Oil and Gas

Luminant's Texas coal unit starts without fanfare

HOUSTON, Oct 19 (Reuters) - Luminant’s controversial Sandow 5 lignite coal-fired unit in central Texas began commercial operation in late September with little fanfare, a company spokeswoman said on Monday.

Sandow 5, located near Rockdale Texas, between Dallas and Houston, was completed after a long legal battle between environmental groups and Alcoa Inc AA.N, which owned power plants to support its nearby smelter operation.

The 581-megawatt Sandow 5 is the first new coal unit in Texas in 17 years and Luminant’s first new unit in 16 years.

“Sandow 5 is a significant new generation source to help meet our future electric demands,” said Bill Luyties, Sandow 5 project manager.

Environmental groups are fighting new coal plants in Texas and challenging the state’s air-permitting process, citing Texas’ ranking as the leading emitter of carbon dioxide, a greenhouse gas blamed for global warming.

Texas regulators, however, have cited the need for additional coal-fired plants to reduce the state’s dependence on electricity from natural gas, a fuel which has seen wide price swings in recent years.

A federal court consent decree reached in 2003 allowed Alcoa to build Sandow 5 if it replaced two, smaller dirtier coal units.

After several aborted attempts to find a developer, Dallas-based Luminant stepped in to acquire the right to build Sandow 5. Alcoa has since scaled back the smelter’s operation.

Luminant said Sandow 5 began producing some power in early July, but weather-related construction delays and some equipment malfunctions during initial testing postponed the unit’s full operation until late September, well after the state’s record summer power use.

Luminant, formerly known as TXU Corp, also operates the 545-MW Sandow 4 unit which began operation 1981.

As part of the $45 billion buyout of TXU Corp by Energy Future Holdings Corp in 2007, the new owners dropped plans to build eight proposed coal units around the state and agreed to cut emissions of mercury, sulfur dioxide and nitrogen oxides by 20 percent from 2005 levels through reduction of existing units and new controls at three new units, Sandow and two units to be built at its Oak Grove station.

Texas still has about a dozen coal plants under construction or proposed, said Eva Hernandez, a regional representative for the Sierra Club’s anti-coal campaign.

While the public may think Texas rejected coal plants in 2007, “we’re seeing a second wave now,” said Hernandez.

Hernandez said Sandow 5 will hurt air quality in Austin, Dallas and other Texas communities.

“With so many alternatives, it does not make sense to build more coal,” Hernandez said.

One MW powers about 500 homes in Texas.

Energy Future Holdings is owned by Kohlberg Kravis Roberts [KKR.UL], TPG Capital [TPG.UL] and Goldman Sachs GS.N. (Editing by Christian Wiessner)