Air Pollution Control Equipment Services, Coal, Emissions

What TXU’s $10 billion plan means for Texas and US power markets

TXU to Double Coal-fired Plants
TXU Corp. has revealed a $10 billion plan to double the number of its coal-fired units, adding onto some natural gas plant sites in the process. The company cited a growing demand for electricity in Texas and the instability of the natural gas market for its choice to add coal-fired plants.

TXU also announced formation of a new company, TXU Renew, which will focus on renewable energy capacity, including wind, as an addition to its future generation plan. In addition, TXU will invest $2 billion to install best available control technology (BACT) for mercury, NOx and SO2.

With a customer base demanding cheap energy, clean air and reliable production, TXU has a tall order to fill.

“Texans want ample generation supply, access to lower electric prices and better air quality, and TXU will deliver all three,” C. John Wilder, TXU chairman and CEO, stated in a press release. He said that new service offerings and massive investment in power infrastructure are intended to save consumers money, add reliable electric generating capacity to reduce dependence on high natural gas prices, create jobs and lower key emissions, all at the same time.

Customer Savings Initiatives
The proposed plants would generate a total of 8,600 MW, according to the company’s press release. The additional power is meant to meet the need of a growing population; state officials expect Texas to grow by six million residents within a decade. In order to entice new customers and retain the current ones, TXU plans to pass on savings to consumers through new rate plans:

• Time of Use – Customers can choose their electricity consumption based on peak and off-peak periods, with savings of up to 20 percent during off-peak times.

• SummerSavings 24 – Offers customers an immediate 10 percent savings in the summer months and a rate that is lower than the current benchmark price of electricity, called the price-to-beat rate, during the other months with a two-year service contract.

• SureValue – Provides a 10 percent savings on the current price-to-beat rate for five-year service contracts.

According to The Dallas Morning News, TXU did not pledge to meet the demands of some consumer groups to tie the benchmark price of electricity to coal price levels instead of high natural gas price levels. After hurricanes in 2005 drove up natural gas prices high, TXU Energy responded by raising rates by 24 percent. The company has continued to keep its prices at that level, even though natural gas prices have declined, the paper reported.

According to TXU, the benchmark rate program expires at the end of this year. TXU commented that the ‘price-to-beat’ program is a transitional price rate and customers now have multiple choices and will continue to have energy options in the future.

“It’s about giving our customers choice,” said Tom Kleckner, TXU spokesperson for generation and environment. “It’s not about a one-size-fits-all program.”

Where the Coal’s Coming From
TXU announced that the 11 new generating units at nine existing TXU Power sites would use a mix of various coals. The local choice, Texas lignite, would only be used at the previously announced plants — Oak Grove 1 & 2 and Sandow 5. These plants will collectively produce 2,200 MW.

“The previously announced plants will be built near existing lignite mines so the cost factors associated with transportation make lignite the right choice,” Kleckner said.

Kleckner acknowledged that there is only so much lignite in Texas. The eight units announced April 20 will all use Powder River Basin (PRB) coal from Wyoming. These units are expected to generate 6,400 MW. The amount and price of PRB coal offer a better fit for the rest of the plants, he said.

“It’s about diversifying what we burn,” Kleckner said. “There are both environmental and economic factors involved in our decision.”

According to EIA data, production of Wyoming PRB coal is double the production of Texas lignite. Lignite is crumbly and has high moisture content while PRB provides a more attractive type of coal in terms of sulfur, heat content and moisture. PRB coal dropped in price from $16.40 per short ton in February to $14.40 per short ton in mid-March, making the future use of Wyoming coal in Texas even more attractive.

Environmental Standards
Amidst all of the news about coal-fired generation, TXU did not forget the environmentally concerned segment of their customer and investor base. TXU says that it plans to more than offset certain emissions from the new units by reducing emissions at existing facilities. While doubling its solid-fuel generation capacity, TXU will reduce some emissions by 20 percent. The plan includes up to $500 million for voluntary emission reductions through fuel switching and retrofitting emission controls at existing units. Overall, TXU plans to reduce SO2, NOx and mercury emissions by at least 1.5 pounds for every 1 pound produced by the new units.

“We’re spending up to $2 billion in control systems for the new plants,” Kleckner said. “The emissions reductions will be made through technology and will result in some of the lowest emission rates in the nation.” TXU pledges to build the new plants with equipment that will result in facilities that are 80 percent cleaner than the average coal-fired plant.

TXU did not commit to include carbon dioxide in its key emission cuts. The company did say that part of its $2 billion investment in cleaner technology would include integrated gasification combined cycle (IGCC) technology, espoused by many in government, industry and within the environmental community as being well-suited for potential carbon-capture, should carbon capture ever become mandated.

Wilder said the three steps TXU will focus on in the present and near future include investing in lower-cost power supplies, offering customers ways to save on their electric bills and reducing key emissions to improve air quality. “There is no quick fix,” he said.