Coal Users Community: Capitalizing on Coal: The Challenges and Opportunities

Demand for energy in America continues to grow. So too does the challenge of generating it in a reliable, affordable, and an environmentally sensitive manner. Given the U.S.’s abundant coal reserves, the nation’s electric utilities are pursuing a variety of strategies to keep coal a key fuel source for generating electricity.

Developing Technologies

One approach involves developing new technologies, such as integrated gasification combined-cycle (IGCC), that can generate electricity from coal more efficiently. IGCC plants feature the high efficiency and low emissions of natural gas turbines with the ability to run on coal or other lower-cost solid or heavy liquid fuels. In addition, IGCC plants hold the possibility for capturing and sequestrating carbon dioxide (CO 2).

Three electric utilities — Duke Energy, American Electric Power, and Southern Company — have announced their intent to construct IGCC plants. The electric power industry is also recommending that the FutureGen project, Clean Coal Power Initiative, and advanced research and development programs be fully funded as authorized in EPAct 2005. Industry is working with the U.S. Department of Energy (DOE) through these programs to move promising technology along the research and development path to commercialization.

Coal-based IGCC technology has been demonstrated on a commercial scale for the past 10 years at two sites in the U.S. and two in Europe. The U.S. plants were built with support from the DOE. One is operated in Tampa, Florida, by Tampa Electric; the other is in West Terre Haute, Indiana, where Duke Energy recently entered into an agreement with the plant’s owners to use the synthetic gas from the IGCC plant to power a 281-MW combined-cycle turbine generator.

Tampa Electric’s 260-MW IGCC facility began commercial operation in the fall of 1996. The utility conducted a test burn in late 2001. Its aim was to study the effects of gasifying a small percentage of biomass (1%) and adding it to the IGCC plant’s primary feedstock of petroleum coke and coal. The result showed that it was technically feasible. In addition, doing so did not increase the monitored air emissions of nitrogen oxides (NO x) and sulfur dioxide (SO 2).

Keeping an Eye on Air Quality

The electric industry is committed to ensuring that future coal use will be accompanied by continued improvement in air quality. Since 1980, for example, the electric utility industry nationwide has cut its SO 2 and NO x emissions by about 40% with advanced generating technologies and by switching to coal with relatively low sulfur content.

Looking ahead, the U.S. Environmental Protection Agency predicts that the electric power industry will spend close to $50 billion between the years 2007 and 2025 to comply with its new Clean Air Interstate and Mercury Rules, CAIR and CAMR. These rules, along with the Clean Air Visibility Rule, are in effect another layer of regulations. As a result, EEI will continue to urge Congress to support federal legislation that would collectively reduce total SO 2, NO x, and mercury emissions under a national cap-and-trade program.

This process will harmonize the many Clean Air Act provisions, immediately establish mandatory emissions requirements, and promote the continued use of the nation’s abundant and low-cost coal resources. In turn, it will help to alleviate the increasing pressure on the country’s supply of natural gas. The result will be a greater reduction in power plant air emissions sooner, with greater certainty and at less cost to electricity consumers.

The electric utility industry is also addressing global climate change. Power sector carbon intensity, measured as the ratio of CO 2 emissions per kilowatt-hour generated, declined by 10% from 1980 to 2004. Under the industry’s voluntary Power PartnersSM program with the DOE, carbon intensity is expected to decrease by the equivalent of 3% to 5% by 2012.

EEI and its members are participating in a unique international effort called the Asia-Pacific Partnership on Clean Development and Climate (APP). Launched in January 2006, APP brings together the U.S., Australia, China, India, Japan, and South Korea. The goal of APP is to accelerate the development and use of cleaner and more efficient energy to promote economic development and reduce poverty.

Such an approach is vital, because in only three years, the combined CO 2 emissions of the world’s emerging economies will exceed those produced by its developed countries. EEI has begun putting together site visits and technology exchanges between the Asian signatories to the accord and operators of U.S. power generation, transmission, and distribution facilities.

Building Alliances

With the electric power industry continuing in a hybrid model of competition and regulation, greater coordination between the Federal Energy Regulatory Agency (FERC) and state regulatory commissions will be essential for building coal-based plants. In the U.S. the states oversee the sale of a utility’s electricity to its regulated base of retail customers and a utility’s energy resource decisions. On the other hand, FERC governs the rates and the transmission of electricity in interstate commerce.

Today, EEI and the industry are working to strengthen these relationships and, with them, the regulatory stability and certainty that will be needed to attract investment in coal plants.

Coal holds both challenges and promises for America’s electric utilities. EEI and its member electric companies are dedicated to addressing the challenges so that a new generation of coal-based electric plants can contribute to the promise of greater economic growth and a higher quality of life.