POWER October 2013 - 6

SPEAKING OF POWER
When Policy and Construction
Timelines Diverge
H
ave you ever been surprised to have
a nice gift rejected? Well, that's
what happened to the POWER team
this summer.
This spring, we chose an interesting and
diverse set of plants from around the world
to recognize as Top Plant Award winners.
However, in two cases, a plant chosen for
an award refused to be recognized. In one
case, the " please don't write about us " request
came up front; in the other case, it
came after work on a story had started.
One was a coal plant; the other was a gas
plant. Both were in the same country. Can
you guess which one?
The chosen plants were deserving of
awards, and we could have written the
stories anyway, but we didn't want to
rub salt in their wounds. You see, in both
cases, the generating companies were
publicity shy because they had already
been burned. They had developed and
commissioned state-of-the-art facilities
with every expectation that they would
be needed and valued, only to have power
policy and markets shift so dramatically
that the now-unprofitable plants are either
offline or due to be shuttered. (If you
guessed Germany, you're right. In August,
RWE announced it would take 3,100 MW
of fossil-fueled capacity offline, E.ON had
shut down or idled 6,500 MW, and Statkraft
idled 1,200 MW in Germany due to
weakened demand and increased renewable
generation.)
Even if you believe the swings in Germany's
energy policy over the past few
years were motivated by the best of intentions,
you have to acknowledge that
project developers are suffering whiplash.
A nuclear phase-out announced in
2000 was followed by life extensions for
nuclear plants in 2010 and then a moratorium
the following year. Meanwhile, a
strong push for renewables and against
coal was complicated when high natural
gas prices and a need to back up renewables
led to calls for new coal plants.
It's no wonder that exemplary new fossil
generation facilities, built with the expectation
that their baseload or peaking
output would be needed (and in some
6
respects still is), suddenly find that
policy decisions and market forces have
squeezed them from both sides, making
them uneconomic to operate. (For
details of these policy twists, see " Germany's
Energy Transition Experiment " in
the May 2013 issue.)
Out of Synch
Germany isn't the only place where the
fate and reputation of a power plant has
changed dramatically between project
approval and commissioning. In the U.S.,
Duke Energy's Edwardsport integrated
gasification combined cycle (IGCC)
plant, one of the coal-fired Top Plants
announced in this issue, has also been
bruised. Though some of the reputational
wounds that project experienced were
self-inflicted, the original rationale for
building the next-generation coal plant
seemed sound at the time. As Bob Peltier
notes in his profile of the Indiana
plant, Duke promoted IGCC technology
for Edwardsport despite its larger capital
cost, in anticipation of federal cap-andtrade
legislation. However, that carbon
regulation never materialized, which
made the plant's cost escalations much
harder to stomach.
Both in Germany and Indiana, nextgeneration
technology projects-with admirable
efficiency and optimal emissions
profiles-were developed to be industry
leaders and exemplars. Although energy
policy can turn on a dime, power plant
construction projects cannot. But does
that mean the reputation of plants developed
under previously supportive policy
regimes should suffer?
All Technologies Face Policy Risk
Historically, in the U.S. at least, nuclear
plant construction has faced the greatest
risk from policy vagarities and retroactive
changes in nuclear plant regulations. But
these days, virtually all generating technologies
have some exposure to risk from
policy shifts. Renewable projects can be
affected by changes in feed-in tariffs or
permitting and interconnection rules.
Coal plants built with the best available
www.powermag.com
control technology can find themselves
subject to new or more stringent regulations.
Even gas-fired generation could
find itself hobbled if, for example, greenhouse
gas emissions regulations tighten
or restrictions on hydraulic fracturing
send gas prices back up.
Some might say the answer is zero
regulation and zero government policy,
but in a democracy, the public expects
elected officials to craft policy responsive
to (inevitably changeable) societal goals,
whether those are cleaner energy, cheaper
energy, or local energy. Admittedly, politicians
and policy wonks often fall short of
optimizing competing goals. But human
limitations don't let anyone off the hook.
The need to provide electricity for growing
populations around the globe is just one
reason we need project developers and
equipment makers to take calculated risks
in developing better technology options.
How, then, do we encourage innovation
and avoid punishing those who push technology
frontiers but get stranded when
policy signals change?
Join the Conversation
If you have a practical solution to this
conundrum that you think would work in
the U.S. or another country, share your
thoughts by adding a comment to the online
version of this column at powermag
.com. Your comment could be featured in
our next issue.
While you're on our new mobile-optimized
website, notice the other ways you
can be part of the POWER community-
by joining the conversation on Twitter,
Facebook, or LinkedIn; participating in a
webinar or event; discovering a solution
presented by an advertiser, a Decision
Briefs host, or a Buyers' Guide listing; or
by posting or finding a job. This industry
is increasingly complex, and though we
are but a small part of it, we aim to offer
the best ways for all stakeholders to interact
with each other. ■
-Gail Reitenbach, PhD is editor of
POWER. Follow her on Twitter @GailReit
and the entire editorial team
@POWERmagazine.
POWER | October 2013
http://www.powermag.com
POWER October 2013

Table of Contents for the Digital Edition of POWER October 2013
