Future Energy

New, Clean Life for Old Coal Plants?

                                     

                                      Source: www.webbaviation.co.uk

Drax Power Station (UK) Combines Renewable Biomass With Coal

Britain's Guardian newspaper announced yesterday that Drax power station, the UK's largest, had begun a project to replace up to 10% of the coal the plant uses with biomass (see Drax's £50M renewables project throws biomass into coal mix, Guardian, May 19th).  After testing cofiring up to 2-3% biomass for several months, the company signed an agreement with Alstrom (EPA: ALO) to construct a US$98 million biomass processing facility that would allow up to 1.5 million tonnes of biomass to be used per year, replacing 1 million tonnes of coal and saving up to 2 million tonnes of CO2 emissions.

Drax is operated by the Drax Group plc. (LON: DRX).  The 4,000 MW power station in north Yorkshire supplies 7% of the UK's power.   

While this is not a first, I was unable to find other examples of co-firing with biomass on this scale.  Not unlike Drax testing 2-3% co-firing for several months, other utilities have run trials.  For example, in 2006, Alliant Energy completed a test burn of switchgrass co-fired with coal at its Ottumwa Generating Station in Iowa (see Switchgrass Burn Test Proves Hopeful, Renewable Energy World, June 19th, 2006).   

The Guardian article qoutes Drax's CEO who describes co-firing biomass and coal as the "forgotten" renewable.  No doubt in the rush to embrace Carbon Capture & Storage (CCS) technology even the coal industry has not paid a lot of attention to what appears to be a relatively low-tech, incremental approach.

CCS offers a high cost, long term solution to managing the carbon risk associated with coal fired power.  If it ever works for widespread implementation, it is some ways into the future.  Co-firing biomass appears to offer an interim step that could be implemented at relatively low cost.  As noted above, Drax indicates that it will be spending only US$98 million for this initiative.

With all of the coal-fired generating plants in the world today, a simple, low-cost solution such as co-firing could be great first step towards managing carbon emissions.

U.S. Electric Power Emissions

Who is the Cleanest U.S.  Power Producer?

Two weeks ago CERES, a Washington based NGO released its sixth report benchmarking the air emissions of the 100 largest electric power producers in the U.S. (see Benchmarking Air Emissions, May 2008).  Using 2006 emission data, CERES together with its partners, Natural Resources Defense Council, PSEG and PG&E Corporation, examined power producers' emissions of SOx, NOx, CO2 and Mercury.  The report ranks electric power producers by their power output and by their emissions rates for each of the four target pollutants.

If you are interested in the sustainability of the energy companies you invest in, the CERES report provides a huge body of data to be mined.  With that in mind, I looked for some simple ways to slice and dice their information in ways that would help me understand the relative regulatory/environmental risk associated with each power producer.

My interest is in investing so the so my first step was to extract the cooperatives and government owned generators, which reduced the list by more than a third.

Step two was to look at CO2 emissions.  What I was interested in here was the emissions rates achieved by each generator, i.e. the kilograms of CO2 produced per megawatt of  electricity generated.  Arguably, the risk each company faces is related to the additional costs per MW it will face in future rather than its absolute level of emissions.

So, if you are as concerened about the future impacts of greenhouse gas regulation as I am, who would you want to invest in?  The table below provides the ten least carbon-intensive U.S. electricity producers in 2006.

  Least Carbon-Intensive U.S. Electricity Producers (2006)

Rank	Company	Symbol	2006 Emissions (Tonnes)	2006 Emissions Rate (kg/MWh)
1	PG & E	NYSE: PCG	216,031	13.0
2	Exelon	NYSE: EXE	5,204,720	68.2
3	El Paso Electric	NYSE: EE	768,884	240.0
4	Entergy	NYSE: ETR	15,263,130	265.4
5	Avista	NYSE AVA	1,193,025	305.9
6	Constellation	NYSE: CEG	8,493,229	347.0
7	FPL	NYSE: FPL	25,009,936	354.0
8	Sempra	NYSE: SRE	2,825,349	355.3
9	PSEG	NYSE: PEG	11,317,355	360.9
10	Calpine	NYSE: CPN	16,065,600	404.0

But CO2 is only one of four pollutants examined by CERES.  To try and develop an overall sense of the different power companies relative regulatory/environmental risks, I constructed a simple index.  I just added up the rankings each company had for each pollutant.  The result shows a lot of overlap with the list of the ten least carbon-intensive generators.

                        Least Emissions-Intensive U.S. Electricity Producers (2006)

Rank	Company	Symbol
1	PG & E	NYSE: PCG
2	El Paso Electric	NYSE: EE
3	Calpine	NYSE: CPN
4	Sempra	NYSE: SRE
5	Avista	NYSE: AVA
6	Exelon	NYSE: EXC
7	International Power	Lon: IPR
8	FPL	NYSE: FPL
9	Entergy	NYSE: ETR
10	IDACorp	NYSE: IDA

My index is pretty simple and doesn't take into account the different levels of risk that may be associated with particular pollutants, e.g. who really thinks CO2 is as undesirable as Mercury?  But it does cut thorugh all of the data to give me a starting piont for looking more closely at U.S. power generators.

By the way, who is the dirtiest power producer using my index?  Allegheney Energy (NYSE: AYE).