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Energy Trade-Off

Clean Coal Gets a Boost in Britain

By Barbara Frye

A handful of British companies are on board with pricey technologies -- coal gasification and carbon capture -- that can greatly cut greenhouse gas emissions.

SaskPower, a public utility in Canada's Saskatchewan province, recently spent about $17 million on an engineering feasibility study for a new coal power plant. Equipped with cutting-edge antipollution technology, it would have been the first commercial-scale coal plant to trap more than 95% of the carbon dioxide it produced -- a vital advance in the race against global warming.

On paper, the plant looked like a winner. SaskPower aimed to sell the carbon dioxide to nearby oil producers, who planned to inject it into their fields to force out more oil. But by the time the utility had to make a final decision last month on the plant, its estimated cost had more than doubled, from $1.5 billion to $3.8 billion, and it was clear that the project couldn't be done quickly enough to meet rising demand for power.

SaskPower decided instead to build new natural gas turbines, at a cost of $525 million. "When we looked at the numbers, we came to the conclusion that today is not the day for coal," says SaskPower Project Manager Max Ball.

That's a recurring story throughout the utilities business, where companies around the world have struggled for years against the tough economics of clean coal. The use of technologies such as coal gasification and carbon capture can slash greenhouse emissions by more than 90%, but the plants cost anywhere up to 82% more to build than traditional facilities.

Carbon Cleanup

Despite the tough numbers, some companies in Britain are forging ahead anyway on clean coal. Mining company Powerfuel is planning to spend $2.4 billion on a power plant in South Yorkshire that could be the first in the world to use both coal gasification and carbon storage. It hopes to connect the facility to the national power grid in 2011. Utility Centrica has a similar $2 billion project under way in Northern England that it hopes will come on line in 2013.

It's not a moment too soon. Despite environmental concerns, the use of coal could rise by nearly 75% in the next couple of decades, analysts say, fueled largely by the developing economies of Asia. At the same time, figures the U.S. Energy Information Administration, carbon dioxide emissions from coal could rise by the same 75% between now and 2030, assuming current usage patterns and the use of traditional coal-burning technology.

"Around the world we're going to use massive amounts of coal, and coal-fired power plants must be cleaned up," said J. Mike Farley, a technology policy expert with Britain-based Doosan Babcock Energy, at a recent conference on European clean-coal technology in Berlin. "They can't be substituted for. Renewables and efficiency cannot do it all."

Crack the Wall

A mountain of cash has been dumped on clean-energy producers in the past few years -- according to one estimate, some $95 billion in 2007 alone for wind, solar, biofuel and other new power technologies. But of that amount, only 0.2% is going to fund research and development into clean coal, according to figures from London-based investment advisers New Energy Finance.

"Basically anyone who can see an opportunity in clean energy has opened their checkbook or is wiring their money," says Chris Greenwood, executive director of New Energy Finance. Clean coal, though, has suffered from a "regulatory and subsidy wall" holding back investment. Once the wall is cracked, Greenwood says, "money will start to find its way toward clean-coal technology."

It seems an obvious target, given how widely coal is used around the world. And after all, there are already known ways to slash coal's carbon emissions. Some, such as integrated coal gasification and supercritical pulverized coal combustion, extract carbon dioxide before or during combustion. Others, such as carbon capture and storage trap it after combustion before it enters the atmosphere.

Some earlier generations of these technologies already are running at commercial gas- and coal-power plants and chemical factories around the world. And pilot projects are under way using more up-to-date applications of the technologies. But nobody has yet put together all the latest carbon extraction and carbon capture technologies in a real-world, coal-fired plant. Some in the industry acknowledge that until they do, no one will know how successful the methods can be.

To encourage faster progress, many in the industry concede that regulators have to jack up the cost of emissions so much that it becomes cheaper for utilities to run new low-emissions plants. "If the price of carbon is high enough, IGCC and CCS make sense," says Nigel Downes, business development manager for Centrica.

Capturing Interest

In the next 15 to 20 years, Downes says, experts predict a shortage of 15 to 20 gigawatts of power generation in Britain. This gap will be occurring just as a wave of older, dirtier, coal-fired plants is due to close. Centrica decided to bet on clean coal because oil and gas suffer from extreme price volatility and new nuclear plants can't come on line for at least 10 to 15 years.

Powerfuel's South Yorkshire project has a similar rationale. "Our aim is to be the first commercial IGCC plant in the world with carbon capture," says Chief Executive Richard Budge. He figures construction will take three to four years.

The European Union is trying to encourage such projects. Ioannis Galanis, a coal and oil policy analyst with the European Commission, says that companies investing in carbon capture "will be rewarded" in new EU regulations concerning emissions trading. But Powerfuel's Budge argues clean-coal pioneers need more than that. He calls for changes in the EU's system of emissions allowances so that coal operators are no longer judged against solar or wind power plants. "If we were to set the same allowance on a fuel-specific basis, there would be IGCCs popping up all over Europe," he says.

The British government also is weighing in. In November it will launch a competition to fund promising carbon-capture projects, with the aim of having the first system in place sometime between 2011 and 2014. "These are massive infrastructure projects, [and] there needs to be some intersection of government and the private sector to help kick-start this," says Chris Turner, a spokesman for the Business Enterprise & Regulatory Reform Dept.

Ironically, neither the Centrica nor Powerfuel projects likely will receive any funding because the government favors carbon recapture schemes -- and both the Centrica and Powerful plants also include gasification.

Funding and Future Profitability

Still, there's surprisingly little public funding available for clean coal. The EU's current round of research grants, which runs until 2013, totals just €2.35 billion ($3.34 billion) for all energy projects, including renewables, efficiency improvements, and clean coal.

Some in the industry think they shouldn't be waiting around for public money -- especially when market forces are likely to be a bigger incentive. "The cost to emit is going to continue to go up," says Brian Kessler of London consultancy Global Energy Decisions. "Carbon allowances are going to be more expensive…and people are going to want to do capture because it's actually going to be cheaper than emitting." As of Oct. 22, the 2008 contract price to emit a ton of carbon dioxide is pegged at €22.18 ($31.50) -- a huge jump from 2007 rates.

Clean-coal technologies may be years away from profitability, but some argue that early investors could see the biggest opportunity. "Why press for incentives?" asks Klaus Brendow, an adviser to the World Energy Council, a British nonprofit that champions equitable energy use and sustainable production.

Brendow says he knows of 17 companies already investing in CCS and that implementation of climate-protection technology is unavoidable -- and a big business opportunity. "Take the risk," he says. Some finally are starting to do just that.