Is Coal Golden?

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Tampa Electric president Chuck Black sympathizes--to a point. When the company opened Polk Power Station in 1996, the clean-coal technology known as IGCC--integrated coal gasification combined-cycle--was new, unproved and pricey. Situated about 40 miles southeast of Tampa on a former phosphate mine, the plant was the first of its kind, built concurrently with another in Indiana. The Department of Energy helped the Florida utility with a $150 million grant, but the total cost of more than $600 million made it risky, especially since operating costs for an IGCC plant can run 20% higher than those of a traditional plant. Unlike old coal plants that try to remove pollutants from the flue, IGCC plants turn coal into gas (using pure oxygen) and remove the messy stuff first, which results in 20% less nitrogen oxide than a conventional coal-fired plant. "It's our least cost-generating resource, so we count on it and use it every day as part of our system," Black says.

Washington's centerpiece in the clean-coal R&D effort is FutureGen, a test facility to generate affordable electricity from coal, spinning off hydrogen for a new generation of hybrid cars, while eliminating all pollutants and siphoning off carbon dioxide to store it deep underground. As a nonprofit public-private collaboration, the feds are kicking in $700 million, and companies like AEP, Peabody and even the new world champ of coal--the China Huaneng Group--are anteing up another $300 million to get the facility built in Texas or Illinois by 2012.

Companies, smelling profit, are beginning to pile on. GE Energy, which pioneered coal gasification 30 years ago, decided in 2004 that IGCC was a moneymaker--if only someone could "guarantee" that the technology worked. That year GE acquired Chevron-Texaco's coal-gasification business, and now it offers turnkey coal-gasification plants--with warranties. "Before, companies would give you a book 1 1/2-in. thick, describing gas flows in the system so you'd build your own and, if it didn't work, you were liable," says Edward Lowe, GE's Houston-based general manager of gasification. Now GE offers to take on responsibility for everything "from coal off the coal pile to electrons on the grid." AEP and Duke Energy are in the process of design work on three new IGCC plants in Ohio, West Virginia and Indiana, with GE and Bechtel.

No clean-coal revolution is going to happen, however, unless Washington tips the balance with funding and tax incentives for private industry, says Peabody Energy president and CEO Gregory Boyce. The coal company is already a partner with the feds in the FutureGen coal-to-gas power plant. And Boyce is pushing coal-to-liquid technology to provide low-sulfur diesel fuel for truckers and jet fuel for airlines and the military. "Coal," says Boyce, "is our only opportunity to get to energy security and energy independence."