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Central Energy EnergyBiz InsiderFrom: EnergyBiz Insider [service@energycentral.com] Sent: Monday, July 17, 2006 8:59 AM To: Bove, Roger Even Subject: The Possibilities of Coal If you cannot view this email, view it online here: http://www.energycentral.com/site/newsletters/ebi.cfm?id=177 Our Sponsors -------------------------------------------------------Click here for advertising information. The Possibilities of Coal June 17, 2006 Bitter discussions over energy policy are common. But despite the harsh rhetoric, one thing is certain: The demand for energy is destined to swell, particularly as such emerging nations as China and India become increasingly developed. By the year 2100, some estimates peg worldwide economic growth at 500 percent. Ken Silverstein EnergyBiz Insider Editor-in-Chief The demand for power cannot be currently met without coal. It provides the majority of the world's electric power and is both plentiful and comparatively cheap. But, it is dirty. And so the goal is to bring new technologies to the market to make it cleaner. That desire has given rise to "integrated coal gasification combined cycle" plants. Such coal gasification facilities are not yet commercial, but they are expected to be cleaner and more efficient than the facilities today that use modern pulverized coal. In fact, coal gasification plants can cut mercury emissions by as much as 90 percent. And just as important: They have the potential to capture carbon dioxide (CO2) emissions that are thought to cause global warming. The risks are that such generators are unproven in the market and that their upfront capital costs are expected to be higher than both pulverized coal plants as well as natural gas combined cycle plants. "Our judgment is that we have to have coal to satisfy our energy demands on a long term basis," says Tom Micheletti, co-CEO of Excelsior Inc. in Minneapolis, Minn. "But, you have to have the technology to deal with emission controls under known pollutants that include carbon dioxide." Excelsior, which is an independent power producer, has permission to build one coal gasification plant in Minnesota and is laying the groundwork for another two. It expects all the permits related to the first project to get approval in the next year. At that time, the financial covenants will be written before construction would begin. The facility would be up and running by 2011. Excelsior is a private-public partnership. The state of Minnesota is kicking in about $20 million while the U.S. Department of Energy is contributing another $36 million. Without government participation, the capital costs would be too high, admits Micheletti. Minnesota's legislature supports the concept because there have been no base-load plants built there since the mid 1980s and because it desires a clean alternative to natural gas. Under one proposal, Xcel Energy would buy all of the plant's output. While combined cycle natural gas facilities are relatively cheap and easy to construct, the price of the underlying fuel source is too volatile -- typically double that of coal. By giving incentives to build a coal gasification plant, federal and state officials are taking steps to dramatically reduce emissions. In the case of Minnesota, it has enacted laws to require the largest coal facilities to cut mercury emissions by 90 percent by 2015. Greater Efficiencies When coal is burned, it emits sulfur dioxide and nitrogen oxide -- the compounds that produce acid rain and smog -- as well as particulate matter and mercury. Under the Clean Air Act, those pollutants must be removed from exhaust gases that come out of the smoke stack on the backend. The combustion of coal also produces substantial quantities of CO2, which is not currently regulated but the pressure to do so is increasing. The vast majority of coal used today is pulverized, meaning it has been crushed to a fine dust before it is shifted to a furnace and burned. Older coal-fired plants are the least efficient with about 35 percent of the energy input converted to electricity. But, as more power generators opt for supercritical units with higher steam-side operating pressures the efficiencies associated with pulverized coal units can increase to 40 percent, or even higher. Considering the tonnage of coal burned each year, those improvements could have a dramatic effect on the environment. The most advanced form of coal generation is coal gasification, which removes the sulfur dioxide, mercury from the "syngas" before it is combusted. And because the "syngas" is cleaner than raw coal, lower quantities of nitrogen oxide and particulate matter are produced during the combustion or burning process. The CO2 is more concentrated, which makes it easier to Four capture. such plants are operating now: two in the United States and two in Europe. The cost to build a coal gasification plant is about 15-25 percent higher than a pulverized coal plant, says a Standard & Poor's study of the issue. With today's steel prices, the cost of a conventional plant might be as much as $1,500 a kilowatt. But, the efficiency rate of a coal gasification plant could run between 50 percent and 60 percent. That means for every one unit of input, as much as 60 percent is returned as usable energy. And while the early attempts to implement the technology had iffy results, the credit rating agency says that today's models are much more effective and have availability levels of about 80 percent. The result is greater productivity and fewer emissions. Beyond Excelsior's efforts, Duke Energy is working with General Electric and Bechtel Corp. to design and construct a coal gasification plant in Indiana. When built in a few years, it will take an existing 160 megawatt coal plant and convert it into a modern 600 megawatt coal gasification facility. The billion dollar price tag is likely to be a publicprivate effort. Many green groups say that there is no such thing as "clean coal." Others say that as long as coal remains a vital part of the energy mix, the government should require utilities to use the most modern technologies available. They also want more federal support to go toward research and development of carbon sequestration. Coal gasification can help. But, the sequestration process uses a lot of the plant's energy output and not all geographies are equally able to accommodate those plants. "On the brighter side, there are emerging technologies on the horizon that may help solve the problem," says Cary Bullock, CEO of Cambridge, Mass.-based GreenFuel Technologies Corp. It is working with NRG Energy and Arizona Public Service on feasibility studies and pilot projects that would use specialized algae to recycle the C02 back into the plant as fuel, or potentially be processed into bio-diesel or ethanol. Energy demand will only grow over time. The overall goal is to produce more energy and less pollution. Practically speaking, fossil fuels and specifically coal will be around for a long time. But utilities that use coal must continually strive to produce a cleaner product. Because the marketplace indicates it wants those benefits, it must also be willing to help subsidize the cost. Joint endeavors, in fact, will drive the types of innovation necessary to propel energy generation forward in the coming decades. Respond to the editor. Click here to add this e-newsletter to your membership profile. If you are not a member, register now to begin your subscription. View Archives Online Visit EnergyBiz Online to view past issues of EnergyBiz Insider. Sign up for your own copy of EnergyBiz Insider Click here to add this e-newsletter to your membership profile. If you are not a member, register now to begin your subscription. About EnergyBiz Insider The mission of EnergyBiz Insider is to deliver objective analysis and commentary on the most important issues affecting the global power industry to our circulation of 82,000+ industry professionals. It is published by Energy Central, the leading news and information source for the global power industry. Energy Central Power Network Respond to the Editor the editor. Have a comment or question about this article? Send an email to This e-mail service is provided FREE to qualified professionals in the power industry. This e-mail newsletter may be redistributed provided it is kept in its entirety. To republish the full article, please contact Mark Johnson at mark@energycentral.com Visit Member Services to START, STOP, or CHANGE FORMAT for all of your e-mail subscriptions. If you do not wish to receive the EnergyBiz Insider E-Newsletter you may cancel your subscription by following one of the steps below. a.. Visit Member Services, and click on E-mail Management, then cancel your subscription, OR b.. Reply to this e-mail with the word UNSUBSCRIBE in the subject line. Copyright 1996-2006 by CyberTech, Inc. All rights reserved. Energy Central is a registered trademark of CyberTech, Incorporated. CyberTech does not warrant that the information or services of Energy Central will meet any specific requirements; nor will it be error free or uninterrupted; nor shall CyberTech be liable for any indirect, incidental or consequential damages (including lost data, information or profits) sustained or incurred in connection with the use of, operation of, or inability to use Energy Central. Contact: 303-782-5510 or service@energycentral.com Or write us via U.S. Mail - 2821 S. Parker Rd Suite 1105, Aurora CO 80014.

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