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Immunizing America to the California Syndrome: Timely Infusions of Coal to Prevent Power Failure
Santa Fe, New Mexico April 17, 2001
Keynote Remarks by Jack N. Gerard President
& Chief Executive Officer
National Mining Association
To the Western Coal Transportation Association
Thank you ladies and gentlemen of the Western Coal Transportation
Association – thank you for your welcome and your invitation.
Speaking on energy and national affairs in a line-up after
Steve Leer of Arch Coal and Ed Hanberger of the AAR (Association
of American Railroads) more or less puts me in the position of
those baseball players who come to bat after Mark McGwire and
Sammy Sosa.
The heavy hitters have cleared the bases but the game has several
innings to go.
For my turn at bat in this line-up I’d like to offer a
scouting report on the summer season to come.
I invite you to join me in thinking about:
- The pressures causing the Bush administration to make energy
their first big priority;
- Their approach to it;
- The probable place of coal and electric power in it;
- And the coal-oriented measure the mining industry is advocating.
It helps perspective to first scout the other side.
In 1996 the Natural Resources Defense Council made a fair amount
of national news with a study that picked winners and losers among
power producers. It separated them into enterprises whose policies
put them in good shape to meet the challenges of the oncoming
century as well as those with practices that put them in bad shape.
The challenges were framed in terms of the last administration’s
most likely policies on climate and energy; and in terms of measures
favored then and now by NRDC.
Very high on NRDC’s list of the best, brightest and strongest
were:
- Pacific Gas and Electric, of California;
- The Bonneville Power Administration;
- The Sacramento Municipal Utility District, of California;
- And Southern California Edison.
NRDC especially liked the Californians’ reliance on natural
gas, hydro-electric generation and the more novel varieties of
renewable energy to the specific exclusion of coal-based power.
California also bet its future on another concept in favor
with the green movement – the idea that power not used is
the moral and useable equivalent of capacity built, the so-called
negawatt.
In the heyday of the negawatt a planner for the Sacramento
district could boast in the national press of his confidence that
most future requirement for new capacity could be met by rigorous
demand-side management. This particular planner even confided:
If you can’t lick them, join them.
Now, not even five years later:
- Pacific Gas and Electric is in Chapter 11;
- Bonneville is urging the power-intensive aluminum industry
to take a two-year hiatus due to low water behind its dams;
- Heroic efforts are being made to keep Southern California
Edison afloat;
- The Sacramento district is desperate to build a power plant
but can’t;
- California is in distress due to high costs and low reliability;
- And the rolling blackout has become the ultimate tool of
demand-side management – the tool of necessity in California
no less than Calcutta.
Behind the California syndrome are at least five weaknesses
implanted by theories or causes of the green and consumer movements:
- Lack of intra-state generation capacity;
- Lack of diversity in the generation that exists – too
little alternative to natural gas for too much power;
- Lack of transmission capacity for power and fuel;
- Over-stringent air regulations that take capacity out of
service without regard to need;
- And, by most accounts, a sham deregulation – a counterfeit
of the real thing that appears to have been an attempt to nullify
the law of supply and demand.
As recently as last November, some in California were expressing
confidence that power supplies would be adequate for this summer.
But demand grew unexpectedly beyond California’s ability
to generate or import power.
Then came the shocks of December, January, February, March
and April.
Theory once argued that the least-expensive power is the megawatt
not used.
Experience is proving that the most expensive megawatt is the
one which is not there when it’s needed. It closes businesses.
It taxes the poor. It disrupts life. It raises the price of available
power. And it bleeds away vitality.
In the federal climate of the 1990s, concepts of the of the
kind advocated by NRDC and embraced in California policy began
to find expression in the regulatory proposals, attitudes and
policies of key federal agencies.
Reshaping the economy was given precedence over protecting
the public’s health and general welfare.
As they applied to electric power these efforts tended to attempt:
- Curbing the use of coal in present generation;
- Tying most new generation to one fuel – natural gas;
- Punishing or preventing new generation with coal;
- And otherwise using indirect pressures to allocate the market.
It was an experiment in herding, intimidation and coercion
by regulation and the continual threat of ever-escalating regulation
in lieu of legislation. Uncertainties multiplied. No one would
risk an investment in baseload power. Nobody built baseload power.
They turned to unused capacity.
Meantime, the power requirement grew by 526 billion kilowatt-hours
over the last eight years – by a little more than the total
power requirement of the Federal Republic of Germany, one of the
world’s other leading economies.
Generation growth divided as follows:
- Coal – increase of 266 billion kilowatt-hours, about
51 percent of new supply, also equal to the total output of Italy,
another leading economy;
- Natural gas – increase of 159 billion kilowatt-hours,
37 percent of new supply;
- And nuclear – increase of 144 billion kilowatt-hours,
27 percent of new supply.
From 1993 through the year 2000, the national average of capacity-utilization
in the coal-based fleet rose from 62 percent in 1993 to 71 percent
last year. The preliminary figures suggest it hit 77 percent last
December when California’s troubles began to distort Western
power.
Most growth in power supply came from the existing coal-based
fleet. Low-cost coal moderated the price of power and of other
fuels. It filled the gap when other forms fluctuated for whatever
reasons.
But now the excess capacity is being claimed, the reserve shrinking.
Now the North American Electric Reliability Council is warning
that the nation’s reserve margin for this summer is dangerously
low – 11 percent.
Now in Washington the realization has taken hold that the California
syndrome is a communicable disease:
- That other parts of the nation may experience rolling blackouts
absent modification of policy;
- That reliability may soon be at risk – limited capacity
to generate or to transmit;
- That national power supply may soon be inadequate –
too much demand, not enough capacity;
- That natural gas is experiencing an artificial, policy-induced
volatility;
- That reliance on imported oil is dangerously high;
- And that the sum of concerns adds up to a clear danger which
demands early and diligent attention – which merits a new
National Energy Policy.
Soon after taking office President Bush established an Energy
Policy Development Group headed by Vice President Cheney and comprised
of key cabinet members and other officials. The energy group is
planning to bring forward its policy recommendations about this
time next month.
We’ve met with principals and participants from time to
time and we’ve been told that it will be fuel-neutral as
to electric-power generation. The details are still in development.
However, it might be useful to match some public statements
from the administration with the facts about energy in America.
In Charleston, West Virginia, in February, President Bush began
what looks like an ongoing effort to inform the public about coal.
He said then, and has said frequently since:
"Coal is in abundant supply
in America… we need a national energy policy
of which coal needs to be an integral part."
The coal you produce and put to such good use is part of a
274-billion ton recoverable reserve that is the energy equivalent
of:
- All the world’s oil;
- 1.3 times the oil of the 11 nations of OPEC (Organization
of Petroleum Exporting Countries) whose cartel influences the
price;
- And 4 times the oil of Saudi Arabia, whose production does
the most to influence OPEC.
America’s coal is the largest single increment of energy
held within the borders of any one nation in the world. It stands
for one British thermal unit of every six Btus of fossil fuel
available in the world.
Asking the U.S. to ignore coal in energy policy would the equivalent
of demanding that OPEC ignore oil.
Recently the President rejected the Kyoto Protocol to the climate
agreement as a basis for U.S. policy and a companion demand that
he reclassify the carbon dioxide by-product of combustion as a
pollutant. The objective of the protocol is to impose restrictions
on the use of carbon-based fuel, especially coal.
In taking these steps, the President said:
To the President’s point: In domestic energy production
the reality is that coal is:
- 32 percent of all production;
- 40 percent of domestic fossil fuel;
- And, in the year 2000, the source of 53 percent of all electric
power, up from 52 percent in 1999.
In fossil fuel for the future, U.S. coal is:
- 39 times the recoverable energy of domestic natural gas –
3 percent of reserves, a fractional portion of which is coalbed
methane;
- 54 times the energy of domestic oil – 2 percent of reserves;
- More than nine Btus of every 10 available to do the work
of the nation;
- And an electric power reserve equivalent to 495-trillion
kilowatt-hours.
In the year 2000, American industry, commerce, business, amusement,
medicine and households got 1.9 trillion kilowatt-hours of power
from coal out of a total requirement for 3.7 trillion-kilowatt
hours. The requirement for power is expected to grow by 45 percent
through 2020.
As the President said in rejecting the protocol:
Federal projections anticipate a requirement to expand national
generating capacity by:
- An additional 74,000 Megawatts through 2005;
- Another 115,000 Megawatts through 2010;
- Another 127,000 Megawatts in the 10 years after that;
- For a cumulative 316,000 Megawatts through 2020.
As the President said:
The best of the generating applications from the Clean Coal
Technology Program are available for deployment and offer the
following:
- Reductions of up to 20 percent in the carbon dioxide released
per kilowatt-hour of production through efficiency gains alone;
- Nitrogen removal that is 50 percent to 80 percent better
than limits imposed by the federal New Source Performance Standard;
- And sulfur removal that is 75 to 85 percent better than the
standards.
To this must be added the comments of Secretary of Energy Abraham
at a public Energy Summit in March:
"…the administration will not regulate coal out
of existence…. will not support measures that…threaten
electricity supplies…(or) significantly raise electricity
prices."
To the Secretary’s point: America’s 50 lowest cost
power plants are either coal-based or nuclear, and:
- Power from the best coal plant cost 83/100ths of a cent per
kilowatt-hour for operations and maintenance;
- The first nine of the best 10 plants are coal-based;
- 39 of the best 50 are coal based – 80 percent;
- The 39 coal plants average 1.8 cents a kilowatt-hour;
- And the 11 nuclear plants average 1.26 cents.
Excluding hydropower in times of high water, the rule of thumb
is that the greater the reliance on coal-based generation, the
lower the price of electric power. States that rely on coal generally
have the lowest rates.
In short, there’s a new perspective taking hold on energy
and on coal.
Where abundant and low cost energy not long ago was officially
scorned and scolded from high places as a symptom of waste and
self-indulgence, it seems now to be looked upon as a condition
precedent for economic growth and an inducement to innovation.
Where coal once was the special and particular object of punitive
policies, it seems now to be seen as a resource that can and must
be linked with technology in ways that allow the nation to balance
its concerns and aspirations.
Where once the goal of leadership was to arouse fears and concerns,
the goal now is to lead public opinion to the realities of energy,
the capabilities of technology and the potential of an electric-power
reserve of at least 495-trillion kilowatt-hours.
None of this should be taken for granted: A policy recommendation
in the making is not the equivalent of a public law enacted, engrossed
and signed.
The green movement is mobilizing to oppose the recommendations,
to call into public question the motives of the administration,
and to discredit those who deliver energy.
The tools will be the same ones used previously to chill nuclear
power: Campaigns of public opinion and litigation designed to
arouse fear and resentment. It will be keyed to shock value and
winning headlines. There might even be a movie. It won’t
be called the California syndrome.
The persuasive power is not in any one study or story or lawsuit,
but in the endless repackaging and presentation to the public
in infinite variations the same set of allegations.
Repetition does the work of raising apprehension through propaganda,
not reason.
No sooner had President decided that carbon should not be regulated
than a new threat of acid rain was found in New England and announced
at a well-covered national press conference in Washington. It
got good play. They’ll be back.
For the record: Since the peak year 1976, absolute sulfur emissions
from coal-based generation have been reduced by 30 percent; and
emissions per kilowatt-hour by 64 percent.
Retrofit applications from the Clean Coal Program have been
used to reduce the cost of sulfur removal by as much as 75 percent
and of nitrogen removal by as much as 90 percent.
These retrofits are widely deployed. They delivered improvements
to the natural environment. They delivered improved plant efficiency,
lower costs and enhanced reliability.
The Clean Air Act of 1990 has been a success in all regards
– a world class success. And so has been the Clean Coal Technology
Program.
Yet no sooner had the Kyoto protocol been set aside than old
stories were put into renewed circulation about the speculative
harmful effects and theoretical needless deaths caused by emissions
from coal-fired power plants.
The green movement is angry; and in their opposition they’ll
leave no stone unthrown.
This time industry coalitions have formed to put other facts
and other perspectives into play in the struggle for public opinion
and assent – the kinds of facts and perspectives we have
just covered.
The Clean Coal Technology Program’s generating applications
are proposed for policy in the National Electricity and Environmental
Technology Act – called the NEET bill for short.
The National Mining Association, in cooperation with the Association
of American Railroads, and others in the coal chain, especially
power producers, have begun to advocate the NEET approach widely
before Congress.
NEET is a priority of the National Mining Association. Last
month we canvassed Capitol Hill with more than 20 teams of chief
executive officers – each team containing one from a coal
company, one from a hardrock company and one from a manufacturer
member. They made close to 100 calls on Senators and House members
who sit at important points.
NEET was introduced earlier this year as a free-standing bill
by Senator Robert Byrd, of West Virginia, a leading coal state.
Senator Mitch McConnell of Kentucky, another leading coal state,
was in early co-sponsorship.
By combining the presence of mining, we have been able to gather
co-sponsors in addition to members who normally involve themselves
in coal legislation – members that include the likes of:
- Harry Reid, of Nevada, the Whip and second-ranking Democrat
in the Senate;
- And Jeff Bingaman, of New Mexico, the ranking Democrat on
the Energy and Natural Resources Committee.
In bodies as evenly divided as the present Senate and House,
the wider the base of support the better.
NEET’s provisions also are part of the Senate majority’s
all-purpose energy bill that will be the vehicle for the recommendations
expected from the Bush administration.
NEET bill provides incentives to foster the commercial use
of technologies from the Clean Coal Program:
- To upgrade existing capacity in ways that improve pollution
control and raise output;
- To repower existing sites;
- And to add new capacity.
The eligible generation technologies all achieve efficiencies
in excess of the current 33 percent average. The NEET technologies
include:
- State-of-the-art pulverized-coal generation, 37-to-38 percent
efficiency;
- Atmospheric-fluidized-bed combustion – a clean-coal
application now in fairly wide commercial use, 34 percent efficiency
with the capability to respond easily to changes in load;
- Pressurized-fluidized-bed combustion – a program application
of combined-cycle generation, efficiencies of 45 percent believed
possible but awaiting demonstration on a large scale;
- And integrated-gasification-combined-cycle generation –
a program application, successful demonstrations completed, current
efficiencies of 38 percent with increases thought probable in
the near offing.
A related Coalition for Affordable and Reliable Energy –
called CARE – soon will initiate an opinion campaign aimed
at members of Congress and their staffs that stresses the irreplaceable
link between electric power and coal.
In addition, the energy-producing industries are joined in
a wider coalition to support omnibus energy legislation, which
will beget its own round of activities. And these activities in
turn blend into the effort of an even wider coalition of most
business and industry dedicated to getting a policy in place.
This, then, is the line-up for the summer political season
– the season of rising load and declining margin.
I urge all of you to get into the game as individuals.
Let your elected representatives know what you think: More
than one and more than once. Write letters to the editor.
Do not let the misrepresentations you read, hear or see in
the news go unchallenged or uncorrected. Call the editors and
news directors. They’ll talk to you. If your companies are
not participating in some fashion, urge your executive leadership
to consider involvement.
We may not achieve all we want, and we may not like all we
achieve. It can’t be all coal and it shouldn’t be. Balance
is necessary.
But if we come together now and push, we can much to immunize
America against a spread of the California syndrome.
Coal is a specific – an old name reserved for remedies
that serve a particular purpose.
Coal is 495 trillion kilowatt-hours of prevention and 274-billion
tons of cure.
Coal can even cure California, if they’ll let it.
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