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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