Over the next decade, the cost of new electric-generation plants needed to meet increasing customer demand in Missouri will be approximately $8 billion, and the price tag for complying with more stringent environmental requirements will be approximately $4 billion.
The major factors driving the need for these investments fall into four categories: increasing demand, environmental compliance, fuel prices and the cost of materials.
The U.S. Department of Energy recently projected that demand for electricity will increase 1.5 percent per year or about 40 percent by 2030. Over the last decade, Missouri's use of electricity has increased at an average rate of about 2.8 percent per year. Missouri's electric cooperatives estimate that their demand will grow approximately 2.3 percent per year over the next decade. If Missouri's demand growth rate only slightly exceeds the DOE forecast - say 1.6 percent per year - that represents a need for more than the capacity of three new power plants the size of the Callaway Nuclear Plant in the next decade.
Compliance with tougher Environmental Protection Agency rules governing sulfur dioxide, nitrogen oxides, mercury and particulate emissions will require significant modifications to many of the existing power plants in Missouri. By 2016, AmerenUE alone is expected to spend nearly $2 billion upgrading facilities in Missouri to comply with environmental standards. That doesn't even include the substantial cost of meeting future requirements for reducing greenhouse gas emissions.
Missouri generates approximately 84 percent of its electric energy from coal. Other primary fuels used to generate electric energy are nuclear, natural gas, hydroelectric and various renewable sources. Over the last three years, coal prices have doubled, and the cost to transport that coal (on trains pulled by diesel locomotives) has increased sharply. Even so, coal remains a relatively low-cost source of power. So does nuclear, which also is less affected by fuel prices or regulations on carbon emissions. As to natural gas, its price has more than tripled over the last six years.
Meanwhile, rapid development in China and India is drastically increasing the demand for limited supplies of fuel and other materials needed to produce and deliver electricity. According to one report, China plans to build 562 coal-fired power plants over the next eight years, and India could add as many as 213. Among essential materials, copper prices increased 467 percent between 2002 and 2006, nickel increased 500 percent and aluminum 105 percent. From 2003 to 2005, the cost of boilers used in coal plants increased 65 percent, main transformers and steam turbines increased 43 percent and rolled steel increased 60 percent.
For consumers, focusing on energy efficiency is the best short-term strategy, and it is a key part of any long-term solution to the electricity supply and affordability challenges we face. If demand keeps increasing, utilities either must build or buy the electricity needed to meet it and deliver reliable service. The cost of constructing more generating plants pushes rates up; it is that simple.
Electric utilities in Missouri have energy-efficiency programs in place and are developing new programs to help their customers use energy more efficiently. While doing this, the electric utilities in Missouri are working to ensure that electricity supplies continue to be reliable and reasonably priced.
There are no easy solutions that "someone else" is responsible for. The challenges we face require each of us - utility and consumer alike - to do his part.
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