Jim Huff Santee Cooper, South Carolina’s state-owned utility, beat cost hikes on a 600-MW pulverized coal plant near Cross.

The market for building new powerplants and wind farms in the U. S. is very strong, with most of the top contractors in the sector reporting record or near-record levels of activity and backlogs.

But questions remain about the strength of specific market segments going forward. For example, will the cancelation of several pulverized coal projects in Texas and Florida this year be echoed elsewhere, and will the possible enactment of federal carbon legislation in 2009 further stifle demand for such plants?

“The market [for building new powerplants] is very healthy right now,” says Monty Glover, president of the fossil power div­ision at The Shaw Group, Baton Rouge, La. Shaw is the engineering-procurement-construction (EPC) contractor for a wide range of coal-fired projects, including an 800-MW supercritical pulverized coal plant in North Carolina’s Rutherford and Cleveland counties planned by Duke Energy Carolinas.

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An even bigger project is on the books at Bechtel Group’s subsidiary, Bechtel Power. The San Francisco-based engineering and construction giant in June signed a $2.9-billion EPC contract for a 1,600-MW supercritical pulverized coal station that municipal-utility groups in Illinois, Missouri, Indiana, Ohio and Kentucky are co-developing at a site in southern Illinois.

And, in what could be the start of a trend, Tampa Electric—for 11 years the owner/operator of one of the nation’s two existing integrated gasification/combined-cycle plants—in July asked the Florida Public Service Commission (PSC) to approve plans for a second IGCC plant, this one a 632-MW facility that would generate roughly two-and-a-half times as much power as the utility’s existing IGCC plant.

The good news on U.S. coal-plant construction is countered by recent developments in Texas, where Dallas-based generator TXU Corp. earlier this year suspended—and expects to cancel—plans to build eight 858-MW supercritical coal plants that Bechtel was to design and build as part of TXU’s planned 11-plant expansion in the state.

Similarly, in Florida, the Public Service Commission in June rejected a plan by Florida Power & Light (FP&L), the state’s largest utility, to build two 980-MW ultrasupercritical coal units at a greenfield station in Glades County, citing concerns that the project would not be economical. In July, several Florida municipal utilities, sensing rising opposition to pulverized coal proj­ects from the PSC and the state’s new governor, Charlie Crist (R), scrapped plans for a 765-MW supercritical pulverized proj­ect in Taylor County. A few days later, Crist issued an executive order mandating that the state by 2017 cap utility greenhouse gas emissions at their 2000 levels, and then phase in further reductions through 2050.

Uncertainty about future carbon legislation and concerns about still-rising coal-plant construction costs are making utilities and independent power companies increasingly cautious about developing new coal projects, says Don Zabilansky, president of Denver-based CH2M-Hill’s power business group. It seems clear that no new carbon law will be enacted during the remainder of the Bush presidency, “but what will happen in 2009 is a wild card at this point,” he says.

Coal-plant cost inflation is a serious issue, Zabilansky says, noting that the cost of building a new coal plant has risen to about $2,200/kW, sharply higher than the $1,200/kW or $1,300/kW that many had been estimating only two years ago.

Risky Business

Coal plants not yet under construction, however, present “time risks” to those planning them, says CH2M-Hill’s Zabilansky. “There is the time risk of money” because it takes five years to complete a coal plant, as well as “the time risk of political change” because of the possibility that a strict carbon law could be enacted while a coal plant is under construction, thereby worsening the project’s long-term economics.

As a result, with the pent-up demand for new generating capacity in many parts of the U.S., many utilities are turning by default to gas-fired combined-cycle or peaking plants, Zabilansky says. CH2M-Hill is the EPC contractor for a more than 500-MW combined-cycle plant that Minneapolis-based Xcel Energy is developing in St. Paul, Minn., to replace older coal-fired capacity. It also is building a similar sized combined-cycle plant for Sierra Pacific Power near Reno, Nev., as well as a 600-MW peaking plant for Nevada Power in Henderson. “I see gas-fired projects filling the gap” until coal-fired proj­ects now in advanced stages of development begin commercial operation in the 2012-13 timeframe, says Shaw’s Glover.  He believes the “dash for gas” will continue through 2009 and 2010.

Although no next-generation nuclear plants are under construction yet in the U.S., 17 individual utilities or joint ventures are considering the development of as many as 30 such facilities. Most will decide over the next two or three years whether to give the go-ahead for construction.

“Once the first utility says it is going to build [a new nuclear plant], I think we will see a lot of others follow,” says Brian Hartz, vice president of business development at Day & Zimmerman NPS, a division of Philadelphia-based Day & Zimmerman, which maintains 50 of the nation’s 104 existing nuclear plants.

The pace of new wind-farm development continues to accelerate, largely in response to the enactment of new or tougher state renewable portfolio standards (RPSs). According to the American Wind Energy Association, “well over 3,000 MW” of new wind-turbine capacity will be added in the U.S.  this year, topping the more than 2,400 MW that was added in 2006.

Texas is again providing some of the most important news. Thanks to the state’s aggressive RPS, which was enhanced in 2005 to require that a total of at least 5,880 MW of wind and other renewable capacity be online by 2015, Texas already has more than 3,000 MW of wind capacity in operation. In the past few months, Houston-based Mesa Power unveiled plans to build a 4,000-MW wind farm in Roberts County and adjoining areas, and a joint venture of Shell WindEnergy and TXU’s Luminant Energy subsidiary said it is planning a 3,000-MW wind project in Briscoe County.

Scores of smaller wind projects also are under development, not only in Texas but in the Southwest, the Great Plains, the Pacific Northwest and the Midwest. As with coal- and gas-fired plants, the cost of building wind farms has been soaring due largely to increasing demand and rising materials costs, and developers are scrambling to secure the turbines they need.

Powerplant contractors generally agree that the industry’s good times will continue well into the next decade as utilities plan additional fossil, nuclear and renewable projects to keep pace with rising demand. Most predict that a broad mix of plants will be built well into the next decade, including gas-fired plants to provide peaking power and IGCC plants as that technology becomes more reliable and less costly.

Some utilities were lucky. Santee Cooper—South Carolina’s state-owned utility, based in Moncks Corner—is building a 600-MW pulverized coal plant near Cross for “just under $1,200/kW,” says Mike Crosby, the utility’s manager of station construction. “Getting an early start helped,” he says, noting that the project is now two-thirds complete.