A decision early this month by the U.S.'s largest electricity producer could pave the way for commercial use of a new generation of cleaner coal-fired power plants, changing the energy picture for the nation and possibly the world. On Sept. 1, American Electric Power (AEP) announced it would build by 2010 a 1,000-MW integrated gasification combined-cycle (IGCC) power plant (C&EN, Sept. 6, page 33).
Gasification technology has been used by refiners, chemical companies, fertilizer manufacturers, and others to generate synthesis gas (mostly a mixture of carbon monoxide and hydrogen) for production chemicals and other products. And in some cases, syngas has been used to turn turbines and generate electricity, but in most instances, power generation has been seen as a by-product of the primary manufacturing operation, and electricity has been produced in quantities far short of the size of AEP's planned power plant.
For a decade, the Department of Energy has promoted gasification technology over traditional pulverized coal power plants. Along with industrial partners, DOE has built two demonstration IGCC power plants in the 250- to 300-MW range because of their superior environmental performance and efficiency.
Compared to pulverized coal plants, IGCC facilities emit far less mercury, sulfur dioxide, nitrogen oxides, and other pollutants; they have nearly double the 35% efficiency of conventional coal-fired plants; and they make collection of carbon dioxide, a greenhouse gas, far easier than it is in conventional coal plants. However, they cost about 20% more to build than conventional plants, and energy companies have been unwilling to take a chance on a more expensive and new technology (C&EN, Feb. 23, page 20).
Yet the Bush Administration and DOE are undaunted, and with some industry partners, they are now planning the FutureGen clean-coal project, a $2 billion IGCC demonstration project. This one would produce pure hydrogen to run fuel cells and turbines as well as capture and attempt to sequester CO2.
But James M. Childress, executive director of the Gasification Technology Council, a trade association of gasification companies, thinks that, if AEP follows through on its announcement, the technology may advance so quickly that DOE's FutureGen project will become irrelevant.
Childress says there are about 400 gasifiers operating in 10 nations, most producing chemicals and liquid and gaseous fuels for a host of products. About 19% produce power.
"But this is a turning point," he says. "This plant will be built by people who know what they are doing, and its success will be virtually 100%." He predicts that other utilities that have held back, saying IGCC won't work or costs too much, will now move ahead. He also believes that state public utility commissions, which have been cool toward approving IGCC because of cost and newness, are likely to change their views and approve the projects.
MUCH COULD depend on AEP's success. If IGCC installations grow worldwide, and if ongoing R&D projects to sequester CO2 turn out to be feasible, IGCC could knock coal from its current position as the world's dirtiest fuel and biggest contributor to global warming.
The U.S. and the world rely on coal for most of their electricity; nearly half of global CO2 emissions come from burning coal. Worldwide coal use for electricity is projected to increase by 1,440 GW by 2030. The growth will be led by China, the U.S., and India, according to figures from the Paris-based International Energy Agency. By 2030, IEA estimates that China will have 696 GW of coal-fired power.
So far, one other power generator, Cinergy Corp., is considering using IGCC. Cinergy has begun engineering and site analysis for a plant, Cinergy spokesman Steve Brash says. The company is considering constructing a 500-MW facility and hopes to have a site application filed by the end of the year, he says, although he would not say where. Cinergy, Brash says, is aiming for a completed plant by the end of the decade.
Brash notes that Cinergy has gained experience with IGCC technology through its DOE partnership at the Wabash River IGCC demonstration project in Indiana.
Both AEP and Cinergy are exploring a funding plan developed by Harvard's Kennedy School of Government to help overcome doubts by states, utility commissions, and lenders. The plan proposes a combination of federal loan guarantees and long-term purchase commitments by state and utility commissions to provide the stability needed to encourage investment in the first IGCC units.
The force driving these companies to consider this technology is a combination of potential future CO2 emissions regulations; the availability of cheap, abundant coal; and the high price of natural gas. Natural gas turbines with low construction cost and low emissions were the generator of choice only a few years ago. However, gas prices have now tripled, idling many gas turbines and pushing utilities to hunt for new fuel for electricity.
The outcome will affect all gas users, particularly some U.S. chemical companies that use natural gas for feedstock and fuel and have been hard hit by high gas prices. They would welcome any drop in competition for natural gas (C&EN, Oct. 6, 2003, page 8).
AEP's decision was initiated by a report to stockholders on the potential economic impact of emissions regulations. The report was prepared by a three-member panel of AEP's board of directors, chaired by Robert W. Fri, visiting scholar and former president of Resources for the Future, an economic think tank.
The report was requested by AEP shareholders, including the State of Connecticut and several religious organizations, that hold large blocks of stock through pension funds. They were worried, they said, about the risk to shareholders posed by the company's air emissions, particularly CO2 emissions, which are the highest of any U.S. utility.
The AEP panel produced a 100-plus-page document analyzing the economic impact of several legislative approaches being considered to reduce CO2 and other emissions as well as the impact of pollution control technology options.
THE REPORT SUPPORTS AEP's pollution control efforts over the past decade and notes that the company plans to spend $3.5 billion on pollution controls by 2010 and another $1.5 billion between 2010 and 2020 out of revenues that last year were $14.5 billion.
But the report warns that after 2010, the impact of environmental legislation now being proposed could materially alter AEP's financial condition. It notes that "mandatory carbon constraints in the long term appear probable," despite opposition in Congress and the Bush Administration.
After 2010, the report says, it is increasingly likely that investments in conventional pollution control technologies will become "stranded," that is, forced into premature retirement before their capital costs can be recovered as a result of unforeseen restrictions on greenhouse gas emissions that will render the plants inoperable.
"Enough is known about the science and environmental impacts of climate change for us to take actions to address its consequences," the report continues. It also notes that today's pollution control technologies can improve air quality, but they draw more and more energy, thereby reducing the efficiency of power generation stations, and raising CO2 emissions.
The report says the economics will get worse in the future with the addition of the high cost of capturing CO2 from flue gases exiting pulverized coal plants, raising their costs of electricity by 30 to 50% while making IGCC more competitive.
AEP's report considers nuclear power as an alternative for new construction because of its zero CO2 emissions but warns that "issues of public acceptance, capital costs, and waste storage must be resolved if a nuclear renaissance is to occur in the U.S."
More than 60% of AEP's generating capacity is coal based, and in an accompanying statement, AEP CEO Michael G. Morris says building the IGCC unit is needed to "ensure that we can continue to burn coal economically while reducing our emissions."
The plant will be built in an eastern coal state, says Pat D. Hemlepp, director of AEP corporate relations, near the fuel source and where a regulatory climate favors state and public utility commission approval.
He expects the costs to be between $1.3 billion and $1.6 billion for the first 1,000-MW plant, 20% above the price for conventional coal-fired plants. The costs will drop with each new unit, he adds.
"We knew that, whatever type of pulverized coal plant we put in, we would have to come back periodically and add more environmental controls," Hemlepp says. "We didn't want those retrofit issues."
Melissa McHenry, also from AEP, says the company found itself increasingly adding more complex chemical equipment to the back end of its power plants in order to capture pollutants and comply with environmental regulations. With IGCC, she says, this will end. "We will concentrate all the chemical action in one place in the front end, preparing the gas before it goes to the power turbines."
The IGCC technology, she adds, will give AEP greater choice in coal. For instance, the company can burn some high-sulfur coals that it shunned in the past because IGCC virtually eliminates SO2 emissions.
The biggest problem for AEP has been finding a gasification technology vendor to back the IGCC project.
"We could buy the specs," McHenry says, "but there was nobody to come forward and stand behind this plant that we want to operate for 20, 30, 40 years." AEP, she says, has now cut a deal with GE Energy, which recently purchased ChevronTexaco's gasification technology business, to construct the unit. She notes that GE has a long history of experience in the gas turbine and energy business.
"This is no science project," says Dennis Murphy, a GE Energy spokesman. The company will marry its turbines to the gasification process, he says, "rounding out what we provide to customers."
Environmental groups have championed the technology but are holding back on their enthusiasm over the announcement. "These words are nice, but what matters is what the actions will be," says David G. Hawkins, director of Natural Resources Defense Council's Climate Center. However, he says, AEP's and Cinergy's views show a "seriousness of purpose" that may influence the rest of industry.
Hawkins notes that the three main gasification technology companies--GE, Shell Global Solutions, and ConocoPhillips--all have shown renewed interest in exploiting this market, and he hopes the U.S. will lead the world in making IGCC the technology of choice for coal-fired plants.
"U.S. leadership is the tried-and-true path to success," he says. "We did it with automobile pollution controls, removing lead from gasoline, and adding scrubbers to power plants, and the rest of world, including China, followed."
His fear, Hawkins says, is that if coal gasification is successful, the government may ease the pressure for renewables and efficiency.