OTAG Makes Recommendations to EPA
Does cleaner air mean lighter pockets?
The Ozone Transport Advisory Group has recommended that the EPA should let states adopt a range of...
not. Only the coal-fired plant can recover sufficient operating costs to stay in the market and produce electricity. The nuclear plant will shut down. Neither plant recovers its capital cost; even the coal plant may close when another substantial capital improvement must be made to keep the plant operational. Remember: Investors will value property according to the prospective income stream, so that if investors expect a shutdown in the future, today's fair market value will reflect that expectation.
TECHNOLOGY. Several factors, including (a) lower natural gas prices, from deregulation and pipeline open access, (b) the rise of small power producers, as encouraged by the Public Utility Regulatory Policies Act, and (c) legislative reform, such as repeal of provisions in the Power Plant and Industrial Fuel Use Act of 1978, which prohibited utilities from building gas-fired generators, have each encouraged power producers to turn to new technology (em in the form of gas combustion turbines.
Vendors have responded by increasing efficiencies of combined-cycle natural gas turbine power plants, with heat rates as low as 5950 for an "F" class turbine with triple pressure and reheat. The new G-series gas turbine, now under development, is expected to reach 5860 Btu/kWh under the same conditions.
Capital costs for combined-cycle gas turbine plants are lower than both coal or nuclear plants; $450-$500 per kilowatt-hour for a 120-megawatt facility and $340 per kWh for a 500-MW facility. A combined-cycle gas turbine usually requires a construction lead time of less than two years, compared with eight to 10 years for base-load coal plants leading to lower financing costs. And these plants can start quickly, change load rapidly and shut down immediately. %n2%n Finally, these units produce minimal nitrogen-oxide and carbon-monoxide emissions and no sulfur-dioxide. Pollution abatement costs are generally lower than for coal-fired steam plants.
ENVIRONMENTAL COMPLIANCE. In a competitive market, the cost of environmental compliance will decrease income, as it can no longer be included in rate base or regulated cost of service. Property values will fall. Prospective investors in a power plant will recognize environmental changes that may affect the profitability of their investment. A program with capped emissions and tradeable allowances has already been attached to the restructuring bill introduced by Sen. Dale Bumpers (D-Ark.) and likely will be added to others. Under the plan, the FERC would set caps for each pollutant. High-polluting generators would have a choice of installing new pollution control technologies or buying emissions allowance credits from cleaner generators. %n3%n
The EPA is working on regulations to reduce nitrogen-oxide emissions which appear to target utilities. There is a related risk that the Clean Air Act provisions that allow grandfathering of certain coal-fired power plants would be repealed, again inhibiting the ability of coal-fired plants to compete. %n4%n This repeal will prove more likely if Congress approves the CO2 limitations in the Kyoto Treaty. But the treaty likely will not be sent to the Senate for ratification before the November elections and many senators have already called it dead on arrival. %n5%n Moreover, by 2000 many additional plants will be subject to