Tracking New Coal-Fired Power Plants

Tracking New Coal-Fired Power Plants National Energy Technology Laboratory Office of Systems Analyses and Planning Erik Shuster February 18, 2008 a

Tracking New Coal-Fired Power Plants This report is intended to provide an overview of proposed new coal-fired power plants that are under development. This report may not represent all possible plants under consideration but is intended to illustrate the potential that exists for installation of new coal-fired power plants. Recent experience has shown that public announcements of new coal-fired power plant development do not provide an accurate representation of actual new operating power plants. Actual plant capacity commissioned has historically been significantly less then new capacity announced. The report focuses on those power plant projects that have achieved significant progress toward completion, to provide a more accurate assessment of the ability of this segment of the power generation industry to support demand for new electricity capacity in various regions of the United States. The Department of Energy does not warrant the accuracy or suitability of this information. 2

Tracking New Coal-Fired Power Plants This report provides a perspective of coal-fired power plants that are currently under development, with a focus on those having made significant progress toward achieving commercial operation The status of projects in development varies from project announcements to those under construction Announced projects that are canceled before or during the permitting phase are not unusual; announced projects are not necessarily strong indicators of capacity additions Plants that are permitted or under construction reflect a developer s significant financial commitment to completion and offer a better perspective of the new generation capacity that may be forthcoming Long-term forecasts reflecting declining natural gas production for North American also highlight the increased importance of coal-fired power generation to the Nation s energy security and to a growing economy 3

Capacity GW Delayed and New Projects Stacking Past Capacity Announcements vs. Actual Figure 1 20 18 16 14 12 10 8 6 4 2 0 Delays in Implementation 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Historically, actual capacity has been seen to be significantly less than proposed capacity. For example, the 2002 report listed 36,161 MW of proposed capacity by the year 2007 when actually only 4,478 MW (12%) were constructed. Actual 2002 Report 2005 Report December 2007 4 Source: 2007 data Global Energy Decisions Velocity Suite (12/31/2007) 2002 2005 data Previous NETL Tracking New Coal-Fired Power Plants Reports

Historic Capacity Additions by Years Refer to Figure 1 Actual plant capacity, commissioned since 2000, has been far less than new capacity announced; the year 2002 report of announcements reflected a schedule of over 36,000 MW to be installed by 2007, whereas 4,500 MW (12%) were achieved The trend over several years has reflected the bulk of power plant developments shifting out in time due to project delays Delays and cancelations have been attributed to regulatory uncertainty (regarding climate change) or strained project economics due to escalating costs in the industry New announcements combined with delayed projects have tended to increase the backlog of plants in the queue Cancellations become more prevalent as prospects of fulfilling all projects in the queue become impractical 5

Current Coal-Fired Capacity Projects (quarterly change) Table 1 General Status October 2007 Report Number of Plants Current Report Change October 2007 Report Capacity (MW) Current Report Change Under Construction 24 28 +4 12,506 14,885 +2,379 Progressing Projects Near Construction 8 6-2 4,565 1,859-2,706 Permitted 13 13 0 6,169 6,422 +253 Uncertain Potential and Timing SUB TOTAL 45 47 +2 23,240 23,166 Announced (early stages of development) 76 67-9 48,440 42,394 TOTAL 121 114-7 71,680 65,560-74 (-0.3%) -6,046 (-12.5%) -6,120 (-8.5%) Status Listing Under Construction Near Construction Permitted Announced Description Project is under construction. Project has been approved; majority or all permits are obtained. Sponsor is contracting vendors and Engineering, Procurement and Construction (EPC) contractors. Site preparation has begun. In the permitting phase. Two or more permits approved or fuel or power contracts have been negotiated. Early stages of development to filing for permits. May include a feasibility study. 6 Source: Global Energy Decisions Velocity Suite October Report data collected (9/20/2007); Current Report data collected (12/31/2007)

Current Capacity Additions by Years Refer to Table 1 Table 1 reflects the current status of coal-fired plant development activity with quarterly changes Progressing plants are projects with status indicating permitted, near construction, or under construction Progressing plants have attained a higher likelihood of advancing toward commercial operation; however, regulatory uncertainty and industry cost increases are impacting development decisions for all projects Two net plants have been added to Progressing projects in the last quarter; there has been a modest net loss of 74 MW (0.3%) of Progressing projects during the quarter 7

Capacity (GW) Current Capacity Additions by Years Figure 2 20 18 16 14 12 10 8 6 4 2 0 Actual Announced Permitted Near Construction Under Construction 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Actual Operational Dates Proposed 8 Source: Global Energy Decisions Velocity Suite (12/31/2007)

Current Capacity Additions by Years Refer to Figures 2 & 3 Current coal-fired projects in development reflect the potential for a surge in growth but questions exists as whether this is achievable The 2,400 MW of new added capacity installed in the last three years (800 MW per year) is only 18% of the 13,400 MW of progressing plants that are proposed to be operational in the next three years Coal-fired plants commissioned, from 1990 through 2007, have averaged 976 MW per year in the U.S.; this lack of domestic demand has significantly reduced the level of skilled human resources available to perform current projects (Figure 3) Scarcity of skilled labor for power plant engineering, procurement, project management and construction activities, increases major equipment and EPC costs and calls into question the viability of the annual commissioning levels reflected in current schedules 9

Our Workforce and Skills Challenge Figure 3 Lost opportunity to transfer a generation of valuable experience A Two Decade Gap for Coal; Three Decades for Nuclear 10 Source: EIA AEO 07 reference case and Annual Energy Review 2006

Past Quarter Comparison (all Projects) Figure 4 Commissioning dates determined for these projects during the quarter Continued Delays with a Quarterly Decline in Mostly Announced Projects 11 Source: 2007 data Global Energy Decisions Velocity Suite October Report data collected (9/20/2007); Current Report data collected (12/31/2007)

Net Capacity Changes (Removed or Added Opportunities) Figure 5 91% of MWs removed represent Announced projects Lima Energy 600 MW IGCC Stanton Energy Center 315 MW IGCC Removed Capacity Total Net Reductions 6,120 MW (-8.5%) for 4 th Quarter 2007 12 Source: Global Energy Decisions Velocity Suite (12/31/2007)

Geographical Map by NERC Regions: Coal-Fired Plants (Permitted, Near Construction, and Under Construction) Figure 6 13 Source: Global Energy Decisions Velocity Suite (12/31/2007)

Proposed Capacity Relative to NERC Regions Table 2 Progressing Projects NERC Region Under Construction Near Construction Permitted Sub Total Announced Grand Total ASCC Capacity (MW) - - - 0 300 300 Plants - - - 0 2 2 ERCOT Capacity (MW) 3,265 0 900 4,165 5,330 9,495 Plants 4 0 1 5 5 10 FRCC Capacity (MW) 0 0 0 0 750 750 Plants 0 0 0 0 1 1 MRO US Capacity (MW) 1,649 55 0 1,704 2,880 4,584 Plants 5 1 0 6 6 12 NPCC Capacity (MW) 0 0 0 0 1,420 1,420 Plants 0 0 0 0 3 3 RFC Capacity (MW) 2,505 562 985 4,052 9,558 13,610 Plants 3 2 4 9 13 22 SERC Capacity (MW) 4,150 500 2,557 7,207 7,391 14,598 Plants 7 1 3 11 15 26 SPP Capacity (MW) 1,832 0 1,350 3,182 800 3,982 Plants 4 0 2 6 1 7 WECC Capacity (MW) 1,484 742 630 2,856 13,365 16,221 Plants 5 2 3 10 20 30 N/A Capacity (MW) 0 0 0 0 600 600 Plants 0 0 0 0 1 1 Total Sum Capacity (MW) 14,885 1,859 6,422 23,167 42,394 65,560 Total Count of Plants 28 6 13 47 67 114 14 Source: Global Energy Decisions Velocity Suite (12/31/2007)

Proposed Technologies of New Plants (quarterly change) Figure 7 *Progressing PC subcritical: - 3 plants due to revised status reported reverting from Progressing to Announced Table 3 **Progressing IGCC: 2 removed + 1 added = -1 plant net Technology Listings Operational (Since 2000) Progressing (Permitted, Near-, and Under Construction) October Current (Change) October Announced Current (Change) October Total Proposed Current (Change) PC Subcritical 10 25 22 (-3)* 26 18 (-8) 51 40 (-11) CFB 8 12 14 (+2) 12 11 (-1) 24 25 (+1) PC Supercritical 1 4 8 (+4) 9 9 (0) 13 17 (+4) 15 IGCC 1 4 3 (-1)** 29 29 (0) 33 32 (-1) Source: Global Energy Decisions Velocity Suite October Report data collected (9/20/2007); Current Report data collected (12/31/2007)

Proposed Technologies of New Plants Refer to Figure 7 and Table 3 Opportunities involving conventional technologies, such as subcritical PC and CFB, are more plentiful and tend to be more advanced due to earlier start in development (Figure 7 & Table 3) Advanced technologies proposed, such as supercritical PC and IGCC, reflect more recent trends in development activity, so fewer have achieved permitted status Regulatory uncertainty for GHG legislation is a key issue impacting technology selection and project economics Returns on investment for conventional plants, including supercritical, can be severely compromised by the need to subsequently address CO 2 mitigation Higher capital costs incurred for IGCC may make such new plants less competitive unless their advantage in CO 2 mitigation is secured 16

NERC Generation Capacity Margins Perspective Figure 8 135 GW Increase in Summer Peak Capacity Required by 2016 17 Source: 2007 Long-Term Reliability Assessment NERC, October 2007

Consideration of EIA and NERC Capacity Forecasts Refer to Figures 8 and 9 NERC foresees inadequate peak summer capacity margins in several regions of the U.S., as early as next year, requiring 135 GW of added capacity by 2016 (Figure 8) In contrast, AEO 08er (2008 early release) forecasts a net increase of only 4 GW in total capacity by 2016, substantially lower than NERC s estimate (Figure 9) Differences are partly attributable to declining assumptions for annual electricity generation growth rates, with NERC s report reflecting prior year data compared to EIA The forecasts represent a wide variation in the perceived need and value for near-term added generation of all types 18 Note: EIA, AEO 2008 Early Release, December 2007 data is referenced in this report; EIA is expected to reissue this report in March 2008 incorporating the Energy Independence and Security Act of 2007 ("EISA")

GWs 1,400 1,200 1,000 U.S. Peak Summer Generation Capacity NERC and AEO 08er Capacity Outlook Figure 9 979 GW +131 GW additional required to maintain capacity margins (NERC) +4 GW by 2016 (AEO 08er) (41 GW of retirements) 800 600 400 200 - NERC New Summer Capacity Other Renewable Sources Nuclear Power Combustion Turbine/Diesel Combined Cycle Oil and Natural Gas Steam Coal Capacity Growth Forecasts Vary Substantially, Partly Due to Assumptions for Annual Electricity Generation Growth Rates 19 Source: EIA, AEO 2008 Early Release, December 2007; NERC 2007 Long Term Reliability Assessment, October 2007

Billion kwh/year Declining Total Electricity Generation Growth Rate Assumptions Figure 10 6,000 5,800 5,600 5,400 5,200 5,000 1.9%/yr growth AEO 05 AEO 06 1.6%/yr AEO 07 1.5%/yr AEO 08er NERC growth 4,800 4,600 4,400 4,200 4,000 1.2%/yr growth Reduction of 27 BkWh/year growth equates to reduced need for 3,700 MW of new generation each year (@85% c.f.) 2005 2010 2015 2020 2025 2030 Declining Growth in Long-term Electricity Demand; NERC Estimates Tied to Higher Growth Rate 20 Source: EIA, AEO 2008 Early Release, December 2007; NERC 2007 Long Term Reliability Assessment, October 2007

Declining Electricity Generation Growth Rate Refer to Figures 10 and 11 Electricity generation growth rate assumptions have declined substantially over the last 4 Annual Energy Outlook reports, dropping from 1.9% in AEO 05 to 1.2% in AEO 08 (Figure 10) The resulting decline in forecasted average annual increase in kwh demand for the U.S. amounts to 27 BkWh per year; this equates to the generation of approximately 3,700 MW of new capacity (each year) operating at an 85% capacity factor There has been a long term trend in declining generation growth rates in the U.S. (Figure 11) The current AEO 08er forecast of 1.2% electricity generation growth has moved below the last six year average growth of 1.7% If the forecasted growth rate is too low this will underestimate the new capacity needed to maintain adequate capacity margins with implications for periods of insufficient electricity supply 21

Total Electricity Generation Growth Figure 11 AEO 08er 2.2%/yr 20 yr 1.7%/yr 1.5%/yr 6 yr NERC 1.2%/yr EIA Forecast for Electricity Generation Growth Well Below Recent Averages 22 Sources: Electricity generation: Energy Information Administration. 1949-1994: Annual Energy Review 2006; 1995-2006: Electric Power Annual 2006; 2007-2030: Annual Energy Outlook 2008 early release; NERC - 2007 Long Term Reliability Assessment

Development Activity vs. EIA AEO 08er Figure 12 Low forecasts for new capacity may not reflect sufficient market promise to attract new skilled human resources to the industry AEO 08er reference case and trendline 20GW through 2016 Trendline 5-Year Actual Actual Installation Trend and EIA AEO 08er Reference Forecast Correspond; A Significant Surplus of Developments Exists Above EIA s Forecast Demand 23 Source: EIA, AEO 2008 Early Release, December 2007; Global Energy Decisions Velocity Suite (12/31/2007)

Coal and Natural Gas-fired Development Issues Refer to Figures 12 and 13 Coal-fired power plant development activity significantly exceeds the current estimate of need by EIA (Figure 12) Evidence provided by recent installations and the low forecast for new capacity in 2008 suggest that the capability to install and commission plants is constrained by limited skilled resources Low forecasts of demand growth add an element of demand uncertainty to the problems of regulatory uncertainty and rapidly escalating costs for coal-fired power plant development Should electricity demand growth prove higher than anticipated, the alternative of increasing natural-gas fired generation will create fuel resource adequacy issues, due to diminished natural gas supply expectations (Figure 13) Virtually all incremental demand for consumption of natural gas can be seen to require increases in imports of LNG 24

Tcf/Year Total Natural Gas Supply to U.S. (Including LNG) Figure 13 AEO 01 AEO 02 AEO 03 AEO 04 AEO 05 AEO 06 AEO 07 AEO 08er Gradual Decline to 20 Tcf without LNG AEO 08er no LNG Increased Use of Natural Gas in Electricity Will Require LNG; N. American Natural Gas Supply for U.S. Trending Down 25 Source: Annual Energy Outlook 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008 early release reference cases

Summary Coal-fired power plant development activity has experienced a significant number of cancellations (8.5% of MW) during the quarter, mostly involving Announced projects Progressing projects have increased by two plants with little change in the total MW involved, during the 4 th quarter 2007 Recent forecasts of EIA and NERC represent disparate views on the need for near-to-mid-term increase in U.S. capacity Should NERC s views for required new electricity capacity prevail, significant added coal-fired plant capacity will be required to maintain reliability in several U.S. regions and to keep electricity prices from rising due to shortages Forecasts for natural gas supply to the U.S. indicate that turning to additional natural gas-fired generation will create fuel resource adequacy issues and increase LNG imports 26