Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Coal Gasification Gets Real

The technology works, but public policy will dictate its future.
Fortnightly Magazine - January 2005

Skies legislation clearly favors life extension at big, dirty PC plants over new clean-coal plants," Simbeck says. "And from a purely economic perspective, the choice is clear: Relicense the big dirties forever. In fact there is no economic value for a company in reducing emissions."

In a scenario where cost continues to trump the environment, an IGCC investment would be little more than a red herring. "It has a lot of sex appeal and neutralizes the environmentalists," Simbeck says. The "red herring" role would translate into a few medium-sized IGCC plants being developed slowly over the next decade, but no rapid tidal shift toward gasification.

Put another way, global warming and energy security are long-term issues, and stock performance and profitability are immediate concerns. When immediate concerns conflict with long-term ones, human nature usually favors the immediate.

Thus the future of IGCC remains unclear, despite some promising developments. In the short term, government support for at least a few projects likely will force IGCC's transformation from a demonstration technology into a prime-time commercial one. The involvement of companies like GE, Bechtel, and Conoco Phillips supports such a transformation.

Beyond that, however, IGCC's future might depend on state-level decision makers and environmental advocates. To the degree advocates make the case for long-term thinking and public utility commissions pursue long-term public policy goals through ratemaking decisions, IGCC might well become the technology of choice for the next generation of coal-fired power plants. But it won't happen on a purely economic basis, no matter how compelling or laudable the public policy benefits might be.

R&D Investment

When the U.S. Department of Energy announced the winners in the second round of its Clean Coal Power (CCP) initiative, one project took the lion's share of the funds: a 285-MW, air-blown integrated gasification combined-cycle (IGCC) project being developed by Southern Co., Orlando Utilities Service, and Kellogg Brown & Root.

The Orlando project's $235 million grant accounts for 78 percent of the CCP initiative's $300 million round-two disbursement, and it represents a significant share of the DOE's total $600 million budget for fossil energy R&D. As such, it illustrates a fundamental problem with federally funded energy R&D projects; namely, the federal cash cow has nowhere near enough milk to feed the industry's research needs.

In the past five years, Congress has increased funding for the DOE's fossil energy R&D programs, from about $404 million in fiscal year 2000 to $603 million for fiscal 2005. While this funding increase is substantial in percentage terms, it represents a paltry sum for what many see as America's most critical R&D funding need.

Energy R&D Crisis

In the late 1990s, researchers Robert Margolis and Daniel Kammen studied energy R&D funding and technology patent awards in the United States, and they reported a disturbing trend in the journal Science-namely, "the energy sector dangerously underinvests relative to other technology-intensive sectors of the economy" ("Underinvestment: The Energy Technology and R&D Policy Challenge," , July 1999). Energy technology R&D investments, both government and private, dwindled steadily over two decades, going from a combined $12 billion in