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Intent on sending a strong market signal to those who would build coal-fired power plants and sell electricity to California, that state's Public Utilities Commission says the Golden State isn't interested in pumping more global-warming related pollutants into the atmosphere.
In an Oct. 6 policy statement, the commission laid out plans to impose new standards for carbon dioxide greenhouse gas emissions for investor-owned utilities in California, which purchases about 20 percent of its electricity from generating plants around the West, including Utah.
A statement from commission President Michael Peevey calls the policy a way to "act expeditiously to send the right investment signals to electricity markets throughout the West."
Environmental activists applaud the action, which they say is bound to affect plans to build at least 24 coal-fired plants in eight Western states.
"California is saying, yes, they're open for business and are willing to buy power, but it's going to come from cleaner sources than it has before," said Tim Wagner, director of the Sierra Club's Utah Smart Energy Campaign. "If you're looking at investing in future energy sources, you would be wise to invest in renewables instead of coal. Investing in a coal-fired power plant is tantamount to going to Vegas and throwing your money on a craps table."
But energy experts say California is gambling, too.
"California is a huge market, but they're not a world unto themselves," said Dave Tabet, geologic manager for the Utah Geological Survey. "I would guess Californians are going to be spending a lot more on electricity."
Subtle cues: Reed Searle, general manager of the Intermountain Power Agency plant in Delta, said the California PUC policy could affect some future power development decisions because "no coal-fired plant can meet the terms and conditions from an economic standpoint."
That means the regulatory agency probably won't approve the purchase of any more coal-fired power.
"They just found a very clever way to say that," Searle said.
Intermountain Power already has run up against California's determination to find cleaner power. Last year, the Los Angeles Department of Water and Power withdrew its participation in the 900 megawatt expansion of the Intermountain Power Project near Delta when then-Los Angeles Mayor James Hahn decided instead to invest the city's $400 million to develop renewable energy resources.
Searle said that California owns 75 percent of the 1,800 megawatts IPP's first two units now generate. But Intermountain Power is proceeding with plans to build a third unit because 100 percent of the rights to its 900 megawatts have been sold to municipal power agencies and PacifiCorp.
The California PUC action, Searle said, is strictly political.
"It is an anti-coal effort that has come about because of powerful interests - environmentalists, movie stars," he said.
James Kennon, who heads a grass-roots effort to stop construction of a coal-fired power plant near Sigurd, said he and his compatriots are watching to see how the Sevier Power Co.'s plans are affected by the California ruling. The 270 megawatt merchant plant is a speculative venture that would likely sell all of its power to California, Kennon says.
Bruce Taylor, spokesman for Nevco, Sevier Power's parent company, said that's not necessarily so, because California isn't the only potential buyer. In fact, Utah is growing so fast, all of the Nevco plant's electricity could be sold right here.
"So when someone says to me, 'Why are you building? You don't need any more electricity,' it just makes me chuckle," he said.
California leads the West: Forty years ago, when California was concerned enough about its air quality to take the national lead on reducing tailpipe emissions, automakers couldn't ignore the state's huge buying power.
Now, with greenhouse gas, California is again leading the way, seeking lower emissions from coal-fired generation, said John Nielson, an energy expert with the conservation group Western Resource Advocates.
With a population of 34 million, California constitutes a buyer's market, and its policies have the potential to shape markets across the West.
California needs to add about 1,000 megawatts a year - enough for about 1 million homes - to its grid to meet its growing needs. At the same time, Gov. Arnold Schwarzenegger has initiated a policy to roll back the state's greenhouse emissions to 1990 levels by 2020, making it all but impossible to build new generating plants in the state.
Meanwhile, out-of-state coal-fired plants now under contract to sell electricity to California emit about 67 million tons of greenhouse gases each year.
In June, Schwarzenegger issued an executive order declaring the debate over global warming over and said the state would make a top priority of protecting the environment, including that of states from which California imports power. With its Oct. 6 policy adoption, the Public Utilities Commission has validated the governor's order.
The commission policy identifies fuel efficiencies as its primary goal, followed by a goal of having energy from renewable sources account for a third of its electricity by 2020. The rest would be subject to greenhouse gas performance standards.
New technology: Nielson says the coal-generation sector can stay in play by turning to coal gasification, which separates the coal into its component parts, including methane, which is burned to heat the turbines. The process strips out pollutants and compresses carbon dioxide, which makes it easy to capture.
Gasification adds 10 percent to 20 percent to the cost of coal-fired generation, but operators increasingly are seeing it as a necessary wave of the future.
Last month, Michael G. Morris, chief executive of American Electric Power Co., the nation's largest operator of coal-fired power plants, announced the construction of a 629-megawatt plant that would use gasification in Meigs County, Ohio, by 2010. American Electric also is planning a second gasified plant to be built by 2013. The federal government is making funds available for other such projects.
Hope for renewables: There is some irony in California's role in new coal technology. The state's failed deregulation experiment four years ago led to new dependence on natural gas to power electric plants, speeding depletion and spurring the price of that relatively clean resource.
With the West estimated to harbor a 250-year supply of recoverable coal, Nielson expects the economics will improve for plants that will run for 60 years. During that time, he said, regulations on greenhouse gases are bound to emerge. For investors, "there is a long-term risk management issue here," he added.
Intermountain Power's Searle agrees. Once the American Electric plant is running, he said, gasification will be commercially viable. Which is fine, says Wagner of the Sierra Club. But market forces behind renewables are much stronger than those propelling gasification. Solar and wind technologies are already available, and the Western Governors' Association wants Western states to generate and transmit 30,000 megawatts of clean energy by 2015.
"You're going to see a lot more wind energy put up throughout the West," Wagner said. "If this California initiative puts a major driver in the seat of renewable energy, in the long term that can only be good for the customers."