From Plan to Plant: The Struggle to Make “Clean Coal” a Reality

In early June, New York Gov. David Paterson proclaimed that his state would commit $6 million to buttress a carbon capture and sequestration (CCS) viability study for the development of a new 50-MW clean coal plant in Jamestown, in western New York. The circulating fluidized-bed (CFB) project, which would use pure oxygen to combust coal and subsequently capture and sequester 90% of emitted carbon dioxide (CO2), would be “the first of its kind in the world” and could potentially enable New York firms to launch exports of the technology worldwide, Paterson promised.

More importantly, it would address the “twin threats of climate change and growing energy demand,” and it could “drive technology and innovation, improve our energy security, reduce energy price volatility, and create clean-tech jobs throughout the State, particularly Upstate,” he said.

To this end, Paterson promised that New York State would support the project until it came to fruition—although he noted that it could face several hurdles before becoming a reality.

For example, the newly formed New York Oxy-Coal Alliance, a public-private collaborative R&D effort, would need to resolve permitting issues: The alliance would require approval of an amendment to a permit already received from the New York Department of Environmental Conservation (DEC) to allow the plant to capture and sequester CO2 for the life of the project. And then there are political concerns: To authorize siting of a CCS facility, the New York assembly would have to develop and pass legislation—as none currently exists.

Cost: The Cross of Clean Coal

Above all, the alliance would have to prove that the project is economic and, more significantly, that power generated from the technology will be cost-effective. The National Energy Technology Laboratory last December optimistically estimated that an oxy-coal–fueled plant with carbon capture could cost up to $2,900 per kW—equal to an amine-scrubbed plant and $400 less per kW for an integrated gasification combined-cycle (IGCC) plant.

The Oxy-Coal Alliance is aware that the $145 million project cannot proceed without federal and private sector funding. For the moment it will rely on Democratic Gov. Paterson’s $6 million pledge, $800,000 of previously awarded state funds, and $4 million, which will be made available for the project over the next three year.

As far as measures to make the energy produced by the plant cost-effective, the governor’s office has indicated that the New York Power Authority (NYPA) is collaborating with the Jamestown Board of Public Utilities (BPU) to develop an “aggressive” energy-efficiency plan.

But is this really enough to take the project from plan to reality?

The alliance could take a page from a similar project planned at NRG Energy’s facility in the township of Tonawanda, only 85 miles northwest of Jamestown in upstate New York. In December 2006, NRG’s bid to build a 680-MW IGCC plant at its 90-year-old Huntley facility (frequently referred to as the nation’s dirtiest plant) emerged as the sole winner of a statewide clean coal competition held under the auspices of former Gov. George Pataki. The $1.5 billion project that had been expected to capture 65% of CO2 by converting coal into pollutant-filtered syngas was scheduled to go into commercial operation in 2013—the same year as the Jamestown plant is now scheduled to debut. Unlike the much smaller Jamestown project, NRG’s plant was in 2006 touted as design-ready to capture and sequester carbon from the “first day of operation.” It had looked promising—all except for the hulking obstacle of making the technology cost-effective.

The NYPA had in 2006 awarded NRG a conditional contract because “the cost of the IGCC technology is above current market pricing for new coal plants using more traditional technology that doesn’t have the option to capture and sequester carbon.” By October 2007, despite forming an alliance with the NYPA to pursue tax credits and other federal or state funding sources to bridge the economic gap—which some have pegged at $400 million or 20% of the total price tag—the project was put on hold until it found cost reductions to maintain the state-awarded financial support.

NRG still has a lot of catching up to do before a looming July deadline for establishing that the plant will be cost-effective. The company is reportedly looking to either extend the 20-year support agreement set by Gov. Pataki in a memorandum of understanding by 10 years, or it may use the NYPA’s bond rating to secure a better rate, as has been done by some Midwestern states.

Meanwhile—especially because of the spotlight on Jamestown’s new clean coal project—the Tonawanda Township has been left wondering at the state’s diminished support for Huntley station, the power facility that pays up to 15% of its budgets in lieu of taxes.

Clean Coal Casualties

Industry sources have suggested that because the Jamestown project uses a different technology and is much smaller than Huntley Station, it has a greater chance of becoming operational. However, as a clean coal plant, it will still need to fight the odds that have crushed the hopes of several similar projects.

The matter is serious: In 2007, the Huntley Station project was among 11 clean coal plants to be abandoned or put on hold due to strained project economics from escalating costs or failed funding. So far this year, six projects have been shelved or canceled for the same reasons.

In April, for example, the West Virginia State Corporation Commission rejected Appalachian Power’s Mountaineer IGCC plant, a proposed 629-MW facility expected to cost about $2.33 billion, on the grounds that the cost estimate was “not credible.”

Agrium Corp. cited construction costs and a worsening economy as reasons for why the company would not proceed with its Alaskan coal gasification plant in March.

Also in March, the Associated Electric Cooperative cancelled its 660-MW Norborne Baseload Plant because costs had increased to $2 billion. That plan’s situation was exacerbated by the Rural Utilities Service’s cancellation of all coal project financing.

The most notorious disruption in 2008 of a clean coal plant’s project funding, which subsequently caused the project to come to a screeching halt, was the U.S. Department of Energy’s (DOE’s) abrupt January withdrawal from plans to build the experimental FutureGen plant in Mattoon, Ill. The DOE had said at the time that it would pull its funding, mostly due to higher-than-expected costs, and direct it toward multiple clean coal projects.

Even the Jamestown BPU, which has been developing its project since 2003, has suffered the drought caused by redirected funds, so it is now more or less prepared for the vagaries of funding. In 2006, Gov. Pataki vetoed a bill to support the project—although it had overwhelmingly passed in both houses—and poured the funds instead into state sponsorship of NRG’s Huntley Station project.

If the Oxy-Coal Alliance does not receive the $100 million of federal grants and private sector funding with help from the state, Paterson has vouched that New York, through the Empire State Development Corp., will still own the plant and its design and engineering, and will attempt to attract new developers to the site in the future.

—Sonal Patel is a staff writer for POWER and COAL POWER.

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