AmerCon : Energy : Coal

Progressive Policy Institute
2004.12.02

Clean Coal

It's hard to imagine a future that doesn't include coal as a bulwark of U.S. energy security.
Half of our electricity comes from coal, more than double the share of any other fuel
source. And in contrast to oil we have plenty of it -- about a quarter of the world's
reserves, enough to last for more than two centuries. With oil and natural gas prices
soaring, increased nuclear power uncertain, solar and wind power barely off the ground,
and the "hydrogen economy" still in the hangar, coal's profile hasn't been this high in
decades. The U.S. Department of Energy says it will remain our main source of
electricity through 2025 and predicts we will need more than 100 new coal-fired
plants between now and then just to keep pace with demand.

For policymakers, the big question is, "How clean can we make those plants and the ones
we already have?" Despite a fairly successful decades-long push to make existing
coal-fired plants cleaner, they still aren't exactly green. The plants (particularly the oldest
and least modified among them) release gases and particles that cause smog, acid rain,
lung disease, and mercury poisoning. They also produce between 30 and 40 percent of
the nation's carbon dioxide emissions, a leading cause of global climate change.

Some environmentalists insist "there is no such thing as 'clean' coal" and that massive,
rapid conversion to renewable energy is the only proper course. Similar messages even
crop up in popular culture; a recent episode of the HBO series Six Feet Under, for
example, featured a character saying he couldn't believe we would be "so stupid" as to
keep burning coal. But such arguments ignore that it's possible to produce electricity from
coal about as cleanly as from natural gas, which most environmentalists and public health
advocates favor over coal (even if not as passionately as renewables). They also give
short shrift to the massive costs we would incur if we immediately ditched half the source of
our electricity and replaced it with something else, however more desirable.

Absent a scientific breakthrough on the order of "cold fusion" or an unlikely steep decline
in the price of other fossil fuels, coal is here to stay for the foreseeable future. The
challenge is to make using it as safe as possible for the environment and human health.
And fortunately, there is a way to make electricity from coal that produces far less
air pollution, greenhouse gas emissions, and waste compared with prevailing
methods -- and that yields hydrogen that can be used to power virtually
non-polluting fuel cells. The technology is called integrated gasification
combined cycle (IGCC), or coal gasification for short.

Conventional coal-fired power plants burn pulverized coal or a coal-water slurry. In
contrast, IGCC plants turn coal into a synthetic gas composed mainly of hydrogen (which
can be tapped off for use in fuel cells) and carbon monoxide (which can be burned). The
gas is processed to remove 95 percent or more of its sulfur and nitrogen impurities,
making it nearly as clean-burning as natural gas.

The cleaned-up gas is burned in a turbine to create one source of electricity. Then the
heated exhaust is captured to boil water, creating steam to drive a second
electricity-generating turbine. This latter exhaust contains carbon dioxide in a highly
concentrated form, which makes it easier to capture and keep out of the environment, for
example by pumping it into the ground.

Today's IGCC plants operate at about 40 percent efficiency compared with the
roughly 33 percent efficiency of conventional plants, meaning they burn less coal
to yield the same amount of energy and thus emit fewer pollutants and less
carbon dioxide. Experts say future gasification plants should achieve efficiencies
of 50 percent or higher.

IGCC technology can be retrofitted onto existing plants, albeit at significant cost.
Gasification plants can also be configured to run on virtually any carbon-based fuel or
blend of fuels, including municipal solid waste that would otherwise end up in a landfill. In
addition, they use less than half the amount of water as conventional coal-fired plants,
which would be of tremendous benefit in the arid West.

Basic coal gasification technology has been around for centuries. Until the 1940s many
municipal utilities supplied their customers with coal-derived "blue gas" for heating,
cooking, and lighting. But gasification was largely forgotten as electric lights replaced
gaslights and as utilities switched to then-cheaper natural gas for heating and cooking.
Coal continued to be and remains one of the mainstays of electric power.

Rising fossil fuel prices and worries about our dependence on overseas oil are just two of
the factors sparking the surge of interest in clean coal technology. Policymakers and
private interest groups are also using a combination of pressure and incentives to
persuade the U.S. electric industry to switch to cleaner methods of burning coal.

With the Bush administration pulling the United States out of the international Kyoto
Protocol on climate change, state governments have taken the lead on curbing
greenhouse gas emissions. New York and nine other mid-Atlantic and Eastern states, for
example, are considering creating a regional "cap and trade" program to reduce power
plants' carbon dioxide emissions. California, Oregon, and Washington State, meanwhile,
announced they would collaborate to cut such emissions from all sources. And this
summer, seven states and New York City filed a "public nuisance" suit in federal district
court in New York seeking to force the owners of 174 power plants to curb their
greenhouse gas emissions.

Utilities are also feeling heat from insurers and major investors including state retirement
funds, labor unions, and religious denominations to act on global warming. Utilities have
also noted that the McCain-Lieberman Climate Stewardship Act, which would set a national
goal for greenhouse gas emissions and provide emitters with flexibility to meet it, enjoys
strong bipartisan support in the U.S. Senate.

Washington and some states, meanwhile, also offer the electric industry financial subsidies
to research and build cleaner coal-fired plants, which can be up to 25 percent more
expensive to build than conventional ones. Over the past 20 years, the federal government
has spent roughly $5 billion on clean-coal technology and President Bush has pledged to
spend another $2 billion over the next 10 years. The administration, however, has
come under fire for weakening federal Clean Air Act provisions that require
operators of coal-fired plants to install new pollution control equipment when
they make capital improvements to their plants. Some environmentalists have
also criticized Bush's proposal to curb the plants' mercury emissions through a
cap-and-trade program.

In Illinois, Gov. Rod R. Blagojevich persuaded state lawmakers in 2003 to pass legislation
to boost the use of the state's coal, which has fallen out of favor in recent years due to its
high sulfur content. The first part of the new law authorizes the state to issue up to $500
million in new bonds to support the construction of new power plants or the expansion of
existing ones that use Illinois coal and are sited next to coal mines in the state. The bonds
will significantly reduce interest rates on plant construction financing. The second provision
makes it easier for new or out-of-state power companies to tap into existing state grants
supporting the construction or retrofitting of plants that burn Illinois coal. The companies
can get up to $100 million in grants per project.

All of these factors combined to produce a whirlwind of clean-coal activity beginning in late
summer 2004. At the end of August, American Electric Power Company, Inc. (AEP), one of
the world's biggest coal consumers and owner of the most U.S. power plants, announced
plans to build a $1.3 billion, 1,000-megawatt coal gasification plant by 2010 and to spend
$5 billion between now and 2020 to further reduce sulfur, nitrogen, and mercury emissions
from its existing plants. Large institutional shareholders have been pressuring the
company to take a more aggressive stance on pollution and climate change. AEP is also a
member of the Chicago Climate Exchange (CCX), the world's first voluntary multi-national
and multi-sector marketplace for reducing and trading greenhouse gas emissions. CCX
participants have pledged to use a rules-based market to reduce their greenhouse gas
emissions by 4 percent from an average of their 1998-2001 emissions, or between 50 and
60 million tons, by 2006.

A day after the AEP announcement, Consol Energy Inc., a major Appalachian coal
company, and FirstEnergy Corp., a major Eastern electric utility, announced they had
formed a joint task force to evaluate the commercial feasibility of IGCC and other
clean-coal technologies. The companies said they hoped to move from planning to
development over the next five years.

In early October, General Electric Co. (GE), a leading manufacturer of power-plant
turbines, and U.S. construction and engineering giant Bechtel Corp. announced they were
teaming up to design and build standardized coal gasification plants for sale to electric
utilities. A few months earlier, GE signaled it was bullish on the commercial feasibility of
IGCC technology by buying ChevronTexaco Worldwide Gasification Technology Inc., which
has provided about 60 percent of the technology worldwide.

In late October, Ohio-based utility Cinergy Corp. announced it had signed a letter of intent
with the new GE/Bechtel alliance to build a $900 million, 600-megawatt coal gasification
power plant in the Midwest. "Given the high price of oil and the limited supplies of
natural gas available, coal is the most practical alternative," said Cinergy chairman
and chief executive James E. Rogers. "Our challenge is to find ways to use an abundant
resource in an economic and environmentally clean way. Coal gasification has proven to
be efficient, and there is no cleaner coal technology."

Coal gasification even emerged as a bone of contention in the waning days of this year's
presidential election campaign. Less than a week before Election Day, the Bush
administration awarded a $36 million grant to support the construction of a $1.18 billion,
531-megawatt IGCC plant in hotly contested Minnesota. The Kerry campaign, which had
pledged to invest $10 billion in gasification and other clean-coal technologies (an amount
five times greater than that proposed by the president), characterized the Bush
announcement as a ploy to win votes in a key battleground state.

Election year politics aside, the recent flurry of commercial activity strongly suggests that
business now sees gasification as a promising way to make electricity from coal in a market
that's likely to include tough greenhouse gas controls. It remains to be seen how many of
the 100 new coal-fired power plants we'll need in the next 20 years will be built with IGCC
or other clean-coal technology. But the early signs look bright. And that's good news for
the economy, environment, human health, and America's security.

Resources for Action

Progressive Policy Institute's State Clean Air Exchange (here)

Additional Reading

"Global Climate Change and Coal's Future." Remarks by Eileen Claussen, president of
the Pew Center on Global Climate Change, at the American Coal Council's Spring 2004
Coal Forum. May 18, 2004.

"Gasification Technologies: A Program to Deliver Clean, Secure, and Affordable Energy."
U.S. National Energy Technology Laboratory. 2001.

"Getting to 'Clean Coal.'" Chemical & Engineering News. February 23, 2004.

"Clean Coal's Uphill Haul." The Economist. September 19, 2002

Bush administration's Clean Coal Power Initiative

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