Allegedly the politics of climate change policy is pretty simple in the electric power industry: on the one side you have hydro, nuclear, and renewables, and on the other you have oil, gas, and coal. A company planning a coal-fired generating plant just outside of Sweetwater, Texas is an exception to this simple scheme: the project economics rely on expectations about federal climate legislation to help ensure a market for the 90 percent of its CO2 emissions that it expects to capture.
According to this news story from the Midland Reporter-Telegram, Tenaska Inc.’s choice of Sweetwater was all about location, location, location. They found a spot with direct access to two rail lines, so they won’t be shutdown by transportation bottlenecks on just one rail line. Sweetwater is within the ERCOT power market in Texas, with prices heavily influenced by the cost of natural gas, so the planned 600-MW coal-based plant should obtain attractive margins. And it hopes to sell the CO2 into the nearby Permian Basin oilfields which use the gas for enhanced oil recovery.
“One of the things that’s important to point out is the fact that we’re assuming in our economics that there will be some sort of federal climate legislation related to CO2 emissions,” [Tenaska representative David] Fiorelli said by phone from his Arlington office. He cited the Lieberman-Warner bill that would establish a carbon market and provide incentives for projects like Tenaska’s Trailblazer Energy Center. He acknowledged that the Lieberman-Warner bill “could take a different form” but said company officials are confident some form of legislation will be signed into law. “Our choice was, rather than wait until a bill passes, analyze it and decide to take action, we decided the odds were strong something like Lieberman-Warner would pass were high enough that we moved into development so we would be ready to move ahead with financing and construction.”
You might recall that Sweetwater was also featured in the recent New York Times story on West Texas wind power, discussed on KP about a week ago. (The proposed coal plant may also come in handy in cases in which the wind dies down and over 1000 MWs of power suddenly disappear, like happened last week. Typically coal plants do not ramp up or down fast enough to be the ideal partner for wind, but something is better than nothing.)