Cleaning up coal

Sunday, December 19, 2004

Cleaning up coal
Cinergy puts a new spin on an old technology

By Mike Boyer
Enquirer staff writer

Terry Ochs is fuel coordinator at Cinergy Miami Fort Station coal yard. Cinergy is considering a clean-coal plant.
The Enquirer/Meggan Booker

MULTIMEDIA

• The gasification process (11 MB PDF) (PDF)

Cinergy Corp. Chairman James Rogers likes to use an expression on taking risks that he picked up when he worked in the Texas gas business: "The pioneers get the arrows, and the settlers get the land."

Nevertheless, Rogers is leading Cinergy, whose coal-fired electric plants have been a frequent target of environmentalists, on a pioneering effort to build a $900 million clean-coal generating plant in Indiana.

"I think it's a manageable risk," said Rogers.

The parent of Cincinnati Gas & Electric is expected to make a decision early next year about whether to go ahead with the project, its first new around-the-clock generating plant in more than a decade.

Its options include repowering a 50-year-old plant near Vincennes, Ind., or building a new plant on CG&E-owned land near Patriot in Switzerland County.

Columbus-based American Electric Power is considering a similar $1.6 billion clean-coal plant in one of seven eastern states it serves, including Ohio, Kentucky and Indiana.

Both utilities, which combined annually burn more than 100 million tons of coal, say they'll need additional generating capacity by about 2010, when the plants would begin operations.

Cinergy, which says it needs about 1,000 megawatts of additional capacity in central and southern Indiana, envisions a 600-megawatt generating plant to fill much of that gap. A megawatt is typically described as the power consumed by 1,000 homes in a year.

AEP, which is about three times larger than Cinergy and the nation's largest electric generator, envisions a plant about twice as large, up to 1,200 megawatts and costing more than $1.6 billion.

A confluence of rising environmental pressure, the availability and abundance of coal and the rising cost of alternative fuels such as natural gas is pushing both utilities to embrace technology to produce electricity not by burning it but by turning it into a synthetic gas to run generators.

But there is much at stake for customers. Based on projections that conventional fuels such as natural gas will continue to rise in price in the coming years, Cinergy said it believes coal-gas fired generating would be more favorable to rate-payers in the long term.

The discussion over such power plants is giving coal a better reputation among environmentalists and raising its status as not just a past source of power but one for the future as well.

"Hands down, it's a much cleaner technology than conventional coal plants," said Kurt Waltzer of the Ohio Environmental Council in Columbus.

James Childress, executive director of the Gasification Technologies Council, an Arlington, Va.-based trade group, said Cinergy and AEP are leading the charge for coal gasification in the United States.

"They understand to use coal in the U.S. in the long term, you've got to gasify it," he said. "I don't think there's a major utility in the U.S. that's not looking at it seriously today."

The technology

Gasification is environmentally cleaner than a traditional coal-fired generating plant for two reasons.

First, pollutants such as sulfur dioxide, nitrogen oxide and mercury are removed from the gas before it is burned rather than trying to capture them as they go up a smokestack. That is more efficient and less costly.

AEP said the gasification process removes 99 percent of sulfur dioxide and mercury emissions before the gas is fed into the gas turbine, and nitrogen oxide emissions are about half those of a conventional coal plant. The "slag" left over after gasification is about half that from a traditional coal plant.

Second, AEP and Cinergy believe they eventually will face government restraint on emissions of carbon dioxide into the atmosphere. Carbon dioxide is a greenhouse gas identified as a leading culprit in theories of global warming.

"When I look out 30 years I think there's a very good chance we'll have some type of carbon regulation," Rogers said.

Because it's more efficient, carbon dioxide emissions are smaller with coal gasification. It is also easier to separate carbon dioxide from synthetic gas.

Advocates of coal gasification see other benefits.

One is that it can use higher-sulfur coal such as that from mines in Ohio and other eastern states that have been shut down because of tighter rules on sulfur dioxide emissions.

"Coal is an important domestic fuel source, and we need to continue to use it," said Melissa McHenry, AEP spokeswoman. "We think it (coal gasification) is the right technology going forward."

To the extent coal gasification becomes widespread, it could lessen demand for natural gas. That eventually could mean lower costs for consumers who use natural gas to heat their homes.

"Gasification technology isn't just good for utilities," said William Rosenberg, a Harvard University fellow who has developed a financing plan designed to make the plants more affordable.

"It's also important to keep jobs in America by allowing industries to make syngas instead of having to buy high-priced gas from the pipelines." he said.

Another advantage is that gasification allows valuable chemicals such as methanol and hydrogen to be produced at the same time.

"We've actually had some interest from chemical companies who want to take some of the syngas for their chemical processes,'' said Rogers.

Weighing the risk

The downside of coal gasification is that right now it is significantly more expensive than a traditional coal-fired generating plant.

Bob Moreland, Cinergy's general manager of analytical and investment engineering, estimates the cost of a coal gasification plant in the range of $1,500 to $1,700 per kilowatt, while a traditional coal-fired plant would cost between $1,300 to $1,500 per kilowatt.

The other issue is that the technology is a marriage of a traditional electric plant with a chemical process that isn't familiar to utilities.

"It's not new technology, but there aren't thousands of these plants out there," said Moreland.

He said utilities require a learning curve to understand how the process works and the issues it raises.

Rogers believes Cinergy can manage the risk through a partnership with General Electric Co. and Bechtel Corp., which would design and build the plant, and by getting the go-ahead from utility regulators on recovering costs from ratepayers before starting to build.

Rogers said the investment community is comfortable with Cinergy's strategy. He points to the fact the company's stock hit an all-time high of $42.42 the day after Thanksgiving, shortly after it announced an agreement with GE and Bechtel. The stock closed Friday at $41.83.

"Our job with GE is to find a way to get the costs where they'll be competitive with (a traditional coal plant)," said Cinergy's Moreland.

GE is the leading supplier of gas-fired turbines in the world. Last summer it signaled its interest in being a major player in the coal gasification market by acquiring a leading technology supplier, ChevronTexaco Worldwide Gasification Technology Inc.

And in October, GE teamed with Bechtel Corp., the international engineering and construction firm, to offer a turnkey package to electric utilities.

"The fact GE has stepped up to the plate to back the technology is important," said AEP's McHenry.

"In the past, you could buy the plans for a gasifier and then take it to an engineering company and they'd build it and you bought a gas turbine from someone else."

The environment

Environmental groups, at odds with both utilities over pollution, see benefits in coal gasification.

"It has the potential to get to near zero emissions on most conventional pollutants," said Waltzer. And, "it's cheaper and easier to get carbon dioxide out of an IGCC plant than a conventional coal plant."

But some consumer groups think that instead of building more electric plants, utilities and state regulators should do more to encourage energy efficiency and conservation through tax credits and incentives and by deploying more renewable energy resources.

"There's no doubt it (coal gasification) is cleaner than a traditional coal plant," said Grant Smith, executive director of the nonprofit Citizen Action Coalition in Indianapolis.

But, he adds: "Nothing is quicker and cheaper than energy efficiency. For every dollar you spend on energy-efficient, you save $2."

What's ahead

Cinergy's Rogers said the utility is spending money to slow demand growth, pointing to more than $150 million spent over the last decade to reduce peak demand in Indiana by about 150 megawatts. He said Cinergy will continue to encourage more efficient electric use, but that won't reduce all the future demand.

Cinergy also is looking at renewable energy resources such as wind-power turbines to meet some of its demand.

"The important point on wind is you can't count on it when you need it, and there's no way to store electricity," Rogers says.

Although hydrogen production is not a primary motivation for gasification, some gasification advocates think such plants could someday be a source of hydrogen to power vehicles. Pure hydrogen is a byproduct of coal gasification.

"The reality is, coal has a great chance of being a hydrogen source because it's such a cheap fuel," said Peter Savage, a Maine-based chemical engineer and consultant who recently co-wrote a study on the advantages of coal.

Rogers agrees coal gasification holds promise. But he's cautious about the risk of becoming too reliant on the technology.

"Based on what we know today, coal gasification is going to be an important technology for the future - but not the only technology."

E-mail mboyer@enquirer.com