Read this then lets talk about those prices
http://news.medill.northwestern.edu/chicago/news.aspx?id=92169As the rest of America wrestles with how to meet spiking energy demand while keeping costs and greenhouse gas emissions low, energy provider Duke Energy Corp. and the residents of Knox County, Ind., are at ease.
These southwestern Hoosiers are looking forward to the construction of Duke Energy Indiana’s $2.35 billion coal gasification plant in the White River town of Edwardsport, Ind. It's a new-technology venture that will use local Illinois Basin coal to succor the growing energy needs of a state reliant on its fuel-guzzling agricultural and manufacturing industries.
Although it's the most abundant fossil fuel in the country—and therefore the cheapest—coal is notoriously dirty when burned, producing emissions with high levels of carbon dioxide and sulfur. Duke’s new integrated gasification combined cycle (IGCC) electric power plant will capitalize on Indiana’s vast coal reserves without exacting so high a toll on the environment.
According to Jack Stultz, the future manager of the Edwardsport IGCC plant, coal costs $2.15 per million Btu, or British thermal units, a measure of energy, versus $12 per million Btu for natural gas.
Coal gasification, according to the Gasification Technologies Council based in Arlington, Va., converts fuels such as coal and petroleum coke into a synthetic gas; the so-called syngas is then treated to remove pollutants including sulfur, mercury and carbon dioxide.
“This particular plant is going to be much cleaner than the current Edwardsport plant,” said Knox County Councilman Bob Lechner. “We’re improving our community—not only economically but also environmentally. It was a natural win-win situation for the county.” The state legislature also applauds the plan.
Despite the 18 percent energy rate hike that will result from the plant’s costly construction, and despite the common distrust of any energy production involving coal, local residents and most local environmentalists are strongly supportive of the IGCC plant.
“On the side of the environmental issue, certainly we’re vitally concerned about that,” Knox County Development Corp. President Gary Gentry said. “It’s our home, it’s where we live. The foundation of our economy is built on our agricultural capabilities and we certainly don’t want to do anything that would erode that foundation.”
According to the State Utility Forecasting Group, an organization that predicts statewide electricity consumption, prices and resource requirements, an additional 1,290 megawatts of base load resources will be needed by 2012; one megawatt is enough to power 330 average-sized houses at any one time. This requirement greatly influenced Duke's decision to build a new plant, particularly given that, with 800,000 customers, Duke Energy Indiana is the state's largest energy provider.
The IGCC, which will replace Duke’s current 60-year-old, 160-megawatt coal-fired Edwardsport plant, will be a 632-megawatt plant, which is adequate capacity to power approximately 200,000 houses.
Once completed, the Edwardsport IGCC will be the largest of its kind, although two first-generation IGCCs have been operating commercially in Terre Haute, Ind. and Polk County, Fla. for more than a decade.
The Terre Haute site includes the 260-megawatt Wabash River Coal Gasification Repowering Project, owned by Wabash Valley Power Association, a cooperative Indiana energy provider. The U.S. Department of Energy contributed $219 million to the project to help develop the coal gasification technology, Duke’s Web site reports.
At Terre Haute, sgSolutions LLC runs the gasification facility while Duke Energy Indiana and the Wabash Valley Power Association use the synthetic gas in their energy production.
An IGCC plant uses the gas, in combination with traditional steam turbines, to produce electricity more cleanly than older generation coal-fired plants. To that end, an IGCC provides for sulfur reduction 10 times greater than the level required by the federal government, and the level of particulate emissions is four to five times lower than federal standards, Stultz reported.
The current 160-megawatt Edwardsport plant runs approximately 30 percent of the time and produces 11, 000 tons of emissions—sulfur dioxide, particulate, mercury and nitrogen oxide—per year.
The 632-megawatt IGCC plant, which will run approximately 85 percent of the time, will produce 2,900 tons of air pollutants per year. And although the new plant will produce more carbon dioxide emissions overall, the IGCC will produce 45 percent less carbon emissions than the current plant on a megawatt-hour basis.
Duke’s decision to build an IGCC took into consideration these environmental benefits as well as what the company believed to be the roadblocks involved with other energy sources: the significantly higher cost associated with natural gas and the unreliability of alternative energy sources such as wind and solar power were contributing factors, Stultz explained.
“Indiana is a coal state,” Stultz affirmed. “Coal is a cheaper fuel than some of the other options and Indiana has a vast reserve of readily available, reasonably priced fuel.”
Indiana has become a “coal state,” as Stultz puts it, because a large chunk of southwestern Indiana sits on the Illinois Basin, a structural depression in the earth filled with sedimentary rock that stretches under parts of Illinois, Kentucky, Missouri and Iowa as well.
In fact, Illinois is positioned to follow suit. According to an e-mail from Marcelyn Love, spokeswoman for the Illinois Department of Commerce and Economic Opportunity, Secure Energy Inc. is developing a $500 million gasification plant in Decatur and Christian County Generation LLC is working on a 630-megawatt IGCC southeast of Springfield.
In Indiana, organized development of the state’s coal resources began in the 1830s, and by 1918 production exceeded 30 million short tons, according to the Indiana Geological Survey. Indiana has approximately 57 billion tons of un-mined coal, of which nearly 17 billion tons is recoverable using current technology, the Survey reports.
“That coal enables the residents of the Midwest to have available to them the most economically affordable electricity source in the U.S.,” said Gentry. “And that’s why the manufacturing industry is clustered in the Midwest. The dynamics of the economics of coal is so interlaced. You see it everywhere, all about you; it makes us who we are economically.”
The Indiana Department of Environmental Management has issued a permit for the Edwardsville IGCC, indicating the plant’s compliance with all state and federal air pollution requirements.
“IDEM permitted the Duke Energy Edwardsport facility based on these environmental regulations .... This plant will be a showcase for new clean coal technology, assisting our nation in producing electricity in a more environmentally sensitive manner,” IDEM spokesman Robert Elstro said in an e-mail.
Yet, despite IDEM’s approval, as well as thumbs-up from conservation organizations such as the Clean Air Task Force and the Indiana Wildlife Federation, the Sierra Club and the Citizens Action Coalition of Indiana are vocal in their opposition.
“In Indiana they are locked into this coal addiction problem,” opined Bruce Nilles, director of the Sierra Club’s national coal campaign. “Public officials who are beating this drum are doing a disservice to Indiana because the state will be left behind in this clean energy economy.”
Instead of coal, which he says has a “legacy of destruction with the coal mining and the carbon emissions,” Nilles champions using alternative energy sources such as wind and solar power and encouraging state residents to consume energy efficiently by renovating old buildings and cutting electricity usage.
“There are times when the wind doesn’t blow and there are times when the sun doesn’t shine and there are times when the coal plants don’t work when they need maintenance,” Nilles said. “The U.S. Department of Energy said you can meet 20 percent of your energy needs with wind power and Indiana is at 1 percent. What does Indiana know that the government does not?”
In addition to the necessary environmental permits, the Indiana Utility Regulatory Commission last year granted certificates of need after several hearings attended by local citizens and environmentalists.
Although most of the environmentalists were attending in protest, residents from surrounding Knox County communities showed up to demonstrate their strong support.
“I have yet to hear a negative comment about this plant from someone in my district,” remarked state Rep. Kreg Battles. “I’ve lived in Knox County my entire life and I have never seen a community rally around a project like this. At the IURC hearing scheduled in Bloomington, we had almost 400 people testify from Knox County in support.”
Lechner and Gentry corroborated Battles’ account, noting that busloads of people were driven from their hometown of Vincennes to Bloomington for the August 2007 hearing.
In light of the fact that the IGCC plant is a multibillion dollar endeavor and some of those costs would be transferred to consumers, the rate increase also had to be approved by the IURC.
The rate hike, according to Stultz, will be 18 percent, phased in between 2009 and 2013. The project is also being financed in part by $460 million in federal, state and local tax incentives.
“It’s almost the mantra of traditionally regulated states: safe and reliable service at just and reasonable rates,” IURC spokeswoman Beth Roads asserted. “Part of ‘safe and reliable’ is that we have enough electricity so we don’t experience the blackouts that happen in other states; and the other part is, if we’re talking about safety issues and encouraging technology, that’s better for the environment, that will go into part of our consideration.”
Although the increased cost to everyday consumers was a concern, the effect on the manufacturing industry—a major player in Indiana’s economy—was also on Gentry’s mind when the Knox County Development Corp. weighed the pros and cons of the IGCC.
“The rate increase is not easy on our manufacturing industries that are competing globally, but it’s only one of many factors they have to take into consideration,” Gentry said. “Not to do this project because it raises the cost of electricity production by 18 percent would not be a good choice.”
According to Patrick Kiely, president of the Indiana Manufacturers Association, Indiana has always been a low-cost electricity state and the IMA would be concerned by any project that ramps up costs for its members.
The IMA recognizes, however, that building new energy facilities that reduce emissions is preferable to retrofitting archaic plants with scrubbers, which is why it supports the IGCC.
“We know we need new base load in this state and we have an aging fleet with the coal-fired stuff,” Kiely stated. “Everybody’s going to see rising energy prices regardless. Certainly we want to do something here that makes sense: taking advantage of our local coal resource.”
Despite the greater cost to consumers across the board, one reason for IURC’s strong support of coal gasification technology, Roads explained, was Indiana State Senate Bill 29 in 2002. Among other provisions, the bill enumerates the benefits of using Illinois Basin coal for Indiana energy production and recommended that the state encourage the use of advanced clean coal technologies, such as coal gasification.
“The Indiana legislature told us clean coal technology is a priority and good for the country and Indiana,” Roads added. “Coal is something we have here, in place, and we don’t have to rely on something coming from overseas. If we can find a way to use coal that’s better for the climate and environment, then that’s a good thing.”
At present there is little to see at the site of Duke’s future IGCC. While the aging Edwardsport coal-fired plant chugs and smokes half a mile away, a team of engineers works a rig in the middle of an open, grassy field where the IGCC will eventually sit.
That rig, part of Duke’s study of the geological formations located beneath the IGCC site, is extracting core samples to evaluate the geology down to the aquifer.
Part of Duke’s agreement with the IURC was a promise to look into the possibility of carbon capture and sequestration (CSS), a process by which carbon dioxide emissions are trapped during the energy production process and then injected into the earth so as to prevent atmosphere pollution. Duke is looking at capturing and permanently storing approximately 18 percent of the plant's CO2.
“The IURC approving the plant for $1.985 billion,” which was the original cost before the updated May 1 proposal, “included a request for us to do a study on carbon capture and we’re in the throes of that as we speak,” Stultz affirmed. “So our charge is to figure out, ‘Can it be done?’”
In order to be able to inject the CO2 into the earth, the geological makeup has to be right. Once Duke completes its study of the possibility of CSS at the new site, the company will return to the IURC and present its findings. If it is determined that CSS is a workable option and the IURC wants that technology in place, the cost of the plant would increase, Stultz noted.
CSS would certainly be an important step for the plant, both environmentally and financially. While Duke’s current cost estimates for the plant do not take into account the possibility of a carbon-constrained future, caps on CO2 emissions are a very real possibility.
A national cap-and-trade bill has been approved by the Senate's Select Committee on Energy Independence and Global Warming and will be debated on the Senate floor in June.
If the country segues into a carbon cap-and-trade program, CO2 pollution will incur a price. With cap-and-trade, companies that produce carbon emissions must buy a credit in order to pollute. In Europe, carbon trading is $30 per ton, according to Sierra Club’s Bruce Nilles. As of yet, it is unknown how much carbon could cost if cap-and-trade is instituted in the U.S.
“We know carbon regulation is coming and we know it will not be zero dollars,” Nilles remarked.
Nevertheless, Stultz expressed his support of cap-and-trade regulations.
“I think we believe that the trade program is the right way to go, but some of the current legislation is not in favor with utilities, so they
are working to get a better understanding of the impact of that because the economic impact to the ratepayer is significant,” Stultz said.
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