Sunday, July 7, 2013
Sixteen Tons* - Tough Times Ahead for Coal-Fired Electricity in New Hampshire
Prior to the commissioning of the Seabrook nuclear power plant in 1990, a large portion of the electricity generated in New Hampshire came from the combustion of coal. Since then, as shown by the data in the figure below, the importance of coal-fired electricity has diminished substantially. Last year coal was only responsible for 7% of the electricity generated in the State. In this post, we take a look at the coal-fired electricity business in New Hampshire and some of the challenges it faces.
To understand the coal-fired electricity business, we should start with the fuel – coal. Coal is the most abundant fossil fuel on the planet and it consists largely of carbon plus varying amounts of hydrogen, oxygen, nitrogen and sulfur. Coal used for electricity generation normally has a carbon content greater than 75% and it also contains compounds of aluminum,calcium and silicon that form coal ash when coal is combusted. On top on those elements, coal is also contaminated with deleterious metals, such as cadmium, mercury, selenium and lead. The key problem associated with coal is that, on burning, it releases these nasty elements and they end up in the off-gases, from which they have to be removed in expensive particulate capture and gas scrubbing units. In spite of these air cleaning units, considerable quantities of these metals are released into the atmosphere.
In a coal-fired power plant, the coal is pulverized and fed into a burner which heats a boiler that produces steam. The steam, in turn, drives a turbine which turns the generator to produce electricity. The main inputs to a coal-fired power plant are coal, water and labor; the outputs, other than electricity, are numerous and problematic. First of all, there are all the nasty contaminants such as sulfur and the deleterious metals that need to be removed from the off-gases in large water-based scrubbing units. These metals are recovered from the scrubbing solutions and then need to be disposed off as hazardous waste. A basic flowsheet for the coal-fired electricity business with the main inputs and outputs are shown in the figure below.
Generating electricity from coal is highly inefficient so there is a great deal of waste heat that is created. As I noted in Not So Classical Gas, the conversion efficiency for NH coal-fired power plants is only 31%. In other words, only 31% of the energy in the coal is converted into electricity and the other 69% is lost as waste heat. A great deal of this waste heat is transferred to the cooling water that is critical for the operation of these power plants. This cooling water either comes from natural waters in rivers and lakes or from the large evaporative cooling towers such as the ones shown in the figure below which are typical of power plants located away from large natural water supplies. The problem with using natural water supplies is that large volumes of water are needed to absorb the waste heat. In the process, the water is filtered, treated and is warmed up. This, of course, negatively impacts any fish and other aquatic creatures that might be sucked into the cooling water intakes. On the discharge side, the receiving water body might have a limited capacity to absorb the waste heat and this can impact the natural water ecosystem, affecting both plant and aquatic life forms.
Coal ash is another byproduct of coal combustion. This largely consists of a fine, non- combustible silica and calcium oxide residue and it often contains appreciable amounts of deleterious elements like mercury, cadmium, chromium and others. The ash is stored on-site at power plants or is disposed of in landfills. In some cases it can even be used as a component of Portland cement.
It is all these nasty byproducts - hazardous waste produced from the scrubber solutions, coal ash and a great deal of waste heat – that are behind the assertion that coal is a dirty fuel. And this does not even begin to consider the issues associated with coal mining - which is a difficult, complex and hazardous operation that has significant environmental impacts. Coal's only redeeming factors are that the US has large coal reserves and, until recently, on an energy equivalent basis, it was less expensive than natural gas.
New Hampshire has two large coal-burning plants both owned by Public Services of New Hampshire (PSNH): the large 440 MW facility located on the Merrimack River in Bow and the smaller Schiller plant located on the Piscataqua River in Portsmouth. Some technical details for these operations are provided in the table below.
Due to lower costs of wholesale electricity, driven by low natural gas prices, both of these operations have been challenged the past few years to provide electricity at prevailing market rates. As a result, the outputs from these operations have dropped off considerably and in 2012 the Merrimack plant only operated at 31% of its theoretical capacity and the older Schiller Station only ran at 9% of its theoretical capacity. However, as the chart below shows, in the first quarter of 2013, with the brief period of natural gas pipeline limitations that we encountered in New England, these operations, and particularly the Merrimack Station, were again able to operate at higher rates. In the first quarter the capacity factors of the Merrimack and Schiller operations were 0.83 and 0.32, respectively, which are higher than the 2012 numbers presented in the table above. Unfortunately, this improvement is most likely a short-term event. Recent monthly data from the EIA show that, in the second quarter, these plants are barely operating again. Other than in the unlikely advent of high natural gas prices, it appears to be another tough year ahead for these coal-fired operations.
On top of the market price challenges, the Merrimack plant has had to deal with new operating permits for discharge of wastewater from their operations, which limits water-borne metal discharges as well as waste heat. The latter limitation could even result in the installation of those large expensive cooling towers shown in the photo above. At this time I believe the wastewater discharge permit, which took the EPA 14 years (!) to draft, is still in dispute.
To compound PSNH's coal-fired electricity challenges, the NH Public Utilities Commission (PUC) recently released a report which discussed the challenges associated with PSNH's high cost of electricity, its dwindling customer base in a competitive environment, the challenges of recovering costs of past investments from a smaller group of customers and even the divestiture of PSNH electricity-generating operations, including their coal-fired power plants. If PSNH were to divest themselves of their generating assets, this would complete the process of deregulation, leaving PSNH just in the distribution business. But to do so would require the State to come to terms with how to compensate PSNH for past investments and fixed costs that they have not recovered through the sales of electricity. This is indeed a difficult and contentious issue and will require a lot of study. This would have all been easier years ago, before the advent of cheap natural gas, when coal plants still had value and stranded costs could have been recovered by higher prices for generating units. Now there is even some speculation that PSNH NH coal-fired power plants have no value at all.
So NH coal operations are being squeezed every which way. They have to deal with cheap natural gas, tougher air and water discharge restrictions, customer loss due to competitive landscape, and then - just two weeks ago - President Obama mentioned in a recent speech that he has directed the EPA to prepare to limit carbon dioxide emissions from new and existing coal-fired power plants. This is not good news for coal-fired energy in NH and perhaps it is time for PSNH to consider converting these their coal-fired operations to natural gas operations, which is what some utilities in other parts of the country are doing. Something has to be done otherwise we and PSNH are going to be singing that that famous line from the Tennessee Ernie Ford coal mining song, Sixteen Tons*, "Sixteen tons and what do you get - another day older and deeper in debt."
Quite frankly, it is all a bit of a mess. Because of foot dragging, extended negotiations during restructuring deliberations and legal actions by various parties, PSNH has perhaps held onto to its generating assets long after they should have been sold. With the recent advent of cheap natural gas, those coal-fired assets are now worth substantially less and, because legislation allows for cost recovery in the case of divestiture, modification or retirement of assets, NH residents are going to be on the hook one way or another for investments made by PSNH to maintain their coal-burning attributes.
Such are the joys and responsibilities of a public utility. On one hand, we want them to provide cheap and reliable electricity, we want them to be there as a backstop to other providers, we want them to invest in infrastructure build out and investors and lenders, who foot the bills for the infrastructure projects, quite correctly expect a financial return. Oh yes, and then we want them heavily regulated in a competitive environment as well. All of that comes at a price. The verdict on the wisdom of restructuring is, in my mind, still out. Yes, there is cheap electricity available and many folks are benefiting from lower rates, but we are still are going to have to foot the bills for past public utility investments, one way or another. If the message goes out that lenders and investors have to bear the brunt of the write-offs, this will send a chilling message to this group and future large-scale infrastructure investments, which we very much need, will become difficult to fund. There are tough days ahead as we work through the consequences of the restructuring programs underway.
There is perhaps some gloating over the way PSNH is being squeezed from all sides but it is important to note that natural gas is not necessarily an all-around better option. Yes, it is a cleaner fuel with far lower deleterious contaminant levels, but the means of recovery from shale via fracking has a host of associated issues including wastewater treatment, methane losses and seismic disturbances. A recent study showed that the greenhouse effect impact from fugitive methane emissions associated with shale gas is rather shocking. The article, published in the journal Climate Change, analyzed the methane emissions connected with shale gas exploitation and the authors compared the effect of higher methane emissions associated with fracking for natural gas with conventional gas wells. Even though methane combustion releases less carbon dioxide than coal burning, the increased methane emissions from shale gas extraction, coupled with the fact that the greenhouse effect of methane is 25x that of carbon dioxide, means that, in the short term (20 years), the greenhouse gas impact of shale gas is considerably higher than that of coal. However, over a 100-year period, shale gas is equivalent to that of coal because methane has a shorter atmospheric lifetime than carbon dioxide. This study suggests that transitioning from coal to natural gas produced from shale gas will do little in the short term for global warming trends. Now that is pause for thought.
So where do we stand at the moment? A week ago PSNH published a lengthy but well reasoned response to the PUC report and it is clear that there is much to be taken into account in the debate regarding the fate of PSNH's generating assets. The New Hampshire legislature has recently passed legislation SB 191 which requires NH to establish a ten year state energy strategy plan. We have a lot to think about and deal with in the next year or so and it is now time to set up conferences, roundtables and meetings so we can come up with a well-researched and thoughtful plan for the future. Remember: it is not just about us. It is about future generations as well and they expect us to make wise decisions. Let's make the best of this opportunity and not leave them with a battered can that we have just kicked down the road.
Until next time, remember to turn off the lights when you leave the room.
Franklin Pierce University
(*Sixteen Tons – A song written by Merle Travis and made popular in the 1950s by Tennessee Ernie Ford. Johnny Cash did a great cover but here it is featuring one of my favorite guitar slingers Jeff Beck playing with Billy Gibbons of ZZ Top. Enjoy Sixteen Tons)
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