The scale and complexity of Duke Energy’s Edwardsport coal gasification plant under construction in southwest Indiana has added about $530 million to project costs—a 23% increase—company officials told state regulators last week. The integrated gasification combined cycle (IGCC) plant slated to begin operation in 2012 is now estimated to cost $2.88 billion.

The total project, including engineering, construction, and purchasing is 57% complete, the company said in testimony and exhibits filed with the Indiana Utility Regulatory Commission (IURC) last week. The commission must review and approve the filing before any new costs can be phased into customer electric rates.

When regulators approved the plant in 2007—as well as the phase-in of rate increases associated with the project—Duke had estimated the project would cost below $2 billion. In May 2008, the utility announced the plant would cost about $365 million more—citing materials and rising labor costs—raising the price to $2.35 billion.

The update filed last week follows another $150 million increase filed with the commission last November for more steel, piping, and other material needed for the 630-MW IGCC project. At that time, the utility had asked the IURC to hold a proceeding when most engineering work was complete so that the company could further revise the cost estimate.

Duke said that if approved, the increase in costs will add about 3% to the project’s customer rate impact. “Based on a customer’s bill today, the project will result in an overall average 19 percent rate increase phased into rates by 2013.”

"This is the first time a plant this size using this advanced clean coal technology has been built anywhere in the world," said James Turner, president and chief operating officer of Duke Energy’s Franchised Electric & Gas businesses. "We worked with GE, Bechtel and other design firms to perform an engineering study early on; however, as engineering progressed, the project’s design and complexity expanded significantly. Unfortunately, this evolution in scope and complexity makes an increase in the cost estimate impossible to avoid," Turner added.

Turner said that the project deserved merit because it would demonstrate that power could be generated in an “environmentally sustainable way.” "Some would like to turn away from coal completely,” he said. “That’s not realistic given that it powers most of Indiana’s—and half of our nation’s—energy needs. Indiana has more than 110 years of recoverable coal reserves. We simply cannot turn our back on this abundant, relatively low-cost fuel resource."

The company also said it would retire the existing 160-MW plant—with coal and oil units more than 60 years old—in conjunction with the completion of the new facility.

Sources: Duke Energy, IURC