Two Paths to a Future Powered by Integrated Gasification Combined Cycle

Both California and Pennsylvania recently put forward energy plans that are likely to speed implementation of highly efficient and low-polluting technologies for generating electricity from gasified coal.  The 2005 Integrated Energy Policy that the California Energy Commission ("CEC") adopted at the end of November would indirectly have this effect by requiring the Golden State's utilities to procure power only from generating stations that meet Governor Schwarzenegger's (R) greenhouse gas ("GHG") performance standards, which integrated gasification combined cycle ("IGCC") units can but traditional coal-fired plants cannot.  Fast on the heals of the CEC Policy, Pennsylvania Governor Rendell (D) unveiled his Energy Deployment for a Growing Economy ("EDGE") initiative to provide low-interest loans for IGCC units and a moratorium on required pollution controls on existing coal-fired plants whose owners commit before 2007 to install IGCC by the beginning of 2013.  The Rendell proposal likely will require Environmental Protection Agency ("EPA") approval of the moratorium on pollution controls at existing plants as that would extend by two years the 2010 emission reduction directive of EPA's recently announced Clean Air Interstate Rule ("CAIR").

California is the 6th largest economy in the world and the 17th largest emitter of GHG.  Every two years the CEC updates California's energy plan.  The 2005 plan imposes on utility power procurements the GHG performance standards that Governor Schwarzenegger established last June.  Those standard aim to reduce GHG emissions to 2000 levels by 2010, to 1990 levels by 2020, and to 80 percent of 1990 levels by 2050.  These standards effectively rule out procurements from traditional coal-fired plants and cast into doubt the viability of several dozen non-IGCC coal-fired projects (including some under construction) that are designed to serve the enormous California market.  Another project targeted to the California electricity market, the 1,300-mile Frontier transmission line that would link Powder River Basin coal deposits in Wyoming with California, may also be jeopardized by implementation of the GHG performance standards.

Because the capital cost of an IGCC plant runs 20-plus percent higher than for a traditional coal-fired unit, some have predicted that, in order to access the abundant coal reserves in the west, California would likely need to invest in some early IGCC plants to help demonstrate and establish the technology.  But then comes along the Pennsylvania initiative.  If it garners EPA buy in, EDGE could provide precisely the stimulus that IGCC requires, not only in Pennsylvania and California, but also in other markets with abundant coal reserves.   The program will give new and retrofit IGCC projects priority access to nearly $ 1 billion in low-interest loans form the Keystone State's Economic Development Financing and Energy Development Authorities.  Two of the leading IGCC technology providers, General Electric and Shell Oil, have committed to Governor Rendell that they will guarantee the performance of their equipment in connection with the EDGE program.

Nearly 10 percent of Pennsylvania electric generation capacity is coal-fired units that will need to discontinue operations or invest in costly pollution controls beginning in 2010 under CAIR.  [See Maryland Governor Proposes Plan to Reduce Plant Emissions] Each of these will be a candidate for conversion to IGCC under Governor Rendell's initiative.  When coal is gasified pollutants can be removed more economically and efficiently than they can be removed from the pulverized coal burned in traditional plants.  IGCC plants also emit significantly less carbon dioxide, the GHG principally responsible for global warming.