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In Quiet End to a Coal Battle, Utility Puts Canceled Plant Parts Up for Sale

Some experts suggest coal owners may be hesitant to buy old plant designs like the shelved South Carolina facility because their emissions are too costly

Apr 5, 2011
A power plant operated by Santee Cooper

A South Carolina utility is hoping to salvage some of the money it lost from a shelved coal-fired power plant by selling off its turbines, pumps, pipes and designs.

The move marks the quiet end of a very public, five-year saga over a controversial coal plant that was designed with earlier — and weaker — environmental standards in mind.

State-owned Santee Cooper placed an advertisement in March for parts to a 660-megawatt unit of the 1,320-megawatt Pee Dee Energy Center it planned to build by 2012.

The project was canceled last year due to falling energy demand and rising operational costs related to reducing its massive greenhouse gas and toxic emissions.

Mollie Grove, a spokesperson for the utility, said the sale had already peaked the interest of various undisclosed companies. "I think we'll be successful in selling [the parts]," she told SolveClimate News.

But with new U.S. EPA rules on carbon emissions and other hazardous pollutants underway, experts suggest that a deal for the old parts may be difficult as the industry is now building more efficient, less polluting power plants.

Developers 'Holding Their Breath'

Dave Gerhardt, an energy analyst at ICF International in Fairfax, Va., said it is typical for coal owners to purchase plant components ahead of construction and sell the parts if need be.

"It is not uncommon that if a project gets canceled halfway through ... [developers] do a quick auction and try to recover some of their investments on the components," he said. "These are big ticket items," even the architectural designs.

But today, many developers are hesitant to build older-model coal plant designs like the Pee Dee facility because their high carbon emissions are too costly to control, he told SolveClimate News.

For many in the industry, the watchword is wait and see.

"A lot of [developers] have been holding their breath for a couple of years to see what is going on with carbon dioxide and other potential regulations" before investing in new coal plants, Gerhardt said.

(Listen to the SolveClimate News podcast episode: Coal Owners Retiring 'Significant Components of Their Fleets')

The 'Ford Pinto of Power Plants'

When Santee Cooper first announced plans in April 2006 for a pulverized coal facility, federal regulations did not yet limit carbon emissions or cap mercury levels.

But on Jan. 2, EPA's greenhouse gas rules kicked in, requiring developers of new power plants with large carbon footprints to curb emissions using cost-effective Best Available Control Technology, or BACT, in order to get air quality permits.

Coal owners are weighing the best options for their plants. These include: co-firing with biomass; testing out nascent carbon capture and storage (CCS) techniques; installing expensive smokestack scrubbers; or switching to relatively cheaper and cleaner natural gas altogether.

Last month, EPA proposed the first national standard for emissions of mercury, arsenic and other toxins from coal plants, which would go into effect in 2015.

Under Santee Cooper's plan, the 1,320-megawatt Pee Dee plant would have emitted around 10 million tons of carbon and 400 pounds of mercury per year — over 30 times the legal limit — according to the Southern Environmental Law Center (SELC), which defends environmental groups in South Carolina and five nearby states.

A typical 500-megawatt coal plant, by comparison, annually releases around 3 million tons of carbon and 170 pounds of mercury.

"This is the Ford Pinto of power plants," SELC said on its website. "Why is Santee Cooper building an old-model unit when other utilities are building higher-tech plants?"

The utility maintained that the coal plant, which was to be built along the Great Pee Dee River in Kingsburg, would help provide the additional 385 megawatts needed to prevent power shortages by 2012.

SELC countered that Santee Cooper could cover its energy shortfalls by increasing energy efficiency by 1 percent — all the while saving billions of dollars in construction costs and sparing the air and water from toxic emissions.

The Electric Cooperatives of South Carolina, a trade association, has argued that the entire state could reduce energy use by 20 percent through efficiency measures.

Caught in the Middle of an EPA Rules Overhaul

Amid increasing opposition to the plant, the state Department of Health & Environmental Control (DHEC) issued Santee Cooper a draft of the Prevention Significant Deterioration (PSD) air quality permit in October 2007.

That month, members of the SELC, Coastal Conservation League, S.C. Wildlife Federation, S.C. Sierra Club, the Southern Alliance for Clean Energy and residents of towns near the coal plant gathered at the statehouse to protest the permits.

By January of 2008, the DHEC had received more than 700 comments on the air permits, including a 138-page letter from SELC outlining the agency's failure to meet the BACT standards for permitting the proposed coal facility.

The Pee Dee center suffered a setback a month later, after a federal court ruled that EPA had violated the Clean Air Act by evading mandatory cuts in toxic mercury pollution from coal- and oil-fired power plants.

Santee Cooper was soon required to apply Maximum Achievable Control Technology (MACT) for curbing mercury and hazardous air pollutants, which bumped the coal plant's price tag up from $998 million to $1.25 billion.

"We warned DHEC that the mercury standard it was using for the Pee Dee permit was too weak and would get tossed out in federal court. And that is exactly what happened," said SELC attorney Blan Holman in a subsequent press release.

Santee Cooper Officially Throws in the Towel

After nearly a year of reviews and continued opposition, the DHEC ruled in December 2008 that the coal plant complied with all state and federal air quality regulations and had earned the necessary air permits.

Not long after, John Frampton, director of the state Department of Natural Resources, urged the DHEC to consider the environmental consequences and health risks of the Pee Dee coal plant. Former Gov. Mark Sanford also announced his opposition to the facility.

DHEC board members convened in February 2009, and decided to issue the permits. Two months later, SELC filed an appeal on behalf of 20 organizations asking the courts to rescind them.

"DHEC did not even require an analysis of ways to reduce carbon emissions, and Santee Cooper has yet to publicly acknowledge the cost to ratepayers for the ten million tons of carbon dioxide the proposed plant would emit," SELC charged in a press release.

SELC did not win the appeal. But by August 2009, the fight had ended.

Santee Cooper's advisory board moved to suspend plans for the coal plant, acknowledging the rising costs of coal in its decision.

"We are witnessing three significant changes," chairman O.L. Thompson said in a press release.

"The current recession has reduced overall demand for electricity, proposed federal [greenhouse gas] regulations would significantly increase the operating costs of coal-fired power plants and Central Electric Power Cooperative, our largest customer, intends to gradually reduce its power load from Santee Cooper by approximately 1,000 megawatts beginning in 2013."

(Listen to the SolveClimate News podcast episode: The Hidden Cost of Coal)

101st Shelved Coal Plant, but 6,700 MW Commissioned

SELC's Holman said in a statement: "We commend Santee Cooper for recognizing the true cost of coal and acting decisively to move South Carolina forward to a clean energy future."

Santee Cooper's Grove told SolveClimate News that the utility didn't officially cancel plans for the plant until summer 2010, when the power cooperative received regulatory clearance to shift its demand to Duke Energy.

That year, the Pee Dee facility became the 101st U.S. coal plant to be suspended or rejected since 2001, according to SELC.

All the while, nearly 6,700 megawatts from 11 new coal-fired power plants were commissioned in 2010 — the most since 1985 — and an additional 14,400 megawatts is already permitted or under construction this year, according to figures from the National Energy Technology Laboratory.

Still, rising coal and construction costs, widespread pollution concerns and cheaper natural gas prices have left some investors wary of building more coal-fired power plants, Gerhardt said, especially old models.

"There is still a lot of risk there. You do see some investors shutting down [plans] because they perceive the [cost] of a coal plant able to comply with carbon regulations to be very high," he said.

"There is a lot of uncertainty and cost uncertainty."

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