The Department of Energy’s $26.4 billion budget request for fiscal year 2010 proposes cutting funding for nuclear and fossil power and increasing funding for energy efficiency and renewable energy.

The proposed budget was released May 7. It proposes a 37.8 percent cut in funding for nuclear power and a 20.6 percent cut in fossil energy funds. The budget seeks a 6.4 percent increase for renewable energy programs.

U.S. Energy Secretary Steven Chu said his agency’s proposed $26.4 billion budget request highlights the administration’s commitment to science and technology.

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Funding for Energy Efficiency and Renewable Energy was $1.7 billion in FY 2008, $2.18 billion in FY 2009 and is proposed to reach $2.3 billion in FY 2010. Some $16.8 billion in additional FY 2009 appropriation was made earlier this year.

Funding for fossil energy was $888.5 million in FY 2008, $1.1 billion in FY 2009 and is proposed to be reduced to $881.6 million in FY 2010.

Funding for nuclear energy was just over $1 billion in FY 2008, almost $1.36 billion in FY 2009 and is budgeted to be reduced to $844.6 million in FY 2010.

The proposed Office of Energy Efficiency and Renewable Energy (EERE) FY 2010 budget of $2.3 billion reflects a 6 percent increase over FY 2009. DOE said the budget request builds on Recovery Act funding of $16.8 billion to provide funding for electric vehicles, cellulosic ethanol production, advanced batteries and fuel cells, among other programs.

Wind, solar, geothermal and water power programs are slated to receive $475 million under the 2010 budget to help integrate renewable energy technologies with energy storage and smart grid technologies to resolve intermittency; support wind power research and development to enable wind turbines to produce a growing fraction of U.S. electricity; invest in solar power to make photovoltaics widely available nationwide and commercially cost-competitive with conventional electricity by 2015; accelerate a refocused geothermal program that conducts enhanced geothermal systems research, development and deployment for base load capability; and pursue water power technologies as part of EERE’s research and development portfolio.

DOE’s proposed budget also seeks $845 million for the Office of Nuclear Energy. DOE said this is the final year of investments to demonstrate untested licensing process for new nuclear power plants. The FY 2010 budget requests $192 million for fuel cycle research and development. The budget focuses on long-term, science-based research and development of technologies with the potential to produce beneficial changes to the way the nuclear fuel cycle is managed.

The budget also seeks $20 million to close out the Nuclear Power 2010 program. This cost-shared, licensing demonstration program supported activities with industry that focused on enabling an industry decision by 2010 to build a new nuclear plant.

The budget request includes $191 million to continue developing advanced nuclear energy systems known as “Generation IV (Gen IV).” These next-generation technologies will enhance nuclear power’s safety, cost-effectiveness and proliferation-resistance. Gen IV research and development includes activities in support of the solving the underlying technology challenges (fuels, materials and neutronic and thermofluids modeling) of the Sodium-cooled Fast Reactor, Molten Salt Reactor, Supercritical-Water-Cooled Reactor, Lead-cooled Fast Reactor, Very High Temperature Reactor and the Gas-cooled Fast Reactor.

The FY 2010 budget request also includes $70 million to fund modeling and simulation tools to enable fundamental change in how the U.S. designs nuclear power and fuel cycle technologies and to fund research into the behavior of materials under extreme conditions, including high radiation fields, high temperatures, and corrosive environments over long periods of time, relevant to nuclear energy applications.

The FY 2010 budget requests $882 million for the Office of Fossil Energy. This includes $431 million for carbon capture and storage research and development, which DOE said is the foundation of its clean coal research program—David Wagman

Post-recession Energy Demand Could Favor Coal

A study of recent recessions shows energy demand jumping as the economy improves. The same could occur at the end of this recession, said Bryan Hawthorne, manager of Project Development, Business & Technology Services for Burns & McDonnell. He spoke at the company’s 10th annual Coal-Fired Symposium in May.

Data from the last three recessions (1981, 1991 and 2001) show energy demand growing 8.5 percent on average over the five years following a recession’s end. Assuming the trend holds this time, some 350 TWh of new capacity would be needed. Some, but not all, new capacity likely will come from wind and natural gas projects. New nuclear is unlikely to be a factor in the next five years, Hawthorne said. That means coal should remain in the mix for new baseload capacity. Given the time needed to permit and build a new coal plant, work should begin now to ensure enough baseload capacity is available. Additional investment should also be made to optimize existing coal plants, he said.

Credit markets are reopening for high quality projects, said J. Anthony Sprow, chairman and CEO of Dahlgren Group. Risk tolerance depends on how much power output is covered by long-term contracts; the willingness of engineering, procurement and construction (EPC) firms to shoulder risk; and carbon pass-through mechanisms. For projects $750 million in size and smaller banks might be willing to take a position as high as 30 percent, or around $125 million. Project size sweet spots lie between $300 to $400 million. For projects larger than $750 million borrowers need to “lean heavily” on their relationship banks. And it’s “unlikely” a consortium of banks could be put together for $1 billion in financing, he said. One recent project that large required 100 banks and “a lot of muscle” to put together.

Sprow said lending for coal plants will likely resume once clarity is reached on the carbon issue. At a minimum, projects need a pass-through clause for the cost of carbon. Renewable energy projects are being cut, but utilities may be able to fill the void given that they may be better able to manage risk allocation. “Only better projects and better credits will get financing,” he said. Air quality control system projects are “on top of the heap” for financing, especially if the plants and upgrades are in a utility’s rate base.

There’s a “good chance” natural gas prices could fall below $2/MMcf this year, said Jim Rollyson, vice president with Raymond James & Associates, also speaking at the Burns & McDonnell symposium. Natural gas prices are expected to remain low through the summer. Gas production shut-ins could result, first from the Rocky Mountain region where pipeline constraints often mean production is targeted first. Demand for natural gas for energy production is off around 3 percent this year. Growth had averaged around 2 percent before the recession. “There’s too much gas in 2009,” Rollyson said. Longer term, he expects natural gas prices to recover to the $6 to $8 range.

Jeffrey James, business development director for Tenaska Inc., said that capturing 85 percent of the carbon produced by the company’s proposed 765 MW Trailblazer coal-fired power plant in west Texas would require $750 million to $1 billion in capital. Annual O&M expense for such a project would likely rise by $15 to $20 million. And parasitic load would consume 20 to 30 percent of the plant’s generating capacity, largely to compress CO₂ to 2,200 psi for use in enhanced oil recovery. James said two barrels of oil on average are produced for each ton of carbon dioxide injected into an oil field. Trailblazer is projected to produce around 17,000 tons of carbon dioxide annually.—David Wagman

NERC: Lower Demand Bolsters Summer Reserve Margins

The outlook for electricity reliability for the coming summer season is generally good, the North American Electric Reliability Corp. (NERC) reported in its annual 2009 Summer Reliability Assessment.

Report findings include that the economic recession is driving a broad decine in forecast demand. At the same time, this has led to an increase in reserve margins. The 2009 summer peak demand is projected to be nearly 15 GW (or 1.8 percent) lower than last summer. The 2009 summer energy use (which equals total electricity used over time) is also projected to decline by over 30 TWh, trending toward 2006 summer levels.

NERC said summer peak reserve margins across North America are expected to be 4.7 percentage points higher in 2009 than in 2008 due to demand forecast reductions and a 2.3 percent increase in new resources. Most regions have not yet experienced adverse impacts on infrastructure projects, NERC said. However, the Western Electric Coordinating Council region indicated that some generation and transmission projects have been deferred or cancelled, in part due to overall economic factors.

Among other report highlights:

• Coal and natural gas fuel forecasts appear adequate. Overall, U.S. fossil-fuel inventories, supply and delivery capability appear adequate for the 2009 summer season. Coal stockpiles are currently at nearly 50 percent above average levels and natural gas storage at 23 percent above average levels.
• Nameplate wind capacity grows by more than 9,000 MW. Projected installed nameplate wind capacity increased 45 percent from summer 2008 to nearly 30,000 MW total in summer 2009. The need for transmission infrastructure to support these new resources is becoming evident, as regions integrating wind resources are projecting increased transmission congestion in the 2009 summer – particularly during off-peak periods. Nevertheless, integration of new wind resources appears to be manageable for the 2009 summer.

One exception could be the upper Midwest and portions of central Canada where wind generation is expected to reach nearly 6,000 MW (nameplate) this summer 2009, a 50 percent increase over a year ago. Most of this wind generation is in the MRO-U.S. area. According to NERC, at times a large percentage of the wind generation simultaneously operates during low demand periods. Most of the installed wind farms are energy-only resources and have operating guides and Special Protection Systems associated with them. Managing the magnitude and variability of wind generation this summer will be an increased challenge for the Midwest ISO Reliability Coordinator and its associated Transmission Operators.—David Wagman

DOE Narrows List of Nuclear Project Favorites

The Department of Energy narrowed its list of the most likely recipients of $18.5 billion in government loan guarantees to help build the first new nuclear power plants.

DOE told four companies planning new reactors in Maryland, Georgia, South Carolina and Texas that their applications have been elevated for closer scrutiny, department and industry officials said on May 15.

DOE spokeswoman Stephanie Mueller said the applications were singled out for closer review because they are furthest along in obtaining a license from the Nuclear Regulatory Commission. She said DOE has made no decision on who will get the loan guarantees “and has not eliminated any applications.”

The proposed projects singled out for “due diligence” review are: Constellation Energy for a reactor at its Calvert Cliffs nuclear plant near Lusby, Md.; NRG Energy for two new reactors at its South Texas Project near Bay City, Texas; Southern Company for two new reactors at its Vogtle power plant near Waynesboro, Ga.; and South Carolina Electric & Gas, for two new reactors at its V.C. Summer power plant near Columbia, S.C.

Last October, DOE received 19 applications from 17 electric power companies seeking a total of $122 billion in loan guarantees to build new reactors, far more than the $18.5 billion Congress has provided in loan guarantee authority for nuclear power plants.—David Wagman

Industry News

In a reversal from his predecessor, Kansas Gov. Mark Parkinson signed an agreement ending a two-year fight over plans to build coal-fired power plants in Kansas. The compromise allows Sunflower Electric Power Corp. to build one 895 MW coal-fired power plant near Holcomb, instead of two 700 MW plants blocked by Kathleen Sebelius when she was governor. As part of the compromise, Sunflower will build more wind turbines and agree to more pollution controls and a greater investment in energy efficiency. The deal came on Parkinson’s sixth day in office and as lawmakers were preparing another attempt to overrule Sebelius’ veto of legislation to authorize the plants.

Siemens Energy will build a facility in Kansas to produce nacelles for its 2.3 MW machine. The plant will have an annual capacity equal to 1,500 MW. Construction of the 300,000-square-foot facility will begin in August. The first nacelles will be shipped December 2010. Siemens opened a rotor blade manufacturing facility in Iowa two years ago. The company said its Kansas project is a continuation of its efforts to expand into the U.S. market.

Babcock Power Environmental will supply FirstLight Power Resources with the company’s Turbosorp technology to cut emissions from the 146 MW, coal-fired Mt. Tom Power Plant in Massachusetts. The equipment is expected to be operational later this year. The Turbosorp circulating fluidized bed scrubber is a dry system capable of removing more than 95 percent of SO₂ emissions as well as mercury and other emissions.

Edmonton, Alberta-based Epcor Utilities Inc. is spinning off its power generation business into a publicly traded company. The new company, Capital Power Corp., will own 31 coal- and natural-gas-fired power plants with a capacity of 3,300 MW. The remaining Epcor Utilities will retain the company’s power transmission and distribution operations. The new business will give the company access to equity markets to finance acquisitions and new construction, including commercializing capital-intensive clean coal facilities.

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Look to Our Weekly Electronic Newsletter for These Articles

• Breakthrough reached on coal plant development, published May 5
• Delay in climate change bill seems likely, published April 28
• Cap and trade OK, with strings attached, published April 21
• Coal’s place in a carbon-constrained market, published April 14