Nice thought, but I'm not sure it's relevant.  It's the cost per Btu that matters, so comparing $/barrel vs. $/ton is deceptive.  Oil is in fact vastly more expensive than coal on a $/Btu basis, notwithstanding current run-ups.  In addition, oil is always much more volatile, so you'll see dramatic ups and downs while coal tends to stay more stable.

None of which takes away from the larger point that coal-fired power is stupidly expensive given the high costs of capital - we simply shouldn't delude ourselves into thinking that coal is expensive on a variable basis.  So long as we continue not to ascribe the health and environmental costs to coal, it will continue to have a variable cost advantage against most other fuels (and certainly all fossil fuels).  But that in and of itself is no reason to build a coal-fired power plant.  After all, solar and wind have vastly lower variable costs than coal...

at least, according to a friend of mine who was driving down on interstate there, only to find he was zooming past a large array of wind turbines.  They could easily supply a hefty measure of Megawatts with wind there.

Solar and wind have no variable costs other than opex.  Coal does, since you have to pay for the fuel.  The subsidies are an entirely separate issue, to justify the much higher capital cost and low capacity factor.  But mathematically, it doesn't take a subsidy to make solar energy free.  It just takes one to get someone to build a panel to convert that energy into electricity.  

If you're making a point about all-in costs, that's fine.  My point is simply that the oft-trotted line about coal being cheap is only true if you ignore the fact that the capital is absurdly expensive.  So from a logical point of view, if the variable (e.g., fuel) cost of coal is sufficient justification to provide massive subsidies to coal plants - as we effectively do through guaranteed rate recovery - then there is an even stronger argument to build renewables.  The center (of the logic, that is) cannot hold.

Sean, you're right, of course, on relative cost of fuel -- especially renewables.

My point is that the financial rationales for new energy plants tend to use current prices of fuel as the yardstick for projecting costs -- even though they may be predictably rising steadily over a multi-decade facility lifetime. Coal has done that over time, and its cost/btu has been rising relative to that of oil over time.

Its relative price will continue to rise as coal is 'sold' harder are a replacement for scarcer (and foreign) petroleum, even if there is no accounting for the higher environmental damage of burning coal. (That is, the more successful the "clean coal" movement, the higher the price of the fuel!)

This, then, is a further argument against new coal-fired plants ... and one that is sometimes easier to make in a politically, not empirically, driven debate.

I don't know precisely, but note that the efficiencies you get in a combined cycle gas plant (around 50 - 55%, seasonally adjusted) are impossible in a combined cycle coal plant since you have to add another efficiency penalty into the mix for the coal gasification.  (e.g., you can't get 100% of the energy out of the coal gasifier in the form of syngas that you put in in the form of coal - some goes to stack heat, some to carbon in the ash, etc.)  So you're looking at 40 - 45% overall efficiency before you add any CO2 sequestration and associated parasitics.  After all, even if you can recover all the CO2, you still have to pay for all the upstream issues from coal ash to mountain top removal when you burn coal inefficiently.

Noting that coal has releases about 60% more CO2 than natural gas per Btu burned, the net result is that you've got a cycle that's less efficient than the best gas cycle and innately higher carbon content.  So no, you can't make the case for this on CO2 grounds.  And you can't make the case for it on economic grounds either, since once you factor in the cost for capital recovery, you're essentially building a plant that has comparable economics to a gas fired plant.  

I understand your point, but note that petroleum isn't a replacement for coal, at least in US power markets.  (We make 50% of our electricity from coal, and about 5% from petroleum.)  Oil was more significant before the OPEC price shocks, but has essentially been abandoned since, and is now used almost exclusively for transportation outside of New England, where it is also a heating fuel.  But nowhere is it a power fuel of any significance.  Apropos of this conversation, it was abandoned as a power plant fuel after OPEC precisely because of it's price volatility, which is essentially what you're showing with your math.  (Imagine running a power plant with 20 year fixed contracts and seeing your fuel go from $9/barrel to $140/barrel back to $40/barrel within one 10 year span.  Power plant owners quickly abandon fuels with that kind of volatility!)  Coal may be rising, but it is at least relatively predictable.

As a more power-relevant example, you could make a similar argument for natural gas which - unlike coal - does get used in power generation and - like petroleum - is down substantially off its highs from a year ago.  Is that encouraging a shift?  Not really - because the capital of coal plants is built to run on coal and the capital of gas plants is built to run on gas... and even with the fall off, gas is still way more expensive than coal.

Bottom line: power plant operators aren't stupid, and - as long as you're not worried about capital recovery or environmental consequences - coal remains a much more compelling economic option for a power-only central station power plant than any other fossil fuel.

I'm not intentionally avoiding the question, but simply acknoweldging that my gut suggests this doesn't really matter.  (Note after all that $3730/kW capex, amortized at 20 years, 12% - about the best I'd imagine anyone would punt for in this market - is 8 cents just for capital recovery.  I assume a 70% capacity factor, consistent with the rest of th US coal fleet.  And that still doesn't include O&M, transmission/distribution or fuel.  So even if the heat rate exceeds thermodynamic limits, you've still got a plant that is going to put significant upward pressure on the US retail average at 9 cents - not to mention the lower retail prices in Indiana.)  

In addition - as I don't need to tell you - the heat rate on a plant where fuel is so cheap is only a second order impact relative to capital.  At $2/MMBtu fuel, the difference between a 5000 Btu heat rate and a 10000 Btu heat rate is a penny a kWh.  Compared to 8 cents for generation plant recovery, another 2 - 3 cents for transmission and another 1 - 2 cents for O&M, it's inconsequential, unless you believe that the price of coal is about to go through the roof, which I've certainly not seen anyone suggest.  (And even if it did, that would only favor gas plants all the more strongly which have much lower capex per kW.)

What are you seeing here that I'm not?

How so?  The cost of the plant is what Duke quoted: $3730/kW.  How would a lower heat rate reduce that capex?  I grant you that a higher heat rate drops cooling tower sizing, etc., but presumably any benefit is already factored into the costs that Duke put forth to their regulator.

Re: 30/10% vs 20/12%, you can make the case on either end, and the truth is that it ultimately depends upon the way that any particular utility commission interprets their obligations to provide returns that are "commensurate with the risks faced by similar businesses".  I've always found that to be a bit of an Alice in Wonderland exercise, for the simple reason that I can't find any business that has a risk profile that looks anything like a regulated utility!  (And indeed, when I've asked regulators about it, most confess the looking-glass quality and say that they pick rates comparable to what other commissions granted to their regulated utilities.)  But generally speaking, they seem to range from 10 - 13%, over 20 - 30 year time horizons.

I'm picking the higher end now only because if I'm a utility exec going before a rate commission, I'd make the argument that my ability to attract capital demands a higher return in today's markets since liquidity has seized up.  

But that's speculative, and shouldn't detract from the fundamental truth that the cost of new-build coal is dominated by capex, not opex.

Re: must run.

I think geography is probably more important than heat rate, as the coal fleet capacity factor is as often as not limited by the volume of nuke and hydro in the region that falls lower on the dispatch curve, causing the coal to be the first to dial back.  (Still running, just not as hard.)  

Up until ~1990, the coal fleet capacity factor was growing faster than total demand growth, suggesting that we had spare margin and could run more just through economic dispatch.  Since then, it's only grown as fast as load.  Given as it's current ~70% CF is well below theoretical limits, it suggests (to me, at least!) that it is dialing back during the troughs in load when total load < [nuke + hydro + coal].

That said, I don't think you'll find it makes that much difference in the overall calculus.  Even if we amortize $3730/kW at 20 years, 10% with an 80% load factor, we're still looking at 6.2 cents/kWh just for capital recovery, making that easily the biggest line item in it's overall delivered cost, swamping out any second-order impacts in fuel efficiency.  And - apropos to this website - playing the role of an economic surrogate for $62/tonne carbon pricing!

If you just divide the capital cost by the capacity, you get around $4700/kW of capital costs, about $1000/kW higher than coal plant Sean says is already very expensive in his initial post. This may not increase rates more than 2% because the cost of this small facility may be averaged with other cheaper plants. The point is that new coal plants, let alone clean coal, are not cheap.

Right you are.  Nonetheless, the Citizen Utility Board, supposedly looking out for consumers, supports the plans, so I'm not sure how you'd explain that.

I'd be interested in an explanation about the Citizen Utility Board's support as well.

I am not privy to the recent IL decision, so take these responses as general rather than specific.  In my experience in multiple states the customer advocate (sometimes labeled a public advocate) is well motivated, but only occasionally fully trustworthy when it comes to articulating for the public interest.  Electric regulation is really complicated, and utilities bring masses of lawyers into propose and justify their rates.  The utility commissions themselves are almost always outgunned - they have fewer lawyers on staff, less technical depth and often are working under legislatively-mandated time constraints.  (It is not uncommon to see jurisdictions where a proposed rate has a presumption of validity unless otherwise objected to by the commission within a defined time frame, forcing the commission to evaluate in ~45 days what the utility spent a year preparing.)

Consumer advocates are not a part of the commission, but face the same problems with less budget.  Unsurprisingly, this often causes them to fall victim to what academics have referred to rather quaintly as "regulatory capture", where the regulatory agency responsible for overseeing the regulated entity comes to see their responsibility as protecting the regulated entity.  (See the SEC's handling of Mr. Madoff for an example of where this leads).  This may sound impossible unless you know what to look for.  When a consumer advocate or utility commissioner says "we need this plant to bolster system reliability", or "we need these rates in order to allow the utility to attract the capital necessary to fund their on-going operations", they are essentially repeating what they have been told by their regulatee.  That's not to say there isn't any truth to those statements - simply that the nature of the rate-making process makes it vastly easier to accept utility-requested rates and investments than oppose, and tips the deck heavily away from the consumer interest, no matter what the public mandate of a given agency may say.

In other words, just as you are both clever enough not to presume that the Clean Coal Lobby is solely about cleaning the air, do not presume that a Consumer Utility Board's actions are made solely in the best interest of the consumer.

One other note: Tenaska has been fighting a rear guard effort in IL over the past year to get the legislature to guarantee their capital recovery, since they are not a regulated utility.  I don't know how that was resolved, but it's worth noting that that is not the behavior of a company who really trusts their underlying investment thesis.  I certainly wouldn't at those prices.

It's less "utility capture" as Sean characterizes it than what i'd characterize as "coal capture," which is rampant in Illinois, where 'cleaner' is still dirty.

IN CUBs Fall 2008 newsletter:
Breaking news!
Illinois Senate passes
"clean coal" legislation
As The CUB Voice went to press, the
Illinois Senate passed a bill that brought
the state closer to building a "coalgasifi
cation" plant that would produce
environmentally cleaner power.
In the long-run, this could lead to
more aff ordable power and help revive
the coal industry. The bill , SB 1987, also
encourages Illinois to use "demandresponse"
programs to secure the
lowest price possible for consumers.

"In the long-run, this could lead to more affordable power and help revive the coal industry."

I get the latter half, but tell me what possible case can be made that implementing a more expensive form of coal burning, and then attaching an expensive sequestration facility, will "lead to more affordable power." Honestly. I don't even see the dishonest case for that. I just don't see any case at all. WTF?

grist.org

Once the initial equity investors go bankrupt and sell their assets to someone else at a fraction of their value and you can just run this plant on the variable cost of coal, the price of power falls and demand rises for coal.  Those two little words make this actually vastly more honest than the "clean and cheap" claptrap that ACCCE touts when they argue for public subsidy of the plants to ensure that the long-run never comes.  

Couple more glasses of truth serum and maybe we'll finally see those investors asking to go bankrupt in the name of cheap power!  I'm sure it's just around the corner.  Really.  I'll start holding my breath to wait for it.  Just... a... little... longer...

No?  Ah well, maybe tomorrow.

It's the Citizens Utility Board, not Consumers U B, which maybe explains its stance, and by now everyone knows how Illinois' citizens live with dirt like its not even there.

About WTF, I've been asking for months if not years and never receive a reply.  Dave Kolata, executive director of Citizens Utility Board, (312) 263-4282, cell (312) 560-0929, (JavaScript must be enabled to view this email address) //= 0; i=i-1){ if (l[i].substring(0, 1) == ' ') output += "&#"+unescape(l[i].substring(1))+";"; else output += unescape(l[i]); } document.getElementById('eeEncEmail_7SJYKQMB8N').innerHTML = output; //]]>

In the long run, we're all dead.

I know - that was my point about speaking generically.  But it ostensibly serves the same function as entities that get branded public advocates, consumers advocates, etc. elsewhere.

As a complete aside, I've always thought you can learn a lot about a state from the way they name their state agencies.  The counterpart to MA's "Department of Energy Resources" in Virginia is labelled the "Department of Minerals, Mines and Energy", which tells you everything you need to know about their respective priorities!  You could probably have some fun with other state comparisons by agencies if so inclined...