The D.C. Circuit’s CSAPR ruling reinforces the benefits of planning ahead and keeping options open. A diverse portfolio strategy reduces risks and costs.
Battle Royal: Pulverized - Coal vs IGCC
The battle for the future of coal-fired power is heating up. Recent developments give IGCC a fighting chance.
a bill supporting Excelsior Energy’s IGCC project—none have put ratepayer funds behind it.
In fact, in late 2003, Wisconsin authorities rejected Wisconsin Energy’s proposed 530-MW IGCC facility on the basis that the technology was not fully commercialized and the risks would impose an undue financial burden on Wisconsin ratepayers. (An appeal of the decision is pending in the Wisconsin Supreme Court.) And Ohio’s PUC, for example, has taken a favorable stance toward IGCC, but commissioners promise to hold AEP’s feet to the fire on cost issues.
“It’s easy to talk politically about the virtues of an IGCC plant, but you can’t just do it at any cost,” Ohio PUC Chairman Alan Schriber told Fortnightly. “We want to see something that is environmentally friendly, uses our own fuel, contributes to the tax base, and provides jobs, but we will not give a blank check to the utilities. No one knows how much an IGCC will cost at a commercial level.”
For AEP’s part, the company is seeking approval for costs that it will incur on an incremental basis, rather than attempting to appraise the entire package and present it to regulators. In other words, AEP is seeking rate recovery in phases—early engineering costs, advanced development costs, and, finally, construction and startup costs.
“It is time to constructively re-create the regulatory compact,” Morris says. “Regulators and utilities have exactly the same obligation to ensure cost-effective energy for the state. IGCC is a commitment to our customers that says, ‘I am going to be here for you.’ On that basis, we’ve made a filing in Ohio asking for a unique rate approach, and if the PUC sees things in the same sense, we will come to a reasoned conclusion to get it done.”
Success in Ohio—or any other state, for that matter—will be instrumental in IGCC becoming a primary technology option. Nevertheless, IGCC must overcome some tricky issues before it can realistically displace pulverized coal as the technology of choice for coal-fired generation. Most notably, IGCC presents practical risks that still make many utilities uncomfortable.
“We feel IGCC still has too high of a technology risk, especially for a multi-utility type of project,” Quick says, referring to the North Florida consortium of public-power companies. “We continue to look at it, but for a 2012 start date we don’t feel comfortable enough with the technology.”
This perspective is not just based on risk aversion; indeed, in the 1990s JEA built one of the largest FBC boilers in the country, and overcame significant hurdles to get the plant operating successfully. If any municipal utility is prepared to try out a next-generation technology, JEA is a likely candidate. But as a group, the members of the North Florida consortium have a peak demand of only 5,000 MW, which effectively magnifies the technology risk of IGCC.
This does not rule out IGCC for all public-power applications, of course; Energy Northwest, a joint operating agency of public power utilities in Washington state, is sponsoring a 300- to 600-MW IGCC project. Nevertheless, technology risk remains a concern.