Two years ago, I was at an industry conference planning committee and I made the point that the global warming issue was beginning to run ahead of the energy industry's ability to contain it, and that, in many respects, building a coal-fired power station today is a "prudency review waiting to happen." For those of you who don't remember, many of the nuclear plants under construction in the 1980s got caught up in endless prudency reviews—a public process during which the utility's expenditures and resulting rate increases are picked at, prodded, probed, and often, ultimately, following many of those hearings, disallowed. Serious financial difficulty and even bankruptcy resulted.
Last week, several announcements suggest that this was no melodramatic prediction. According to The New York Times, the Kansas Department of Health and Environment turned down a permit for 1400-MW of coal-fired power based on emissions of global warming gases. This is arguably the first time a coal plant has been denied for this reason. Let me repeat the state: Kansas. It's not California, Florida, New York, Oregon. Kansas is a coal-friendly state. Another story revealed that even in Montana, a coal-producing state (or at least one with significant coal reserves), coal plant permits are being fought by bi-partisan coalitions and that electric utilities concede that these groups are being effective. In other reports that cross my desk regularly, I noted that more than 10,000 MW of coal plants recently have been cancelled or postponed around the country.
As enthusiasm for coal wanes, it grows for nuclear even in some quarters that have fought tooth and nail against nuclear in the past. However, there's a problem. The fastest any nuclear plant can come on-line, given regulatory and financing hurdles, is around 2015. Meanwhile, electricity demand continues to grow. As much as the rewewables camp wants to believe it, solar and wind are not going to supply all or even most of the necessary power anytime soon. So what's going to happen?
I believe we will see a continuing and accelerating push for demand side management and efficiency (long-overdue, I might add), and in areas where new power plants must be built, they will probably be fired by natural gas. Further, the nation is expected to be importing much of that natural gas as LNG (liquefied natural gas) from countries that aren't exactly our geopolitical best friends. (Countries with large natural gas reserves include Algeria, Australia, Brunei, Indonesia, Libya, Malaysia, Nigeria, Oman, Qatar, and Trinidad and Tobago.)
My message here isn't that one power generating option is so much worse than another; they all have serious problems in the context of balancing supply, demand, price, and environmental impact. Coal and nuclear are the least expensive options, given all the parameters, and it appears that neither are coming to the rescue anytime soon. Rather, the message here is that natural gas is exorbitant and expected to remain so as long as petroleum inches towards $100/barrel. The message is that electricity rates will continue to go up and the only practical means of containing the impact will be to reduce consumption. The message is that the terror premium inherent in the price of natural gas and petroleum affects electricity prices. When LNG is used for power generation, electricity is held hostage to the same geopolitical vagaries that destabilize petroleum markets.
Here's my humble suggestion: Add that "terror premium" and the costs of defending global shipping lanes to the price of electricity generated with LNG. Defending our shipping lanes should be of increasing concern to us all. In just the past month, there have been several pirate (yes, pirate) attacks, one in which the United States Navy intervened to help North Korean sailors. (See BBC, Chonsun, Wired, International Maritime Bureau) Plus, the highest concentrations of pirate activity is around, you guessed it, some of those same countries listed above—the ones with large natural gas supplies.
Adding the “terror premium” into the cost of importing LNG is one way that clean coal plants (there are far better ways to use coal than those proposed by plants currently on the drawing board), renewables, domestically sourced natural gas, and even nuclear plants put on a faster track, can compete. If our electricity prices are going to be high, they might as well be high for good reasons--support for domestic and carbon-free-sources of electricity.