Underground storage allows gas users and traders to hedge against price volatility. Building more capacity will help North America fully integrate into global gas markets.
Utility projects advance the state of the art.
U.S. utility companies are engaged in a difficult transition. Environmental constraints, resource concerns and transmission-siting challenges are driving the industry toward a 21st century operating model whose shape is only starting to emerge.
Given this dynamic state of evolution, it’s not surprising that next-generation technologies are undergoing their own difficult transitions. Some new technologies are being embraced by the market, but others are struggling to gain regulatory and financial support. This transition is exemplified by four high-tech projects being executed by four electric utilities, including Duke Energy, American Electric Power, Consolidated Edison and San Diego Gas & Electric. Their projects address different parts of the power-supply chain, and they’re taking different paths to secure financing and regulatory acceptance.
Duke and AEP are striving to update the central-station coal model by introducing utility-scale integrated gasification combined cycle (IGCC) plants and carbon sequestration technology. In New York, Con Edison’s Hydra project provides a window to the future as urban utilities grapple with grid congestion. And SDG&E is looking beyond the horizon, toward an emerging distributed-resources model, and creating a smart micro-grid right in its own backyard.
Duke Energy Indiana (formerly Cinergy) is building a $2.3 billion 629-MW IGCC facility at its Edwardsport plant near Vincennes, Ind. The project is scheduled to go commercial in 2012 and will be the first to employ the standardized IGGC reference plant design developed under a General Electric/Bechtel alliance, employing GE (formerly Texaco) gasification technology.
With a service territory in need of additional generating capacity, Duke Indiana proposed an advanced, environmentally-friendly power generation technology that state regulators already were familiar with, and that could burn locally mined coal, thereby benefiting the state’s economy. Further, Duke opted to site the project at Edwardsport, an aging coal- and oil-fired power plant that’s due to be retired.
The proposal relied on an assortment of state and federal tax breaks that would make the overall cost comparable to a traditional least-cost power generation technology, with the possibility of an adjacent carbon sequestration pilot that, if successful, could further enhance the project’s environmental performance.
The Indiana Utility Regulatory Commission gave Duke its certificates of need and public convenience to proceed in November 2007, and the Indiana Department of Environmental Management issued an air permit in January 2008. Further, regulators granted a series of rate increases that will help pay for the new plant during the construction phase.
The rate impact of the construction costs partially will be reduced by more than $460 million in local, state and federal tax incentives. Duke says the plant will result in an average electric rate increase of approximately 18 percent, phased in from 2008 through 2013.
“While the project will cost 20-percent more (than traditional coal-fired technologies), the tax incentives helped bridge that gap,” says Duke spokeswoman Angeline Protogere. “As of March, procurement, engineering, and construction are 20-percent complete. General Electric will deliver the syngas coolers in