Luminant’s Economic Problems Loom Large:
Martin Lake, Monticello and Big Brown Should Be Retired
Click here for a powerpoint presentation of the report released today.
Today, Sierra Club released a report entitled The Case to Retire Big Brown, Monticello and Martin Lake Coal Plants: Three Mismanaged, Unprofitable, Outmoded and Worthless Coal Plants in North Texas. The report details the economic realities for the three named coal plants owned by Luminant. These plants were examined, in part, because they are three of the largest polluters in the state of Texas, have no modern pollution control equipment to manage their emissions, and are facing the worst economic reality of any privately-owned utility. The report looked closely at:
- The 2007 leveraged buyout of TXU Corporation;
- The current prices of both coal and natural gas; and,
- Power prices in the North Texas region of ERCOT, Texas’s electrical grid that encompasses most of the state.
The report concludes that with three basic economic facts—high fixed costs, low natural gas and power prices in Texas, and the need for large new investments to meet environmental requirements—these three Luminant plants should be retired.
“The Sierra Club commissioned this report to demonstrate that coal does not work in Texas.” said Jen Powis Senior Regional Representative for Sierra Club. “After months of research, these plants epitomize why dirty coal shouldn’t have a seat at the Texas energy table. Coal is our largest polluter in the state, can’t be run economically, and these three plants are upside down on their mortgage. Texas should be phasing coal out.”
The report briefly explains the history behind the highly-leveraged buy-out of TXU Corporation by a consortium of private equity investors and the assumptions they mistakenly made about the Texas electricity market. Because these plants were originally overvalued and the market did not expand as predicted, these three plants are ready for immediate retirement.
“These coal plants are and will continue to be a big financial burden to Texas. The 2007 TXU deal has failed, current markets work against coal plants and the future is bleak for Luminant’s Big Brown, Martin Lake, and Monticello,” said Tom Sanzillo, a financial and policy analyst for TR Rose Associates.. “Retire the plants. There are better, cleaner, financially stable and more efficient solutions that do not cover the Texas landscape in mountains of toxic debt.” Sanzillo has examined coal and energy issues in over ten states in the last four years and is the former First Deputy Comptroller for New York State.
A recent report by the Brattle Group, a utility industry consulting firm, reaches a similar conclusion but examined the economics of all merchant coal plants in Texas. A merchant coal plant is one that sells into the grid at wholesale, meaning it is not part of a regulated utility. Texas has 19 operating coal plants, only five of which are owned by regulated utilities. All of Luminant’s five coal plants are merchant plants but these three thirty-year old plants are the oldest, coming on-line in Texas in the late 1970’s. While the report demonstrates why these three plants fail for economic reasons, they also hold much of the blame for North Texas’s and Oklahoma’s problems with air pollution.
“Big Brown, Monticello, and Martin Lake are three of the worst polluters in Texas accounting for over 25% (over 400,000 tons a year) of all industrial factory air pollution in Texas. That’s out of nearly 2,000 industrial plants.” Said Dr. Neil Carman, Air Quality Director for the Lone Star Chapter of the Sierra Club. “They also account for about 50% of all coal plant pollution. These three coal plants alone emit almost 4,000 pounds of mercury into the air every year, over 180,000 tons of sulfur dioxide, over 30,000 tons of smog-forming nitrogen oxides, and millions of tons of carbon dioxide, the prinicipal greenhouse gas. All of those emissions are carried into the Dallas/Ft. Worth area and then up into Oklahoma to Oklahoma City.”
According to EIA data from 2009, Texas is third in the nation in megawatt hours produced by coal plants but also leads the nation in installed wind power, with over 10,000 megawatts of wind mostly in West Texas. By most accounts, Texas could immediately install another 10,000 megawatts of wind generation should additional transmission lines be built to bring wind power from West Texas into Texas’s main population centers in the East.
“A national discussion is currently underway concerning how best to invest to improve our system of electricity for the next generation” said Jen Powis. “Texas should be leading the way in that discussion, and frankly, we shouldn’t be including coal. Why would Texas import coal from other states to burn for electricity when we haven’t even tapped our powerful wind and solar potential? We can lead the way in job creation and economic development in these technologies.”
Click here for the Report or here for the Powerpoint presentation.
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Posted by Donna Hoffman, 3-17-11