FERC underestimated power pollution, NAFTA report says

By the OGJ Online Staff

HOUSTON, Nov. 26, 2001 – New electric generating plants scheduled to sell power to the US could increase pollution in Canada and border states in Mexico, a commission created by the North American Free Trade Agreement reported today.

Prepared by the Montreal-based Commission for Environmental Cooperation (CEC) Secretariat in support of the NAFTA electricity and environment initiative, the documents will be presented at the Nov. 20-30 symposium on environmental challenges and opportunities of the evolving North American electricity market.

The commission report also concluded the US Federal Energy Regulatory Commission seriously underrated how much opening the electricity generation sector to wholesale competition would affect air pollution.

FERC predicted on the basis of the relatively low price of natural gas from 1986-1996, future competition in the wholesale electricity generation sector was likely to favor natural gas generation. Because gas is a relatively cleaner fuel compared to the other fossil fuel choices, FERC deemed it unlikely opening the US electricity market to wholesale competition would have significant air quality impacts.

In its environmental assessment, FERC projected future air pollution scenarios for the years 2000, 2005, and 2010. But natural gas prices rose much higher than anticipated by FERC, thereby diminishing the cost advantage of relatively clean natural gas over dirtier coal generation predicted by FERC, the CEC report found.

From 1993 to 2000, carbon dioxide (CO2), the CEC said emissions from the electricity generation sector were higher greater than projected by FERC, and most closely followed a scenario FERC called competition-favors-coal. FERC underestimated growth in CO2 8%, and nitrogen oxides (NOx) by 4%.

The increase in CO2 from the electricity generation sector will make it more difficult for the US to meet greenhouse gas reduction targets, with or without its participation in the Kyoto Protocol, the report concluded.

The increase in NOx emissions could make it more difficult for states with coal-intensive electricity generation to meet more stringent health and environmental standards regarding fine particles, ground-level ozone (smog), and improved visibility in national parks.

The CEC assessment said the relatively stronger economic position of coal complicates efforts to address mercury emissions from the electricity generation sector, because coal is the dominant source of mercury air emissions from electricity generation.

Choosing sites
Looking ahead, the CEC said siting location decisions would potentially aggravate cross-border air pollution transport, if lower environmental standards within an integrated North American electricity market affect decisions on where to put new power plants.

In addition, it said changes in the preferred choice of the fossil fuel for new electricity generation in a more competitive and integrated electricity market also can increase or decrease greenhouse gas emissions on a continental scale.

The report said planning activity suggests there are places power plant developers consider more attractive than others for new power plants. The reasons could include transmission access to markets, local availability of cheaper fuels, and lower environmental standards.

The report cited as an example Baja California, where proposed new power projects could emit greater than five times more NOxthan proposed new power plants across the border in California. The Mexico northern border states of Baja California, Tamaulipas, and Nuevo Leon adjacent to the US rank among the top 5 out of 32 Mexico states in planned new electricity capacity additions.

New proposed power plants in Alberta, Canada, which would rely heavily on coal, could account for as much as 63% of all new national CO2 emissions from all new power projects nationally in Canada, the report found.

It estimated new power plants in Alberta could account for as much as 94% of all new mercury emissions from new power projects nationally in Canada due to Alberta’s heavy reliance on coal for new generation. At the provincial level, the report noted a proposed new 800 Mw natural gas power plant in Quebec that will sell electricity to US markets could raise Quebec’s emissions of CO2 and NOx by 160% relative to Quebec’s total power plant emissions in 1998.

In the US, proposals for coal power plants in the early planning stages would constitute 8% of new fossil fuel generation on a national basis, whereas coal comprises just 1% of new power plant projects nationally that are in more advanced planning or early construction stages, it found.

The CEC reported concluded emerging interest in coal for future electricity generation in the US due to improved economic prospects compared to natural gas could complicate future efforts to reduce greenhouse gas and mercury emissions from the US electricity generation sector.

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