NRG Energy’s proposed 112-MW project to repower its coal-fired Somerset Station in Massachusetts with plasma gasification technology has moved on to the due diligence phase of the Department of Energy’s federal loan guarantee program.

If selected, the company could receive up to $158 million in loan guarantees, allowing it to retrofit the 108-MW facility with Westinghouse plasma gasification technology that will use solid biomass such as green wood and coal feedstock. The feedstock would be heated to a very high temperature to produce a synthesis gas, which would then be combusted in the plant’s boiler.

NRG said in a statement on Friday that the process could reduce sulfur dioxide emissions by over 95%, mercury emissions by over 95%, and nitrogen oxide emissions by over 60%. NRG said that, if built, the project could be the first large-scale use of plasma gasification for the production of electricity in the U.S.

The process was developed by Westinghouse Plasma Corporation of Madison, Penn., a wholly owned subsidiary of Canadian company Alter NRG Corp. It has already been demonstrated at commercial scale by Hitachi Metals in Utashinai, Japan. The technology is currently being developed in 16 projects at the engineering stage and over 43 proposed projects in North America, the UK, the European Union, and in Southeast Asia, AlterNRG said last week.

The Somerset Station project represents a $40 million to $60 million engineering and equipment sale, and NRG Energy expects equipment will be ordered in 2010. Upon successful completion of detailed due diligence by the DOE and loan structure negotiations, the Somerset plasma project would receive a loan guarantee under the DOE Loan Guarantee Program. NRG also is seeking to bring in additional equity investors for the project.

"NRG supports advanced, environmentally beneficial technologies and plasma gasification offers a practical way for smaller coal plants, like our Somerset facility, to meet–and in the case of Somerset, beat–the state’s strict environmental standards," said Drew Murphy, president of NRG’s Northeast Region. "Repowering Somerset Station with plasma gasification is a green and responsible project, and obtaining a DOE loan is an important step to help make it a reality."

Murphy said that the project was being considered in light of the federal renewable standard, which calls for 20% of power to be derived from renewable energy sources by 2020. "By using up to 35% biomass as a fuel source—as presently permitted—Somerset will be 15 percentage points above the hurdle and a decade or more ahead of the curve," he said.

Sources: NRG Energy, DOE, AlterNRG