OLD ENERGY IS JUST TOO EXPENSIVE

There is growing need for new U.S. power generation. In the absence of serious improvements in efficiency or a sudden burst of new construction of capacity, brownouts, and even blackouts, are a very real likelihood in the foreseeable future.

What is preventing the building of new capacity? A new study from J. Edward Cichanowicz, a consultant to the American Public Power Association (APPA), describes a 4-part constellation of barriers to new power plant construction that might be summarized in a word: Uncertainty.

State and local agencies tend to require different emissions and effluents controls on power plants than federal agencies, creating the need to define “best available control technology” (BACT) for various types of emissions and effluents. Conflicts over the definition of BACT is one of the key sources of the uncertainty.

Uncertainty in regulation creates uncertainty in financing.

The result: Power plants don’t get built.

From Cichanowicz's Discussion And Examples Of Entry Barriers In The Electricity Generation Market: “Most plants were cancelled or delayed for more than one reason. Accordingly, assigning any one barrier as the principle cause for project delay or cancellation is somewhat arbitrary.”

This is not an entirely bad thing. For decades, people have suffered dreadful health effects as the result of all-too-quickly-and-easily-permitted power plants spewing toxicity from the burning of fossil fuels and nuclear energy.

In the last 1-to-2 years community, environmental and legal groups have done heroic work in turning back a “coal renaissance” through the regulatory process.

A 2005 streamling of the permitting process for nuclear power threatens to open a “nuclear renaissance” which must be next on the community, environmental and legal groups' agenda.

From the Cichanowicz study: “…the Nuclear Regulatory Commission (NRC) recently streamlined the process for licensing and permitting a nuclear generator, while the Energy Policy Act of 2005 has eased the financial burden through tax incentive, and loan guarantees. The NRC reportedly anticipates applications for 12 new reactors within the next several years, and up to 15 more after that time period. Developers are presently proposing 47 new reactors…”

Fortunately, the capital costs of both new nuclear and new coal plants appears to make them both simply bad investments.

The capital costs factor at present make New Energy the preferable investment and are expected to continue to do so as long as New Energy continues to get its fair share of government subsidies.

The emerging pressure to control emissions and water consumption are likely to continue to make New Energy the preferable investment although materials costs could potentially affect all energies detrimentally, incentivizing investment in efficiency measures.

click to enlarge

Discussion And Examples Of Entry Barriers In The Electricity Generation Market
J. Edward Cichanowicz, August 2008 (American Public Power Association)

WHO
American Public Power Association (APPA); J. Edward Cichanowicz, Consultant, APPA

WHAT
The development of new sources of electricity generation is slower than predicted and slower than the increase in demand. There are 4 major barriers to development: (1) cost, (2) regulatory approvals, (3) uncertainty of returns on investment, and (4) changing policies on regulation and environmental impacts.

Barriers to traditional power generation are multiplying. (click to enlarge)

WHEN
- The study is dated July 31, 2008, and describes trends as current as 2007 and 2008.
- The study’s overall perspective covers the period from the beinning of “gradual” deregulation of the electric utility industry in the “mid-1980s…”
- 60 proposed coal-fired power plants were abandoned or delayed between 2006 and 2008.
- Up to 47 new nuclear plants are proposed at present.

WHERE
The description is of barriers to development of new U.S. power generation.

WHY
- The barriers are most evident in new coal-fired power generation.
- Natural gas-fired power plants serve a lesser role in the U.S. because of (1) price fluctuations in the natural gas price and (2) the expense of using natural gas cannot easily and economically switch from supplemental to baseload service.
- The permitting process is complicated by (1) a multiplicity of local, state and federal agencies, and (2) permits needed for a multiplicity of factors (Example: coal - airborne emissions, water and liquid effluents, waste heat, solid byproducts)
- Developing “best available control technology” (BACT) is required.
- 4 phases to securing a power plant permit:
(1) Site selection
(2) BACT is developed to obtain regulatory approval and financing.
(3) Regulatory process goes forward until permit is obtained or denied.
(4) Either way phase 3 goes, the legal appeals begin.
- Construction begins if and when the last phase is complete.
- The report offers examples of all 4 barriers, how they have been overcome and how they have stopped power plant development.
- Some of the obstacles to the building of nuclear power plants appear to be easing but, like new coal plants, capital costs are a significant barrier.

Wind power is widely cost competitive and the solar power plant price is on its way to grid parity. (click to enlarge)

QUOTES
- From the report: “As recently described by a veteran permit writer, the task of preparing an environmental permit application requires 4 to 8 months, and subsequently working with various state agencies to secure the permit requires an additional 12 to 18 months. Then, an additional one to three years (or more) can be required to attempt to resolve the lawsuits (Blankenship, 2008).”
- From the report: In contrast to nuclear and fossil power, new entrants may provide a more significant role in renewable power generation. These entrants are enticed by significant growth rates (albeit from a small base) and the present interest in carbon-free power generation…New entrants will likely continue to play a significant role in renewable power generation, particularly in the fast-growing solar “space”. These renewable projects provide an important role…[but] renewable generating equipment is not immune to escalating costs.”