THE DREAM OF “CLEAN” COAL DISSIPATES IN DOLLARS

Clean coal dream a costly nightmare; Five Chicago suburbs and dozens of other Midwest towns in power-plant deal now face the prospect of rising electricity bills
Michael Hawthorne, July 11, 2010 (Chicago Tribune)

THE POINT
Here’s one for the no-big-surprise file: A “clean” coal plant advocated by former Illinois Governor Rod Blagojevich has turned out to cost twice as much as the price at which it was approved.

The Blagojevich name is, of course, synonymous with boondoggle. But the no-big-surprise is not because “Bloggo” backed the project but because anybody ever believed a plant labeled “clean” coal would be anything EXCEPT a boondoggle.

According to Clean coal dream a costly nightmare; Five Chicago suburbs and dozens of other Midwest towns in power-plant deal now face the prospect of rising electricity bills, from the Chicago Tribune, a long list of local and state Illinois political leaders and regulators with the Illinois Municipal Electric Agency (IMEA) believed Peabody Energy when they promised to build a plant that would spew fewer toxins at a low, low price of $2 billion dollars.

The Prairie State Energy project is nearing its 2011 completion target and the price tag for its two 800-megawatt turbines is now over $4.4 billion and rising. Residents and leaders in the communities it will serve trepidatiously await the announcement of what could be a 30% increase in local utility bills.

Two things make this of more than local importance: First, Peabody and other coal industry barons continue to "work" communities across the nation with false promises of plants that will meet Clean Air Act restrictions on toxic spew without mentioning that doing so will make the phrase “cheap coal” an oxymoron. And, second, the coal industry continues to "work" politicians in the Washington, D.C., halls of power with fatuous promises of plants that will capture global climate change-driving greenhouse gas emissions (GhGs) without mentioning that doing so will make the phrase “cheap coal” an oxymoron.

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Because they stand to lose so much from GhG-capping legislation, officials from twenty Illinois communities who supported the building of Prairie State, or now have enormous financial interests in it, have been recruited by the coal industry as lobbyists in its fight against federal climate and energy legislation.

There is no such thing as ”clean” coal. There is, indeed, cleaner coal. Prairie State is real-life proof of it. Prohibitively expensive, Prairie State is an echo of the nearby federal FutureGen carbon capture and sequestration (CCS) experimental project that was abandoned when its projected costs ballooned and only subsequently reinvigorated as a federal welfare and jobs program.

Like the dream of “safe” nuclear power, the dream of “clean” coal is powerfully seductive. These are familiar sources of centralized electricity generation that offer seemingly ideal pathways to emissions-free power.

Don’t be seduced. Nuclear energy, like offshore oil drilling, is only “safe” until it isn’t. No matter what powerful vested interests like BP might promise, stuff happens. It happened to Exxon in Alaska, it happened to BP in the Gulf and it happened to the Russians at Chernobyl. And when it happens, it is devastating.

Don’t be seduced. “Clean” coal is only “cleaner” and there are enormous unanswered questions. The waste of existing ”cleaner” coal plants is an ecological decimation where it leaks or spills as in did at Christmas of 2008 in Tennessee. The sequestering of captured GhGs is of dubious safety and has already been shown to be potentially deadly.

Coal advocates have started a new campaign to get $1 billion in federal money for CCS and a federal commitment to long-term power purchases from FutureGen. Prairie State demonstrates the essence of the folly of investing in “clean” coal (and “safe” nuclear).

The cost of capturing, sequestering and/or disposing of the byproducts of coal combustion adds an estimated 75% or more to the cost of a new coal plant. By contrast, adding the current, still early-stage storage capabilities to New Energy systems likely increases the cost of electricity only about a third.

Why incur enormous increased cost burdens to build dirty, dangerous electricity generation infrastructure when, for the same investment if not less, it is possible to transition over time to reliance on the sun, the wind, the deep crust heat and the flowing waters of this good earth?

Footnote: When the Prairie State “clean” coal plant goes on-line, its GhG spew will be the equivalent of the southern Illinois rural and suburban region having added 2 million cars to its roads.

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THE DETAILS
The cost overruns at Peabody Energy’s Prairie State facility could reportedly affect ratepayers in communities in Illinois and eight other Midwest states.

Illinois communities affected include the suburbs of Naperville, Batavia, Geneva, St. Charles and Winnetka. They are locked into 28-year power purchase contracts with Prairie State, signed when the estimate to build the plant was $2 billion. Its cost is now $4.4 billion, and still rising.

Higher electricity rates are contracturally required to cover construction cost overruns. There is likely to be an even higher price on the electricity from Prairie State when Congress enacts a cap on the GhGs the plant does NOT capture. A price on GhGs will likely add hundreds of millions of dollars to the annual cost of plant operations. A cap and price on GhGs could be in the energy bill the Senate will take up at the end of July.

The Prairie State plant was designed in 2001 to meet the highest Federal Clean Air Act standards by capturing smog, soot, and mercury. Though reportedly sold to Bloggo and Illinois regulators as “a national model for environmentally responsible “clean” coal, Prairie State will not have equipment to capture GhGs.

Would you buy a coal plant from this man? (click to enlarge)

Then-Governor Blagojevich, courting southern Illinois voters, promised Peabody Energy tax breaks and subsidies worth millions of dollars and streamlined permitting and ignored all raised doubts.

Peabody Energy, based in St. Louis, is the world's biggest private coal company. It sold the plant on the promise of creating fewer GhGs because the coal used will be from one of its nearby coal mines – but transport emissions will not be a concern of the proposed energy bill.

Peabody promised the plant would create 3,000 construction jobs and add 500 permanent workers and millions to the declining regional economy.

At the same time, Peabody was easing out of ownership and now owns only 5% of the plant.

Prairie State will reportedly be the largest source of carbon dioxide built in the United States in a quarter-century, spewing 13+ million tons of GhGs per year. Other U.S. power plants emitting that much were built in the 1960s and '70s. Paying for GhGs was not included in the original assumptions about plant costs.

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The Illinois Municipal Electric Agency (IMEA), an association of 33 Illinois cities, owns 15 percent stake of Prairie State. A 2009 prediction showed its electricity rate going to $63.40 per megawatt-hour in 2013, 30 percent above the 2007 rate, due to investments in Prairie State and a smaller, less expensive Kentucky coal plant. Municipalities will add distribution network operation and maintenance expenses to the projected rate increase. The latest cost overruns will require additional financing and still higher rates.

Some local officials, vociferous backers of the project when it was first proposed, do not yet accept they made a bad contract and cannot believe rates will go up 30 percent. Some are waiting for the final tally and hoping it will not be as bad as predicted. Others are working on ways to shave costs to counteract rate increases.

Officials signed the contract because they believed Peabody Energy’s promises and thought they were guaranteeing a supply of affordable electricity that would be a hedge against energy market volatility. Ray Pawlak, a Geneva, Illinois alderman, raised questions at the time about the risk.

By the time the Prairie State power purchase contract was being finalized, the Environmental Law and Policy Center and others were beginning to doubt the promises of “clean” coal, though it was long before the April 2007 Supreme Court decision that put the first nails in the coffin of coal plant GhGs.

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Still, Governors in Florida and Kansas had backed out of proposed coal plants and a Texas power company canceled eight of 11 planned coal plants in favor of wind project investments.

Since the Prairie State contract was finalized, opposition to coal has risen, costs have skyrocketed and ~120 of some 150 planned projects have been cancelled.

Three-fourths of a 2004 $850 million bond that was supposed to finance three new power plants is now being used to cover some of the Prairie State cost overruns and IMEA is seeking another $122 million loan.

Because they stand to lose so much from GhG-capping legislation, local officials whose cities are contractually obligated to the plant have been recruited by Peabody as lobbyists in its fight against federal climate and energy legislation.

Cities may be protected from the full burden of the cost overruns because they have other electricity sources.

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QUOTES
- John Thompson, Director, Coal Transition Project: “FutureGen needs a commitment from the administration that is ironclad This is a way to ultimately break the logjam on FutureGen funding…[I]f there are cost overruns on FutureGen…[and it comes] up short on construction or during the early stage of operations…it will become an orphan…The Republicans are saying global warming does not exist and many Democrats are saying we can solve our energy problems with wind power. This will require uncomfortable truths that won’t go away. And the public must realize coal won’t go away.”

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- Vic Svec, spokewsman, Peabody Energy: "Prairie State was a winner a decade ago, it is a winner today and Prairie State will be a winner decades from now…"

- Duane Jasheway, analyst, Indiana Office of Utility Consumer Counselor: "(O)ne has to wonder if these projects would be considered viable alternatives today if hundreds of millions had not already been invested…"

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- Howard Learner, president, Environmental Law and Policy Center: "These cities and towns are captive buyers at the mercy of Peabody and its ever-increasing costs…People are going to pay higher rates for more pollution. That isn't a winning formula."