PGE Confronts Dirty Dilemma at Boardman
by Ted Sickinger
The Oregonian, December 26, 2008
Wind and energy efficiency ranked first with customers, and coal and nuclear ranked last. In fact,
they thought renewables and conservation should make up 50 to 60 percent of future energy acquisitions.
It's a blustery day in late November, and 150 miles east of Portland a digital readout in the control room at the Boardman Generating Station is pegged at 597 megawatts.
Operating at full throttle, the power plant inhales 330 tons of pulverized coal dust an hour. That's nearly three rail cars worth -- stripped from open pit seams in Wyoming's Powder River Basin -- every hour, almost every day, every year.
Inside the plant's 260-foot-tall furnace, 32 flamethrowing burners ignite the cloud of talcum-size coal particles into a roiling, 3,000-degree ball of noxious gases and ash.
Like a miniature sun, the ongoing eruption creates enough energy to power 280,000 homes served by the plant's part owner and operator, Portland General Electric. It's 19th-century technology. But it's reliable and cheap.
Unfortunately, its also dirty. Very dirty.
All of which leaves PGE, its 814,000 ratepayers and the public a stark choice between economics and the environment: Should they spend hundreds of millions of dollars -- perhaps more than a billion eventually -- to keep the old workhorse going, albeit with a smaller stream of the pollutants that belch from its 656-foot stack today? Or would it be better to shut the plant now, eliminating the largest stationary source of air pollution in the state, but leaving its largest utility more dependent on natural gas and its customers exposed to higher, more volatile rates?
It's no longer an academic exercise. In early December, the Department of Environmental Quality issued draft rules that would force PGE to spend $472 million over the next decade to reduce haze-causing emissions from the plant -- an investment that would raise rates by 3 percent.
Boardman's power is so cheap today that it can probably absorb those costs and remain financially viable. But the equipment would do nothing to reduce Boardman's enormous output of carbon dioxide, the main man-made culprit in global warming.
That bill is still to come and, to a great extent, unknown. Neither the regulations nor the technologies to reduce carbon emissions are fully developed. The cost of either, however, could rival or exceed the price of haze controls at the plant.
The reckoning is coming quickly, most experts say. Climate change was front and center in the presidential campaign, and it's at the core of Gov. Ted Kulongoski's agenda next year.
For many experts, the Boardman dilemma echoes an earlier PGE debacle, the Trojan nuclear plant, which left ratepayers major costs after it was shuttered in 1993.
"The worst thing possible for ratepayers would be to spend a half billion dollars, then to have them turn around and close this because of carbon constraints," said Bob Jenks, executive director of the Citizens' Utility Board of Oregon.
Hooked on coal
Northwesterners love to boast about all the cheap, clean hydroelectric power generated in the region. But the dirty little secret is that coal-fired power plants still provide 40 percent of Oregon's electricity -- about the same percentage as hydro.
Nationwide, coal's contribution is closer to half. And many experts see little prospect of that changing. The United States, after all, is the Saudi Arabia of coal, with adequate reserves for the next 300 years. And coal-fired electricity is one-half to two-thirds cheaper than burning natural gas.
Boardman is the state's lone coal-fired plant, but Oregonians consume plenty of power generated at coal plants in Utah, Wyoming and Montana. Some are owned by PacifiCorp, which serves two-thirds of its customers' needs with coal. But independently owned coal plants are also important sources of wholesale power purchases.
Every week, Boardman consumes four to five freight trains worth of coal -- each 115 cars long. The trains move constantly between Boardman and Wyoming, and often roll into the coal yard with a few hobos who hopped the wrong train south. After making sure they're not about to bury someone alive, plant operators bulldoze the cargo over the 40 acre-yard, where PGE has laid in a five-month fuel supply -- more than a million tons of jet-black, low-sulfur coal.
PGE customers consume 65 percent of Boardman's output, which makes up about 25 percent of the utility's generation and 15 percent of its overall demand.
But that number understates Boardman's importance to the utility. Ever since PGE closed Trojan, it has been heavily dependent on open-market purchases of power. This year, it will buy 25 percent of the electricity its customers consume. That's expected to grow to 33 percent in the next decade as the region's population increases and a number of its long-term contracts for power expire.
If Boardman closes, PGE will be deeper in the hole.
Boardman also is PGE's cheapest source of power. Other plants go off line when demand wanes or the price of energy in the open market drops to low levels. But Boardman typically runs flat out, continually pumping energy into the power grid and pollutants into the sky.
Target on PGE's back
Boardman's emissions have been controversial since it opened in 1980, but the debate has never been louder.
Either PGE needs to commit to Boardman, spending heaps of ratepayer dollars to keep the plant chugging, or close it and live with the consequences: a much greater dependence on natural gas with all the price volatility that entails.
Environmental and conservation groups aren't waiting on regulators. They filed a lawsuit this past fall that contends Boardman should have been subject to more stringent air quality rules from its 1980 opening and should have installed updated controls when modified to increase its output over the years.
"It's clear that the DEQ hasn't properly implemented the Clean Air Act," said Michael Lang, conservation director with Friends of the Columbia Gorge. "What we've seen is a pattern that DEQ has been more interested in protecting polluters than protecting air quality."
PGE and regulators insist Boardman was grandfathered because construction began before clean air regulations were finalized. Moreover, they say, modifications to the plant never triggered new pollution controls because Boardman's emissions didn't increase beyond permitted levels.
Either way, all sides agree that under new haze-reduction rules, PGE must radically reduce Boardman's output of oxides of nitrogen, sulfur dioxide and particulate matter, not to mention mercury. To do so, PGE would have to install $472 million worth of equipment by 2017.
Factor in inflation and finance costs, and PGE figures the cost could balloon to more than $700 million.
The catch: The equipment will do nothing to control carbon dioxide. That's hundreds of millions extra.
Kulongoski has made carbon limits a centerpiece of the environmental regulations he is pitching for the next Legislature. And President-elect Barack Obama has called for a national system that would reduce overall emissions to 1990 levels by 2020.
It's not clear how the lawmaking will play out, but most experts assume carbon limits are inevitable and that industrial polluters could eventually face steep costs -- from $10 to $70 -- for every ton of carbon dioxide they emit. For a plant like Boardman, whose stack spews 5 million tons of carbon dioxide every year, that translates to between $50 million and $350 million annually.
PGE has runs its own numbers on Boardman's future viability but isn't ready to unveil them publicly.
"It's not just carbon regulations. We don't know what gas prices will be, what coal prices will do," said Jim Piro, who takes over as PGE's chief executive this week. "If everything was known and knowable, it would be an easy analysis."
Inside Piro's world
Piro is no global-warming denier. But like many in his industry, he's convinced that renewables and energy efficiencies can't meet all the power demands of Northwest consumers. So-called clean coal will play a crucial role, he says.
"With the drive and the research dollars, I think scientists can figure some of this stuff out," he said of cleaner coal technology.
His industry is betting on it. The utilities and mining industries nationwide have mounted a major public relations campaign around clean coal. The phrase was invoked incessantly by Democratic and Republican candidates during the election campaign.
The concept refers to technology to capture and store carbon dioxide from burning coal by pumping it underground or undersea.
Despite the hype, however, clean coal is little more than a science project today. It's still not clear it's possible, much less cost-effective, to separate, concentrate and inject large volumes of carbon dioxide underground, and make sure it stays there.
Executives from coal-dependent PacifiCorp, which has an even bigger carbon problem looming than PGE, suggest that carbon capture and storage won't be available until 2025 and will probably raise coal plant capital costs by 40 to 50 percent. Retrofitting an existing plant, if geology in the surrounding area is even suitable for carbon storage, also would knock out 10 to 15 percent of a plant's output.
Piro says that if carbon storage is too expensive, or if customers and regulators determine Boardman needs to close, they'll have to deal with the tradeoff. Right now, he says, that means natural gas.
"I'm not excited about being more dependent on natural gas, which would expose us to more volatility, but that's the next step we'd have to take," he said. "We'd have to build a gas plant out there."
The Pacific Environmental Advocacy Center, which is suing PGE on behalf of a coalition of groups that want to shut the Boardman plant, has hired its own consultant to look at potential alternatives, such as renewables and energy efficiency .
"My clients really believe the prudent thing to do is to figure out how to replace this plant now rather than later," said Aubrey Baldwin, a lawyer with PEAC.
What customers think
PGE customers are clear about what they want -- until they consider the price.
In the fall of 2005, PGE hired market research firm Kema to survey customers' perspectives on a wide range of energy resource options.
Customers had strong opinions. A majority thought PGE should meet its power needs with domestically generated, sustainable resources and avoid anything likely to be exhausted in the next 20 to 30 years.
Wind and energy efficiency ranked first with customers, and coal and nuclear ranked last. In fact, they thought renewables and conservation should make up 50 to 60 percent of future energy acquisitions.
From Piro's seat, that's a tall order. Shunning resources likely to be exhausted in 20 to 30 years could mean avoiding Canadian natural gas -- the most obvious resource choice if PGE quits using coal. Energy efficiency is cost-effective, but before the company is willing to pursue it wholeheartedly, it wants a rate structure in place that doesn't penalize it for persuading customers to use less of its product.
PGE, Piro contends, is already adding renewables as fast as it can. Last year it opened its first wind farm, the $255 million Biglow Canyon, where it will spend $770 million to expand capacity in the next two years. It recently issued a request for bids on another big chunk of renewables, and will have to continue spending heavily to meet the state mandate of serving 25 percent of its retail demand with renewables by 2025.
Still, only 4 percent of PGE's electricity comes from renewables today, and the company says it can't add wind power indefinitely without harming the reliability of its power supply.
"Anyone who thinks we can power the entire system with renewables ... unless there's some new renewable I'm not aware of, that's not doable right now," Piro said.
In one way, PGE's customers have already voted on their willingness to pay more for green power. The company's Green Source program allows customers to purchase 100 percent of their electricity from renewable sources. It costs about 10 percent extra to do so.
Only 8 percent of PGE's customers have signed up for it.
Mixed messages from customers aside, the future of Boardman will play out in a series of policy discussions between PGE and its regulators -- or perhaps in court. Conservation and tribal groups are adamant about avoiding further delay. Every day the plant operates without modern pollution controls, they say, is another day of foul air, poisoned fish and public heath risks.
Piro says PGE is willing to shut Boardman if regulators conclude that's financially prudent. But PGE would like to put off any decision, and any big expenditures, for as long as possible.
"The more time we can buy, the more information we'll have," Piro said. "We're in uncharted territory on a lot of this analysis."
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