prototype 275-MW facility—slated to go on-line as early as 2012 at a site in either Illinois or Texas—will use IGCC that also captures carbon dioxide and stores it thousands of feet underground in geologic formations.

The conclusion: The U.S. remains many years and billions of dollars away from commercially viable, cost-effective solutions that can crimp carbon dioxide emissions.
“We must keep expectations in line,” suggests Tony Ahern, CEO of Buckeye Power, a G&T in Columbus, Ohio. “History shows that new technology takes 30 to 50 years to develop and implement. In the early 1800s, 99 percent of our energy came from burning wood. It took until 1880 for coal to catch up with wood in providing half our nation’s energy needs. So we’re not going to shift away from existing coal-fired generation overnight.”

A good story to tell

For decades, electric co-ops have stood out as leaders in developing green power. Today, more than 700 of the nation’s 900-plus co-ops offer renewable energy from wind, solar, hydroelectric, or biomass sources. Renewables comprise about 11 percent of co-op kilowatt-hour sales.

Midulla, who chairs the NRECA Environmental Task Force, also stresses that not-for-profit electric co-ops have long embraced the benefits of energy efficiency.
“Keeping up with rapid growth is one of our major challenges, so we get immediate cost reductions when consumers install more energy-efficient ground-source heat pumps, lighting, heaters and air conditioners, and appliances,” he explains. “Combined with improved efficiencies in power plants and load management programs that reduce electricity purchases during expensive demand peaks, co-ops can temporarily head off the need for new generation while curbing greenhouse gas emissions. After all, the cleanest kilowatt is the one never produced.”

Increasingly, co-ops are pushing energy efficiency by encouraging consumers to replace traditional incandescent lightbulbs with compact fluorescent lights (CFLs). Yampa Valley Electric Association, in Steamboat Springs, Colo., has launched a reduction-in-emissions and conservation program that provides free CFLs.

“When a member brings in a coupon [clipped from the co-op’s newsletter] to one of our offices, we ask them to identify the top five incandescent bulbs they use, give them one CFL equivalent, and offer to sell them four more at wholesale,” relates Jim Chappell, Yampa Valley Electric manager of customer accounts. “We expect 60 percent of our 18,000 residents to participate. That’s 10,800 CFLs. We budgeted $26,000 for the giveaways. The rest of the bulbs we sell at cost.”

Seeing interest in this area based on consumer research, Touchstone Energy® has developed several easy-to-use energy efficiency programs for co-ops and their consumers, including a home energy audit, home and commercial energy savings guides, and a flash media CFL calculator.

As Congress gears up to deal with climate change legislation, NRECA and its members will work to ensure that electric co-ops can continue to provide reliable, safe, and affordable electricity for the next 50 years.

“Over the next decade, electric co-ops need to build half as many new power plants to keep the lights on—there’s no way to avoid that reality,” English emphasizes. “Energy efficiency and conservation measures alone won’t be enough. Economics and issues of supply dictate that many of these generating facilities will use coal as fuel. We have to remind members of Congress to focus on generation technologies ready for prime time, rather than what might be on the shelf many years from now.”

Environmental Outreach Facilitates G&T Coal Project

Photo by Terri Heisele

Every day, another 1,000 people arrive in Florida, boosting the Sunshine State’s population by 1 million every three years. Rapid growth like that keeps Seminole Electric Cooperative, a generation and transmission (G&T) co-op based in Tampa, Fla., hopping. The G&T’s 10 member distribution co-ops serve some 1.6 million individuals and businesses across 46 counties.

“We have to add roughly 160 megawatts a year in either new plant capacity or purchased power just to keep up,” explains Richard Midulla, Seminole Electric executive vice president & general manager. “That definitely gets the attention of environmental groups.”

To make sure power continues to flow in a timely fashion, Midulla recommends that G&Ts reach out to these organizations.

“We have openly sought the input of environmental groups and work with them in designing projects that go far beyond minimum standards,” he remarks. “By working with them, it’s less likely they will delay a project where schedules are important to both final cost and ensuring a reliable supply of energy.”

Seminole Electric, surprisingly a winter-peaking system, operates two 650-MW coal generating units at its Seminole Generating Station along the St. Johns River, located 50 miles south of Jacksonville. It plans to construct a third unit at the site that will cost about $1.4 billion and go on-line in May 2012. The new 750-MW unit will employ the latest clean coal technology through use of a “super critical” boiler that produces more megawatts from less coal, along with state-of-the-art pollution control equipment. An additional $260 million in environmental improvements are being made to the station’s existing units. The end result: a reduction in the station’s net emissions of nitrogen oxides, sulfur dioxide, and mercury.

“To get acceptance for the expansion, we also entered into discussions with the Sierra Club,” Midulla reports. “In return for them not opposing our state certification, we agreed to further lower annual emissions from all three units, continue to pursue renewable energy and carbon dioxide-reducing projects, and purchase approximately $200,000 worth of high-efficiency compact fluorescent lightbulbs that our member co-ops will allocate to their consumers. We also hired biologists to find and relocate gopher tortoises living underground at the new unit’s site, even though that wasn’t required, based on our commitment to minimizing environmental impact.”

Midulla sees the settlement as a “win-win” for environmentalists, the G&T, and Seminole Electric members.

“We can collaborate and negotiate, or litigate,” he comments. “In my experience, the former is faster, more productive, a lot less expensive, and better serves everyone’s interests.”

‘Bottling Up’ Emissions Could Take Decades

Photo by Dimitar Tzankov

U.S. electric utilities could reduce carbon dioxide emissions below 1990 levels by taking aggressive steps to improve power plant efficiency and accelerate renewable energy development, claims a new study by the Electric Power Research Institute (EPRI), a Palo Alto, Calif.-based non-profit consortium whose members include co-ops. But reaching that goal will take at least 20 years and depend on the success of as yet untested technology, no matter how much money utilities spend. (EPRI has begun work on a cost analysis.)

EPRI’s report, “Electricity Technology in a Carbon-Constrained Future,” projects the nation will add about one-third more load—amounting to a total of 1.57 trillion kWh—to the grid through 2030, half of which will be generated by coal. To slow, halt, and eventually decrease carbon dioxide emissions while continuing to meet demand for affordable and reliable electricity, EPRI recommends the following measures:

• Upgrading Coal Plants. Older coal-fired power stations typically operate at roughly 33 percent efficiency; about two-thirds of the energy gets lost in the generating process. EPRI believes new plants coming on-line—even with pollution controls “penalizing” efficiencies anywhere from 25 percent to 40 percent of electricity output—can run at 38 percent to 40 percent efficiency. As part of its calculations, EPRI sets a target of 49 percent efficiency by 2030 and ventures that about half of existing coal plants (150,000 MW) will be upgraded to meet stricter air-pollution standards, allowing them to function at the same level as new facilities.
• Energy Efficiency. The study assumes a 2 percent improvement in energy efficiency of new residential, industrial, and commercial buildings and appliances through 2017. However, Steve Specker, EPRI president/CEO, cautions that appliance efficiencies can be trumped by use of larger devices. For example, a standard TV consumes 40 to 50 W, but new plasma screens use 300 W. Moreover, households have added new appliances, including TV sets, microwaves, and personal computers in every decade since the 1950s.
• Renewables. Even leaving out hydropower, EPRI sees a vast expansion of green power, particularly wind energy—from 2 percent of kilowatt-hours generated today to 6.7 percent by 2030. The assumptions stem partially from investments needed to meet existing state renewable portfolio standards during the next 10 years.
• Nuclear Power. Relying on plans developed in conjunction with the Idaho National Laboratory, EPRI presumes the nation’s existing fleet of 103 nuclear power plants will continue to operate while a new generation of about 50 advanced light-water reactors would start coming on-line in 2015, leading to 64,000 MW of new capacity by 2030.
• Carbon Capture and Storage. The study sees the biggest carbon dioxide cuts coming from coal-burning power plants that collect the gas, compress it, and then pipe it underground for sequestration. EPRI predicts carbon dioxide capture and storage—a technical innovation still largely on the drawing table—could be used at most new coal-based generating stations after 2020; plants employing it would need to produce 14.6 percent of all domestic electricity supplies by 2030 for nationwide curbs in carbon dioxide emissions to actually occur.
• Distributed Generation. During the next 20 years, distributed generation systems such as rooftop solar panels or natural gas-fired micro-turbines could provide power to more homes and businesses, shrinking annual growth in electricity demand by up to 5 percent.
• Plug-In Hybrid Vehicles. Introduced in 2001, gas-electric hybrid vehicles accounted for about 3 percent of passenger cars in 2006. The next step, plug-in hybrids—which have yet to be manufactured on a commercial basis—are expected to make up 10 percent of new car sales by 2017. EPRI envisions batteries with super storage capacities, which don’t yet exist, powering plug-ins for the first 20 to 30 miles each day. Of course, the batteries would need recharging—possibly increasing demand for power although not raising carbon dioxide emissions.