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How to Clean Coal
Page 5

If IGCC power plants look so promising, why haven't more of them been built? The short answer is the low price of natural gas in the 1990s. Rosy talk of nearly endless supplies of domestic and Canadian natural gas, combined with the clean-burning attributes of the fuel relative to coal, led utilities to invest heavily in natural-gas-fueled generating capacity. Predictably, however, all these new gas-fired power plants caused an upsurge in demand for the "fuel of the future." Prices reacted accordingly, tripling from around $2 per thousand cubic feet in 1999 to more than $6 currently. Scores of pristine natural-gas power plants suddenly couldn't produce electricity at competitive rates. Today large numbers of these plants stand idle, repossessed by the banks that financed them. Utility companies have turned back to coal -- not to carbon-capture-ready IGCC, which they view as untried and risky, but to old-fashioned pulverized coal.

U.S. utilities have been slow to warm up to IGCC and carbon sequestration technology for the same reason they opposed the Kyoto treaty: Higher costs for environmental protection, they say, would handicap the country's ability to compete with India and China. And yet some industry leaders have broken ranks, calling for the United States to take the lead in embracing technologies and policies that acknowledge the enormity of the global-warming challenge.

One such forward-looking utility executive is Paul Anderson, CEO of Duke Energy and soon-to-be chairman of the mega-utility resulting from the merger of Duke and Cinergy. "It frustrates me to hear some folks say, 'Why should we spend money to reduce emissions when China and India aren't part of the effort?' "Anderson said in a speech to business leaders last spring. "That is akin to begrudging a modest meal to a neighbor while you are sitting down to a sumptuous feast." He went on to say that he favors mandatory legal controls on greenhouse-gas emissions.

Other large utility companies have followed suit. Cinergy and American Electric Power (AEP), two of the largest coal consumers in the United States, have both announced plans to build IGCC power plants. James Rogers, Cinergy's chairman and CEO, is one of the utility industry's most vocal boosters of the technology. Carbon constraints are inevitable, he believes, and IGCC is the most financially prudent way for a coal-dependent company like Cinergy to prepare for their coming. "I have a sense of urgency," he said during a meeting of leaders from the energy industry and government last fall. "We need gasification now." Both Cinergy and AEP are looking at the geology underlying their prospective IGCC plant locations to determine the sites' suitability for eventual CO2 storage.

Pressure to get the IGCC ball rolling is also coming from businesses that supply utility companies with equipment such as gas turbines. Chief among these is General Electric, the largest publicly traded company in the United States. Last May, GE announced an initiative that it is marketing with the label "ecoimagination," to address global warming, energy conservation, and other environmental issues. The company has pledged to reduce its own global-warming emissions and to double its investment by 2010 in developing more environmentally benign products, including efficient jet engines, hybrid locomotives, and clean-coal technologies. GE built the turbines used in Tampa Electric's IGCC plant. It also owns the coal-gasification technology used in the plant, having purchased it in 2004 from Chevron, which developed it. GE has teamed up with engineering and construction giant Bechtel to offer utility companies a turnkey IGCC package. ConocoPhillips and Shell market competing coal-gasification processes and have also aligned themselves with large power-plant contractors.

Until recently, said Neville Holt, a technical fellow at the Electric Power Research Institute (EPRI), an industry-supported R&D organization based in Palo Alto, California, "the lack of a single supplier who could put everything together and guarantee the results has been a barrier for potential utility customers. But now there are three teams offering IGCC plants with commercial guarantees," a signal that IGCC is ready to make the leap from small demonstration projects to large-scale adoption.

Ironically, among the biggest remaining obstacles are the state utility commissions whose job it is to protect the public from overreaching utility companies. In 2003, the Wisconsin Public Service Commission (PSC) rejected an application from Wisconsin Electric Power (known as We Energies) to build a medium-size 600-MW IGCC plant on the shores of Lake Michigan, near Milwaukee. The commission ruled that "IGCC technology, while promising, is still expensive and requires more maturation." Its main objection was that We Energies might have to raise electricity rates to cover the premium cost of building the plant. Consumer-protection and environmental groups have appealed the panel's decision, which is now under review by the state supreme court. It's widely seen as a bellwether case for scores of new power plants across the country that are now in the early planning stages.

In neighboring Minnesota, a private energy-development group called Excelsior Energy is doing its best to tilt the regulatory debate in favor of IGCC. Tom Micheletti, Excelsior's co-president (a title he shares with his business partner, Julie Jorgensen), maintains that IGCC's reputation of being more expensive than conventional coal-burning technology is based on flawed reckoning. Excelsior has won strong bipartisan support at both the state and federal levels to build a 600-MW IGCC plant in the Mesaba Iron Range area of northeastern Minnesota, to begin operating by early 2011. "If you consider only the up-front cost of putting the plant in the ground," Micheletti says, "then yeah, IGCC probably costs between 10 and 20 percent more than pulverized coal. But if you do a life-cycle cost analysis, my view is that IGCC is the best bet from a purely economic point of view, because you're never going to have to worry about putting on additional pollution-control equipment. Anyone who takes a look at where the country's going knows that we're going to end up with more stringent control requirements for mercury, particulate matter, CO2, you name it. If you figure all that in, IGCC is a better deal."

Another objection to IGCC often raised by traditional coal-plant operators -- a change-resistant group Micheletti refers to as "the boiler boys" -- is that the newer technology will inevitably be more finicky and less reliable than the tried-and-true standard. But Tampa Electric's operating experience over the past 10 years does not bear that out. "Last year, Tampa Electric's IGCC facility was the most reliable coal-fired plant on its grid," Vernon Shorter said. "This is the most consistently available and lowest-cost electricity on its system."

The Bush administration has made support for clean coal technologies a highlight of its energy policy, even as it continues to resist mandatory greenhouse-gas limits. The Energy Department's Clean Coal Power Initiative provides joint government and industry financing for selected projects that demonstrate new power-plant technologies, including IGCC. (Under this program, for example, Excelsior Energy was awarded $36 million toward the estimated $1.2 billion cost of the IGCC plant it's planning to build in northeastern Minnesota.) The department has also earmarked $100 million to support a handful of carbon-sequestration R&D projects around the country. But these are just warm-up acts for the administration's 10-year, $1 billion FutureGen project. When it's built late in this decade at a site that's yet to be determined, FutureGen will be the first power plant in the country, and possibly the world, to combine IGCC electricity production with the capture and geologic sequestration of CO2.

The Bush administration cites FutureGen as evidence of its commitment to sustainable energy production. Others wonder if it's a case of too little, too late. "When put up against things like the National Commission on Energy Policy's recommendation to deploy 10,000 to 20,000 megawatts of IGCC plants across the country in the next 10 years, one FutureGen project, which sometimes gets funded and sometimes doesn't, is extremely disappointing," says Rusty Mathews, senior legislative adviser at the Washington-based law firm Dickstein, Shapiro, Morin & Oshinsky, and a former Senate staffer who worked on the 1990 amendments strengthening the Clean Air Act.

The long-awaited energy bill that Congress passed just before the summer recess contains tax incentives and subsidies to produce electricity using clean-coal technologies. It also contains small incentives for power generation from wind, solar, and other renewables, as well as energy efficiency and conservation. But it fails to impose limits on greenhouse-gas emissions and provides generous subsidies for the oil and gas industry at a time when crude oil is selling for near-record prices. "The bill misses so many opportunities to change the fundamental direction of energy policy in this country," says Karen Wayland, NRDC's legislative director. "If it's not going to reduce the price of oil, address global warming in a serious way, or increase our energy security, what good is it?"

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Illustration: Jim Kopp

OnEarth. Fall 2005
Copyright 2005 by the Natural Resources Defense Council