If one were to sketch a family tree of eastern U.S. power plants, the Gallatin Fossil Plant outside Nashville, Tenn., and the Big Sandy Power Plant in eastern Kentucky might be distant cousins. Separated by 300 miles of Cumberland Plateau, the two hulking coal burners share lineage as power plants that helped industrialize the South after World War II.
The plants' respective owners, the Tennessee Valley Authority and American Electric Power Co. Inc., also have some things in common. They are two of the nation's largest electric utilities with a combined 14 million customers in 17 contiguous states from Ohio to Texas. Both also have long histories of bringing inexpensive power to Appalachia, one of the nation's poorest regions.
But when it comes to their futures, the Gallatin and Big Sandy coal plants have met sharply divergent paths, with significant implications for their surrounding regions. The 976-megawatt Gallatin plant, built in the 1950s on a bend in the Cumberland River 30 miles east of downtown Nashville, will soon undergo an estimated $1.1 billion in upgrades to its environmental controls, potentially securing the plant's operation well into the 21st century.
"The Gallatin project will further improve air quality in the Tennessee Valley, which is cleaner today than it has been in decades," TVA executives said last month when they announced the plant would be retrofitted with sulfur dioxide scrubbers and selective catalytic reduction units to help reduce nitrogen oxides, a primary ingredient in ground-level ozone.
Meanwhile, Big Sandy, with 1,078 MW of generation capacity, will produce its last power in 2015, making it one of the largest coal plants in the country to give way to economic, regulatory and public pressures that are challenging coal's role as the dominant fuel for electricity in the United States. AEP subsidiary Kentucky Power decided to shutter Big Sandy late last year after reversing course on its own planned $1 billion investment in that plant's environmental controls.
While neither the Gallatin nor the Big Sandy decision represents wholesale changes in either utility's operations -- both have large, diversified fuel portfolios -- the choices do highlight the difficult decisions facing the nation's power producers. They are increasingly stretched between meeting the near-term demands of customers and shareholders while also guarding against broader shifts in the economic and regulatory landscape that could significantly change the way they do business.
"It's a complicated maze of a decisionmaking process to determine whether you're going to retire or invest more money in a particular plant," said one senior environmental policy expert with a national utility trade group. "Frankly, these decisions require making predictions about the future, and hardly anyone gets those kinds of predictions right."
Betting $1 billion on an uncommitted EPA
Getting it wrong could be a $1 billion mistake, something no power company wants on its balance sheet. It's also the kind of miscalculation that can trigger regulatory scrutiny and incite enough public backlash to send even seasoned utility executives to early retirement.
In the Gallatin Fossil Plant's case, observers say TVA is making a leap of faith that U.S. EPA will not impose a cap on carbon dioxide emissions from every power plant in the United States, allowing it to pursue a more flexible, plant-by-plant approach to emissions reductions.
Experts say CO2 regulation of existing coal plants, which remains an open question under the Obama administration, would effectively end the working lives of hundreds of base-load power units in the United States, including plants like Gallatin and Big Sandy that are too big, too old and too carbon-intensive to be considered for eventual carbon capture retrofits.