American 'Coal Rush' Hits Some Hurdles

The nation's demand for electricity is growing, and utilities want to build new power plants to satisfy that appetite. Most of those plants — perhaps as many as 150 — would burn coal.

Coal is abundant, but it also produces more carbon dioxide than other fuels. That's the main greenhouse gas that warms the planet. So coal's critics are trying to stop these new plants.

Many of the new coal plants are slated for the Midwest, for utilities such as Westar Energy, which serves about half-a-million customers in Kansas. Westar Vice President Jim Ludwig says the company planned to pick a site for its new coal plant this month, but has postponed the decision.

"When we started the process, an 800 megawatt coal plant cost approximately $1 billion," Ludwig said.

Today, he says, the cost is closer to $1.4 billion, adding "that's a very rapid run-up in the cost of building a new coal plant."

In fact, it's a 40-percent in 18 months. One reason is that everybody — not just in the U.S. but in China and India, too — seems to want a coal plant.

"The generators, the duct work, all of the metals involved in building a coal plant, have all escalated rapidly," Ludwig said. "But also there's a tremendous demand on the labor to build a coal plant again because of so many new projects being undertaken."

Utility executives say engineering firms building those plants are also too busy to take on many new jobs.

So some utilities and power companies have delayed, or even scrapped, plans to build coal plants. Others are trying to justify their higher costs to state utility commissions — the people who have to approve new power plants.

All this has played into the hands of coal's opponents, including Barbara Freese, an attorney with the group Union of Concerned Scientists.

"It gives these utilities a moment to pause and look around and think about the economic reality of these plants," Freese said. "During that time we hope they also take a look at the fact that they are going to have to be paying to emit [carbon dioxide]."

According to Freese, the future for power plants includes some sort of carbon tax or cap to fight global warming. Numerous executives in the energy business agree that such a cap is inevitable, especially with Democrats running Congress.

Right now, Freese and the UCS are making that case in Minnesota, where regulators are deciding on new transmission lines for a big coal plant to be built in neighboring South Dakota.

"This is the first time that state regulators who are being asked to approve a new coal plant have had set out before them the full financial risks associated with future climate laws," Freese said.

But those are future climate laws. There's no law yet that limits carbon dioxide.

Nonetheless, just the threat of a tax on carbon is having an effect in the marketplace. Roger Smith is a marketing manager with Black and Veach, a firm that builds power plants all over the world.

"We're advising people — I believe prudently — to assume that there will be a cost associated with it — and of course regarding cost now you're back to reading the tea leaves, I don't know," Smith said.

Smith says it may not be wise for utilities to think that if they build now, they would be exempt from a future carbon tax... or be able to simply pass on the cost of such a tax to customers.

"I'm not saying people aren't looking at that and saying 'you know, that is the impact to us if we can pass that through or get grandfathered or whatever,' but I think that would be a fairly risky proposition," Smith said.

Environmental groups say they hope the risk of a carbon tax or cap will push utilities toward green energy... energy that doesn't produce carbon dioxide and thus wouldn't be taxed. Many utilities counter that coal is still cheaper.

Who wins is being decided now — largely out of public view — in corporate offices and government hearing rooms across the country.