Leading into the 2011 COAL-GEN conference and exhibition, “uncertainty” was the key word that continued to come up when discussing the coal-fired power generation industry. Uncertainty due to the impending emission control rules for coal-fired generation. That uncertainty has been evident with multiple power generators announcing possible retirements due to looming Environmental Protection Agency (EPA) rules that amount to over 10,000 MW, including American Electric Power (AEP, NYSE: AEP), Southern Co. (NYSE: SO) and the Tennessee Valley Authority (TVA).
Michael Morris, president and CEO of AEP, delivered one of his final public speeches prior to his retirement this coming November. He was one of the keynote speakers at COAL-GEN 2011 in Columbus, Ohio, which is home to AEP. Morris said it is a critical time in the coal-fired industry and that the actions by the EPA are only hampering the industry’s efforts to comply with rules.
“It is clear, to me anyways,” said Morris, “that the activities that continue to go on at the Environmental Protection Agency are leading us into a very blind alley.”
One pending rule that is expected to be finalized sometime this year is the Maximum Achievable Control Technology, or MACT, rule. The MACT rule is expected to limit emissions of hazardous air pollutants from both new and existing coal-fired units. The problem, from some of the utility’s point of view, is that there will not be enough time to retrofit existing plants in order to comply with the rules. And if there is time, some of the older, smaller units may cost too much to retrofit.
“The United States economy will come to a screeching halt on the day that it no longer has base load generation to satisfy the market demands,” said Morris.
Robert Fisher, senior vice president of Fossil Generation for TVA, said that for coal-fired plants to continue operations to provide base load generation, preventative maintenance must be implemented on existing plants.
“These coal plants, as long as you maintain them so they have not gotten to the point of degradation,” he said. “can last indefinitely. The systems that are going to cost the most are those systems in which you did not do the right preventive maintenance.”
As the uncertainty and debates continue over the future of coal-fired generation domestically, coal has still been the fastest growing fuel over the last 10 years, said Frederick Palmer, senior vice president of Government Relations for Peabody Energy.
Peabody Energy, which supplies coal to AEP, continues its coal mining operations worldwide. In 2001, the United States consumed one billion tons of coal while China only consumed 1.5 billion tons. Today, China consumers almost four billion tons while the U.S. still consumes one billion. And Palmer said that by 2050, the global consumption of coal will increase from seven billion tons to 13 billion tons.
“The world growth will be fueled by coal,” he said.
Morris said the carbon capture and sequestration research project at the Mountaineer plant in West Virginia demonstrated that carbon capture, although expensive now, is doable and that the technology must be utilized in the future.
“Coal, without question, will be the fuel choice of the world for many decades to come,” said Morris.
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