COSTLY CLEAN COAL: The coal gasification project in Edwardsport, Indiana, began commercial operations in June 2013 but its price tag has jumped 84 percent.
By Rob Nikolewski │ Watchdog.org
Indiana recently pulled the plug on a proposed $2.8 billion coal gasification plant.
Another plant in the Hoosier State run by Duke Energy using similar technology has gone at least $1.6 billion over its original budget.
And in Mississippi, the price tag for the Kemper electrical generating station that promises to employ gasification — as well as carbon capture technologies — has skyrocketed from its original estimate of $2.8 billion to $6.2 billion.
Are large-scale coal gasification projects worth all the expense?
“If somebody makes a breakthrough technology it may be worthwhile, but so far it hasn’t made much financial sense,” said Dan Kish, senior vice president of policy at the Institute for Energy Research, a Washington, D.C.-based think tank that advocates for free-market solutions to energy issues.
“Coal gasification is not new. It’s been around at least 30 years,” said Alison Kerester, executive director at the Gasification Technologies Council, which advocates for the industry. “What’s new with Duke and Kemper is the scale … Anytime you’re going to scale up like that, you inevitably are going to have issues that come up during construction and initial operation that need to be resolved.”
Gasification is the process of turning any material that contains carbon into a natural gas-like substance called synthesis gas, known as syngas.
More power plants are looking to use coal to make the conversion, especially since tougher restrictions on coal have been imposed by the Obama administration and the Environmental Protection Agency.
“With coal gasification, it is easier to capture and eventually sequester the carbon dioxide from the coal,” Kerester said in a telephone interview with Watchdog.org, “because it comes off in a purer form and a higher pressure.”
But three projects have come under fire from critics ranging from environmentalists to taxpayer watchdogs who say the benefits are overhyped and the costs exorbitant.
Rockport, Indiana plant
“We saw it as a ridiculous project economically from the very beginning,” said John Blair, president of Indiana environmental group Valley Watch, after the state’s Department of Environmental Management rescinded an air-quality permit for Leucadia National Corp.’s planned coal gasification plant in the town that hugs the Ohio River in southern Indiana.
The project planned to use converted natural gas to heat homes. It was to be run by Indiana Gasification, LLC, a Leucadia National subsidiary. The state agency rescinded the air quality permit at the request of Leucadia because a key deadline loomed and the plant had not started construction.
The Rockport project’s director said he’s convinced the plant would have been a success.
“Our project was based on the principle that you never want to have all your eggs in one basket, as natural gas customers do today,” Mark Lubbers told the Indianapolis Star. “At today’s gas prices, consumers are doing great. Our plant would have come on line in 2019. My bet is that in 2020, people will wish this plant had been built.”
The project generated controversy over its agreement to have the state purchase the converted natural gas at a fixed rate for 30 years.
Critics claimed that since the deal locked in a price higher than the current low market price of natural gas, ratepayers would be on the hook.
“All the gas that we were going to buy was at least $6.60 a million BTU,” Blair told WHET-TV. “Right now gas is 42 percent of that figure.”
Kerester said the problem at Rockport wasn’t with the gasification process but the economics of current natural gas prices.
“At this point in time with predictions that there will be cheap and abundant natural gas for some time to come, I think the markets for coal gasification in the United States is a going to be a difficult one,” Kerester said.
Edwardsport, Indiana plant
The advanced technology at the Duke Energy gasification plant uses higher-grade bituminous coal that is converted to syngas to generate 618 megawatts of power.
It’s the largest plant in the country using what’s called an advanced integrated gasification combined cycle — IGCC — technology, which strips out pollutants from coal before it is burned.
When the state’s regulators signed off on construction in 2007, the price tag was estimated at $1.9 billion. By last month, the costs had jumped to $3.5 billion, an increase of 84 percent.
Output at the Edwardsport plant has fluctuated wildly, from as little as 1 percent in February 2014 to 71 percent last November to 20 percent last December.
Kemper plant in Mississippi
Run by the Southern Company, the Kemper gasification plant in Mississippi is designed to turn high-moisture lignite coal into syngas.
But the plant’s gasifier isn’t scheduled to go fully online until at least March 2016 and has been running since August on natural gas.
“We know it will work,” Ed Holland, president and CEO of Mississippi Power, said last month in a local radio interview. “If we go through the start-up process, I really don’t have any worries in terms of getting (the plant) to run in the ways we know it will run.”
Kemper has received $270 million from the U.S. Department of Energy.
There have been problems in Florida, too.
A first-of-its-kind plant by Tampa Electric was introduced in 1996, but ran into a host of issues in its first four years of operation. According to a 2002 Department of Energy report cited by Mississippi Watchdog, most of the problems have been resolved and the plant’s gasifier has been in service “around 80 percent of the time.”
Two other gasification projects in the state were scrapped in 2007.
Tampa Electric plant received $150 million from the Department of Energy for its gasification plant as well as $168 million in American Recovery and Reinvestment Act funds for the plant’s carbon capture program.
“When it comes to picking winners and losers, the government always seems to pick the loser,” the IER’s Kish said in a telephone interview.
But Kerester points to projects already up and running, such as the Wabash River Coal Gasification Repowering Project outside Terre Haute, Indiana, and the Dakota Gasification Company in Beulah, North Dakota, that sells CO2 via pipeline to Saskatchewan that’s used for enhanced oil recovery.
Earlier this month, Lebanon, Tennessee, announced it will go forward with a smaller-scale, $3.5 million gasification project. Instead of using coal, the plant intends to convert about 8,000 pounds of landfill waste into a fuel gas generating electricity.
“The technology has great promise,” Kerester said, adding that emerging countries are particularly interested.
An analysis by the Institute for Energy Research reports that China plans on building 50 coal gasification plants in its populated and smoggy northwest region.
Since China is rich in coal but short on natural gas, gasification makes sense and the IER report said gas-fired power plants emit up to 99 percent fewer criteria pollutants than coal plants.
But a Duke University study showed synthetic natural gas emits seven times the greenhouse gases of natural gas and almost twice as much carbon as a conventional coal plant.
“It can be a nice solution to local pollution, but its overall carbon intensity is worse, so it is not attractive at all from a climate change point of view,” Laszlo Varro, head of gas, coal and power markets at the International Energy Agency, told the BBC last year.