October 2009

State News: August 2009


Pursuing Cleaner Coal

With an eye to making coal more environmentally friendly, states and the industry seek ways to make the numbers work, especially in a weakening economy. Although the technology is expensive, Texas is proposing a tax break and aims to stimulate coal projects that capture CO2 and use it for enhanced oil recovery, injecting it deep underground.
By Mikel Chavers
“What we’ve got is all our commodity eggs in one fuel basket.”
That’s the underlying issue in Texas, said Texas Rep. Phil King. And that’s one reason the state is pursuing cleaner coal for power, King said.
Texas makes about 70 percent of its energy capacity for producing electricity with natural gas. In order to continue to be able to provide affordable and reliable power, “we have to diversify our fuel mix,” King said.
“But the problem with coal is I don’t know if you’ll ever be able to build another coal plant unless you do some form of carbon sequestration—carbon capture,” King, from Weatherford, Texas, said.
But here’s the problem: That so-called clean coal technology for the next generation of coal-fired power plants is expensive, and King said companies are having a hard time getting over what he calls “the prototype penalty.” He is proposing House Bill 469 this session that incentivizes cleaner coal power plants in Texas.
Under the bill, new coal-fired power plants would have to capture at least 60 percent of the carbon dioxide emissions they give off and be able to put the captured gas into a pipeline to be pumped underground.
For companies doing that, the bill creates a $100 million tax credit against the business tax in Texas—that’s per project for a maximum of three projects statewide. It gives the tax credits only after the plant is in production.
The thought is by the time a few of the next generation cleaner coal-fired power plants are built, “Wall Street won’t be so afraid to finance them,” King said. These new coal-fired power plants could be billion dollar projects.
“Everybody believes you can do it, but everybody’s having trouble making the numbers work to do the first few,” King said.

Prototype Penalty

And although capturing carbon dioxide gas and putting it into a pipeline is not exactly new technology, said Thomas Sarkus of the National Energy Technology Laboratory, it hasn’t been put into action when it comes to coal-fired power plants producing electricity.
It’s already being done in the oil fields of West Texas where oil companies use enhanced oil recovery techniques that pump carbon dioxide gas into the ground to squeeze out all the remaining oil.
It’s also being done in North Dakota at a gasification facility where coal is gasified to produce synthetic natural gas. That gas is pumped by pipeline from North Dakota into Canada.
Similarly in Texas, oil companies pipe in carbon dioxide from New Mexico—they import it—to inject into the ground, squeezing out every last bit of oil in the oil fields, King said.
“So we’ve already got a business model that’s working out there and using carbon dioxide to enhance oil field recovery,” he said. “The problem was investors are very, very nervous about building a prototype clean coal plant.”
Here’s why. “It’s expensive,” Sarkus said.
The cost of capturing the carbon and storing or piping it somewhere—perhaps underground—varies from a 30 percent to 80 percent increase in the cost of electricity, he said. It’s more expensive to retrofit old plants with the technology that’s capable of capturing the carbon and storing it. The 30 percent increase applies more to new plants built with the technology.
If capturing the carbon is going to be done post-combustion, or after the coal is fired, “you’re going to need some sort of retrofit technology that you can put on coal plants,” said Ned Leonard, vice president for technology policy at the American Coalition for Clean Coal Electricity.
And that’s where the technology could add closer to an 80 percent increase to the cost of electricity, according to Sarkus.
Pre-combustion, or before the coal is fired—that’s where the integrated gasification combined cycle projects like the ones Texas is hoping for with H.B. 469 come in—also are expensive but not as pricey in terms of money and energy costs as post-combustion, Leonard said.
Not only is it expensive, but the electric power industry is typically a conservative industry, Sarkus said. “The people in the industry take their reliability of service very seriously,” he said. “They will only invest in new technologies that achieve and demonstrate.”
Because when a source of electricity goes down, it’s a big deal—take blackouts, for example, Sarkus added.
“If there’s a disconnect, it’s that nobody has ever blended a coal project and enhanced oil recovery into a single project—and that’s what we’re trying to do and that’s the prototype side of this,” King said.
Also under the bill in Texas, oil and gas producers would get a discount in their tax structure as long as they’re buying carbon dioxide from that cleaner coal plant, instead of importing the gas from other states.
At the same time—and this goes back to the cost of the technology—liquefied carbon dioxide is an awfully expensive byproduct, Leonard said. “When you inject the CO2 in the ground it has to be a liquid,” he said.
“Enhanced oil recovery is probably where carbon sequestration is really going to take hold—because you can make money doing it,” Leonard said.
And that’s perhaps why Texas seems to be in a different spot than most states. Since the price of natural gas has increased, Texas consumers have seen their electric bills increase as well, King said.
“We have a unique situation here in Texas, we’ve got too heavy of a dependence on natural gas for making electricity—that’s running the price up for consumers. We’ve got coal here in Texas and close enough that we can get it here from other states as well. We also have a business in place with infrastructure in place to get (the liquefied carbon dioxide) to the wells.”
What’s more, “it has the benefit of helping our electric consumers and it has the benefit of helping get more oil out of the ground which is a frankly a national issue,” he said.

Making Believers

But some say clean coal technology is a misnomer and just a marketing and public relations scheme by big coal companies to keep their product relevant.
The Reality Coalition, an organization that includes the League of Conservation Voters, the Natural Resources Defense Council, the National Wildlife Federation and the Sierra Club as members, said, “In reality, there is no such thing as ‘clean’ coal in America today,” according to the group’s Web site. “Coal cannot be called ‘clean’ until its CO2 emissions are captured and stored safely,” Reality reports.
Steve Running, a Nobel prize recipient and University of Montana professor, is another skeptic. He’s not a big fan of what Montana Gov. Brian Schweitzer is touting as environmentally friendly clean coal.
Although Running is not an expert in clean coal technologies, he thinks that capturing the CO2, concentrating it, then piping into an injection point only to pump it thousands of feet underground is hardly worthwhile.
“All of this is possible, but it costs a lot of money and energy, dramatically reducing the final efficiency of the generating plant and raising the cost of power produced,” Running said. “So until better ways are found to capture and use the stack CO2, I find ‘clean coal’ to not be a viable strategy with these types of plans.”
Running works with the University of Montana’s Numerical Terradynamic Simulation Group, a lab pioneering new approaches for addressing regional ecological problems.
But clean coal has made a believer out of former Dallas, Texas, mayor Laura Miller.
Miller fought dirty coal for years while in office, fighting a number of old-generation coal-fired power plants in Texas. So when people say clean coal is a myth and a misnomer, “three years ago, I would have probably believed them,” Miller said.
But she’s seen the technology to make coal cleaner. She’s been to clean coal facilities in Italy and Brussels—“I know that clean coal does exist.”
The new aspect in the U.S. is adding the carbon capture side to the mix, Miller said. Now state government officials have a choice, she said. “You can fight it one dirty coal plant at a time or you can raise the bar and force all the other coal plants to be cleaner.”
And that’s been done before, said Sarkus with the National Energy Technology Laboratory. Making coal cleaner has changed over time. When a clean coal program first started in the U.S. Department of Energy in the 1980s, promoting cleaner ways of using coal in the early days meant using technologies that addressed acid rain, sulfur dioxide and nitrogen dioxide, he said. That’s now grown to include mercury emissions and, in more recent years, the definition has expanded to focus on CO2.
Miller is such a believer in clean coal, she now works for Summit Power, based in Denver, Colo. Summit Power is basically acting as the developer in a proposed clean coal project near Odessa, Texas. That project would be an integrated gasification combined cycle plant, which means the plant would turn coal into gas.
The proposed 354-megawatt plant would use clean coal technology from Siemens to produce electricity using coal. Plans for the project have 170 megawatts of electricity going to the electric grid and the rest of the electricity would be used to compress that CO2 gas and pipe it to oil fields for enhanced oil recovery, Miller said.
But although the site for the plant is ready for construction, Miller said the local incentives for the plant haven’t turned out to be enough for the project to move forward.
“Because of the market meltdown, it’s become so difficult to build these projects,” Miller said. “We have asked for some financial incentives to help—the state legislation is very important to that effort.”
Miller said the Summit Power plant should be able to capture well above 65 percent of its carbon dioxide emissions, more than the requirement in the proposed Texas bill.
It would be cleaner than the cleanest natural gas-fired power plant under California or Washington regulations for fossil fuel plants, Miller said. Those states have the strictest regulations in the country.
Summit Power’s project isn’t the only project in the running for the proposed Texas tax credit.
“The bill isn’t specific to any company—it’s Texas-wide,” King said. If the company’s technology is approved, then it will get the tax credits on the tail end.
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