Published on Thursday, October 18, 2007.

Last modified on 10/18/2007 at 12:51 am

Demand for coal falls short of predictions amid uncertainties

By MATTHEW BROWN

Associated Press

At least 16 coal-fired power plant proposals nationwide have been scrapped in recent months and more than three dozen have been delayed as utilities face increasing pressure due to concerns over global warming and rising construction costs.

The slow pace of plant construction reflects a dramatic change in fortune for a fuel source that just a few years ago was poised for a major resurgence. Combined, the canceled and delayed projects represent enough electricity to power approximately 20 million homes.

The U.S. Department of Energy's latest tally of pending coal plants, released last week, shows eight projects totaling 7,000 megawatts have been canceled since May. That's besides the cancellation earlier this year of eight plants in Texas totaling 6,864 megawatts. Utilities have also pushed back construction on another 32,000 megawatts worth of projects, according to the Energy Department report.

"All these reports that we were about to be inundated with coal plants, I believe this report tells a different story," said Kenneth Kern, director of analysis and planning at the department's National Energy Technology Laboratory.

"What has actually happened, if you look at it closely, was much more modest than what was anticipated," he said.

Coal has been a mainstay for utilities, producing half of all electricity consumed in the United States. But it's also one of the largest sources of greenhouse gases blamed for climate change.

In the late 1990s, with natural gas prices rising, utilities eyed cheaper coal as the fuel of choice to meet the growing demand for electricity. Now it appears the resurgence of "King Coal" may have been overstated - or at least put in check by rising plant costs and environmental concerns.

As Congress considers restrictions on greenhouse gas emissions, analysts said utilities are suspending some projects while they wait to gauge the economic impact of future regulations.

Meanwhile, material costs and demand for skilled labor has prompted plant costs to spike 40 percent or more. Industry representatives blamed increased competition from China and other developing nations aggressively pursuing new coal plants.

"This is like a tsunami attacking the whole industry all at once, with very limited amounts of solutions going forward," said Daniele Seitz, an industry analyst with Dahlman Rose and Co. in New York.

In Texas, TXU Energy has turned its attention to nuclear and wind power after dropping eight of 11 proposed coal plants.

"We're taking a different look at the way we plan to meet the demand for energy," said company spokesman Tom Kleckner.

Fewer coal plant proposals in the United States should be welcome news for environmentalists. They have made the utility industry a prime target in their push to confront climate change.

But the trend also could portend problems in satisfying a projected 40 percent increase in electricity demand by 2030, said James Owen with the Edison Electric Institute, which represents many of the nation's major utilities.

The Bush administration has said 6,000 megawatts of additional coal-fired capacity would be needed every year to cover that increase in demand.

"Obviously some things are causing developers to take a careful look at all of their options and whether they want to go forward with projects," Owen said. "But our industry must be able to meet that demand."

Of 151 coal plants announced in recent years, only 15 have been built since 2002. Combined, they generate about 3,700 megawatts.

Of the remaining projects, 121 proposals still are considered viable. That includes 76 now listed by the government as "uncertain" in terms of whether or when they will be built.

Peter Altman, a climate policy specialist with the National Environmental Trust, said the new data raises questions about why the government was "bullish" on coal in past industry analyses. He said the latest report reinforces the need for Congress to do more to encourage conservation, which could ease the demand for new plants.

"The whole question of how many coal plants will be built is based on how much electricity we need. It is within our power to reduce demand," he said.

A spokesman for U.S. Sen. John Barrasso, a Wyoming Republican, said the Energy Department report shows more incentives are needed to help utilities develop cleaner coal-fired plants. Wyoming is the largest coal producer in the nation.

Barrasso spokesman Cameron Hardy criticized the current energy bill working its way through Congress as putting too much emphasis on renewable energies compared to fossil fuels, which provide the bulk of the nation's power.

"Wind energy is great. But we can't just fiddle around with the smallest portion of our energy production," Hardy said.

A spokesman for U.S. Sen. Jeff Bingaman, the New Mexico Democrat who chairs the Senate Committee on Energy and Natural Resources, said coal supporters should be satisfied with incentives included in Congress's last energy bill, in 2005.

Committee spokesman Bill Wicker added the emergence of climate change as a driving issue in Washington has since shifted lawmakers' focus away from fossil fuels.

"The reality is all the trend lines are not supporting the construction of lots and lots of new coal plants," Wicker said.