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Coal-fired and Hydroelectric Utilities

Impacts, Risks and Regulations

Summary

The trend toward economic deregulation is having a profound effect on the electric power industry, with consequences for the future of environmental regulation in that sector.  By introducing competition, and perhaps more profoundly, by separating electric power production from distribution, deregulation may be altering the historical relation between electricity producers and environmental regulators.

Before deregulation, integrated electric utility companies had been treated as much like social institutions as like private businesses.   But in their new capacity as stand-alone entities, operators of production facilities may feel increasingly vulnerable to environmental regulation.  This may eventually have the effect of separating operators of different types of  facilities into distinct interest groups to a greater extent than is now the case.

Production facilities may be conveniently grouped into three major types, according to their power source:  fossil fuels, nuclear, and renewable.  Each type has its own characteristic profile of environmental impacts, and each type is regulated by a different set of agencies.  The major impacts by category are:

Coal-fired plants are currently responsible for generating more power than plants using any other fuel source.  Coal prices have been declining for the past few years, and natural gas prices have been increasing, making coal the cheapest fuel for electric power generation.  However, few new coal plants are being built, in contrast to gas-fired and combined cycle plants.

In the renewables category, hydroelectric power dominates, but most US sites suitable and available for major hydroelectric facilities have already been developed.  Proposals for large new hydroelectric facilities are likely to encounter strong opposition from individuals affected by loss of land, and by conservation interests.  Hydroelectric power from existing plants remains the cheapest renewable source, with wind-generated power a distant second.

In brief, coal and hydroelectric power facilities are the cheapest to run, but the costliest to build, of all options in their respective categories.

The coal-fired power sector is the largest single contributor to acid rain of any industrial activity, being by far the largest source of sulfur oxides.  It is also a significant source of nitrogen oxides, with an impact comparable to that of transportation.  The gradual phase-out of coal and its replacement by natural gas is viewed by many as an environmental agenda in its own right.  Methane produces the least carbon dioxide for a given quantity of heat of all fossil fuels, and overall life-cycle emissions (including fuel extraction, processing, transportation, and combustion) are much easier to mitigate in a natural gas-based than in a coal-based cycle.  However, research into cleaner ways of extracting electric power from coal continues, and several potentially viable concepts are now being evaluated at the pilot plant level.

Several significant regulatory developments now playing out this sector are of particular interest because they may prove to be of importance for many other sectors as well.  Examples include the consequences of emissions trading, and the fate of new source performance standards as they apply to existing facilities that are being upgraded to meet increased demands on capacity.

Contents

Industry profile

Environmental impacts and risks

   Issues List

  Quantitative impact data

Effects of existing and future regulations on impacts

Information sources

Industry profile

Types of producers

In the fossil fuel category, coal-fired plants dominate, although that segment is growing only very slowly, in contrast to gas-fired and combined cycle plants.  In the renewables category, hydroelectric power dominates.  Not coincidentally, coal and hydro power are the least expensive sources (for facilities already built) in their respective categories.  However, the cost of building new facilities is disadvantageous in both cases. A list of new plants on order, together with fuel source, is available from the Electric Power Supply Association (EPSA).  Only about ten of the 586 plants listed are coal-fired, and only five are hydroelectric.

Environmental impacts from hydroelectric plants are not associated with emissions, but with issues such as habitat destruction and loss of potentially productive land.

Trade organizations

The organizations most relevant to this analysis include

There are numerous other organizations concerned with related matters, such as power distribution and marketing, power reliability, and alternative energy sources.  There are also many regional organizations of electric utility companies.

Experience with collaboration

The electric power industry as a whole has been long accustomed to dealing closely with regulators, the public, and other industries, and is very experienced in the collaborative approach.  

An extensive roadmapping effort has laid out a detailed picture of technical and structural progress deemed necessary for the industry through 2050.  The latest available document summarizing the roadmap covers environmental and sustainability concerns.  It may be significant that the document emphasizes two overriding concerns:

Garden variety regulatory issues such as emissions of ozone precursors and fine particulates, acid rain, emissions trading opportunities, and the like are mentioned in the document, but are not explored in depth.  This may indicate a perception, at least on the part of the roadmap participants (a broad cross section of stakeholders) that the suite of tools now available to the industry is sufficient to resolve such problems on a case-by-case basis as they arise.

In the near future, the immediate need for increased capacity in some regions of the U. S. (as exemplified by California's recent problems) is likely to bring these more mundane issues to the forefront.  Even long-established plants, under pressure to increase output, may be affected by a recent ruling upholding the regulatory interpretation of when to classify modifications to existing facilities as creating new sources, required to meet more stringent best achievable control technology (BACT) or lowest achievable emission reduction (LAER) standards.

Environmental impacts and risks

Issues list

Quantitative impact data

Greenhouse gases:  The electric power sector is responsible for about 40% of the total U. S. emission of greenhouse gases, with about three quarters of that from electric utilities, and the rest from non-utility sources.  The emission is primarily carbon dioxide from coal-fired plants -- 1.71 of the 1.99 billion metric tons of carbon dioxide emitted by electric utilities in 1999 came from coal-fired plants.

Criteria pollutants:  Coal-fired electric utility plants were responsible for 11.9 out of the 18.9 million tons of sulfur dioxide emitted from all U. S. sources in 1999 (63%).  The relative proportion of nitrogen oxides from coal-fired utilities was somewhat less (4.9 out of a total of 25.4 million tons, or 19%), due primarily to the contributions to the total from transportation and off-road engines.  Similarly, coal-fired utilities contributed somewhat smaller proportions of fine particulates to the overall total of all U. S. sources (less than 10% of PM10, and less than 5% of PM2.5), in comparison with larger contributions from transportation, other combustion sources (including waste disposal incinerators, and fugitive dust).

The electric utility sector as a whole was the largest contributor by far of all sectors to total reported TRI air releases in 1999, at 41% of the total of all reported air emissions.

Risks

Major types of environmental risk associated with the impacts include:

Effects of existing and future regulations on impacts

Government agencies with primary responsibility for regulating impacts associated with the different fuel source types are:

For operators of coal-fired facilities, air quality regulations generally have the greatest effect on the economics of their operations, and those on their competitiveness.  Since coal is not constrained by supply, and is cheaper than other sources of fuel, its rate of usage in the future will probably be determined by air quality regulation more than by any other single factor.

Extensive information is available on the effects on coal-fired plants of the Clean Air Act Amendments 0f 1990, which mandated stringent reductions in emissions of sulfur dioxide.  Total sulfur dioxide emissions from all electric utilities declined from 15.6 million tons in 1985 to 11.9 million tons in 1995.  The most common method for reducing emissions was switching to coal of lower sulfur content.  The program is also notable for introducing the innovative emissions allowance and emissions trading concepts to air quality regulation.

Coal-fired electric plants are likely to be significantly affected by a rule finalized in 1998 (Regional NOx Transport rule) which requires 22 states to institute measures to decrease their overall emissions of nitrogen oxides.  The affected states are required to have controls on large industrial sources in place by 2003, and to meet overall NOx limits by 2007.  An EPA analysis indicates that the cost of abating NOx emissions from electric utility plants, estimated at $1500/ton and expected to result in a 2% increase in residential electric rates, is significantly more cost effective than other alternatives.  Although individual states have considerable flexibility in devising their own specific implementation plans, an additional regulatory burden on coal-fired utilities is a likely outcome in many of the states.  A similar situation exists with regard to visibility impacts on national parks and wilderness areas, addressed by the Regional Haze Rule of 1999, and with the application of rules setting more stringent ozone and PM2.5 standards.

Information sources

A good source of information on this sector is the Energy Information Administration (EIA) of the Department of Energy.  See, for example, the index page for environmentally related issues affecting electric utilities, at http://www.eia.doe.gov/cneaf/electricity/page/environment.html .  Other documents from the EIA include:

The EPRI roadmap may be found at 

The Electric Power Supply Association http://www.epsa.org/ provides a number of resources, including a database of plants on order in the US at http://www.epsa.org/competition/index.cfm

A comprehensive summary of clean coal technology research may be found at the DoE's "fossil.energy.gov" website, at http://apfbc.fe.doe.gov/ .  Slectged documents include:

The Edison Electric Institute (EEI), http://www.eei.org, provides a number of useful documents, including

Emissions data available from EPA includes