Has Coal Gasification's Time Arrived

[ellis gibb]

The global economy is affecting our industry dramatically. Rising
demand for oil and natural gas means that power generators and
industrial plants will be desperate for basic feedstock that helps
feed the American economy.
New technologies will be created and innovation in our industry will
continue to grow, which will invariably lead to more inventive uses
for coal. With the right incentives and under the proper market
conditions, companies will introduce relevant products and services
too meet these needs and demands. Without this type of thinking in the
energy sector -- where the ever-increasing demand for power and gas is
tapping the availability of vital fuels and putting upward pressure on
prices, it will result in dire consequences to the global economy.
As we all know, natural gas is a finite resource, which at the current
rate of production and consumption would last about 60 more years in
the United States. We also must face the fact that developing nations
will expand and demand more of the world's oil and natural gas to fuel
their growth. Since the U.S. comprises approximately five percent of
the world population but uses about 30 percent of the energy, it is
inevitable for that balance to shift, especially in light of the shift
in manufacturing capacity to overseas markets.
With India and China seeking the same resources as the United States,
costs for these commodities will rise. For instance, the U.S. Energy
Information Administration (EIA) projects oil consumption to increase
by 1/3 through 2030 while electricity demand will rise by 50 percent
over the next decade. Some experts predict this will lead to oil that
may cost as much as $100 a barrel while natural gas could run as high
as $8+ per million BTUs, in the same time period.
As oil prices rise, it usually causes other commodities such as
natural gas and coal to rise as well, generally at a lesser rate than
oil. Coal typically rises at a rate of 40% of that of oil, making it
the cheapest and most abundant alternative to oil, which would explain
why the EIA projects its use to climb over the next two decades and
does not expect nuclear or renewable energy to reduce coal's market
share during this time.
There are solutions to the increasing demand for energy, and include
several which use coal as its feed stock. Coal-to-liquids, is one in
which coal is broken down to form a fuel oil. While potentially much
cheaper per barrel than oil, it is capital intensive and requires that
oil prices stay high to motivate investors to risk this capital. Coal
gasification plants are another technology we have seen in the
limelight in our industry. These are power facilities that clean the
impurities from coal before it is burned and sent out the smokestack,
or in most recent developments (mimicking a DOE project from the
70's), creating pipeline quality natural gas (PQNG).
When coal is burned, it produces sulfur dioxide and nitrogen oxide,
which produces acid rain and smog. In addition it produces particulate
matter and mercury. Under the Clean Air Act, those pollutants must be
removed from exhaust gases that come out of the smoke stack. Coal
combustion also produces carbon dioxide, which is not currently
regulated. However the pressure to do so is increasing.
Coal gasification removes the sulfur dioxide, mercury and carbon
dioxide from the "syngas" before it is combusted or converted to PQNG,
say experts. And because the "syngas" is cleaner than raw coal, lower
quantities of nitrogen oxide and particulate matter are produced
during the combustion process. The carbon dioxide is more
concentrated, which makes it easier to capture.
Four coal gasification power plants are now operating: two in the
United States and two in Europe. American Electric Power expects to
have engineering studies completed next month on two possible coal
gasification plants in Ohio and West Virginia. It would like to have
one or both facilities operational by decade's end. Duke Energy has
picked up Cinergy's proposed coal gasification plant in Ohio, since
the merger of the two organizations.
There are viable options to help reduce the global dependence on oil
and natural gas. Employing energy efficient technologies is a good
start as well as turning waste energy into power and heat.
To keep the global economy viable, creative solutions involving all
different fuel forms are necessary. Coal will continue to play a major
role, however the form of that role appears to be changing. New
technologies are on the verge of becoming commercially commonplace,
and those utilities who utilize the traditional combustion method must
commit to controlling their emissions and their carbon footprints.
Regulatory and market pressures are giving coal a chance to reinvent
itself, and with oil and gas prices at their current levels, and no
major relief in site, the bulk of the new power required will likely
be provided using coal, the workhorse of the industry.
Coal is not without its problems. Eastern spot prices for coal have
risen, and have reached their highest levels in more than 25 years.
This is the second time in 4 years that coal prices have more than
doubled their pre-2000 pricing levels . This spike has caused prices
in new long term contracts to rise as well. The current prolonged
spike in Eastern spot prices is mainly due to supply shortages, as
demand has not grown much in recent years.
There are several reasons that coal prices have spiked. The coal
industry has undergone significant consolidation over the past 15
years, with indications pointing to a continuation in that trend. The
top ten producers controlled 64% of coal production in the U.S. in
2003, compared to only 36% in 1989. Three companies control 60-70% of
production in the Powder River Basin, Northern Appalachia, and
Colorado/Utah. This consolidation has contributed to the volatility of
spot prices by reducing excess mining capacity along with the number
competing for coal contracts.
The reduction in the number of small mines has affected the price of
coal in recent years as well. An example of this is a 68% reduction in
the number of small mines in Central Appalachia from 1989 to 2003. By
reducing the number of small mines, the ability to meet spikes in
demand are reduced, resulting in price spikes in the spot market.
There are other factors contributing to rising coal prices; including
increase in demand, even though over the last 5 years the increase has
been small. Other contributing factors are the reduction in the size
of U.S. utility coal stockpiles, the reduction in miner productivity
in all of the major coal producing regions (except Northern
Appalachia), pressure from U.S. export coal demand, and the reduction
decrease in the number of Class 1 railroads. With spot market coal
prices increasing, where do the opportunities for coal exist? They
exist with integrated coal gasification combined cycle plants.
Gasification, also known as partial oxidation, has been commercially
practiced for many years; especially in the chemical industry, where
most of the installed plants produce ammonia, hydrogen or other
chemicals. The feedstock for these plants has included natural gas,
oil-derived fuels, petroleum coke and coal. Integrated Gasification
Combined Cycle (IGCC) is often proposed as an alternate method of
converting environmentally disadvantaged fuels into electricity. Some
believe that IGCC units will not be built in the short term unless
natural gas prices remain elevated, there is high load growth and a
national cap on CO2 emissions are implemented. However, with the
arrival of the Clean Air Interstate Rule (CAIR) and the Clean Air
Mercury Rule , and the availability of high sulfur (i.e. 7 lb. /MMBtu)
coal, such as Illinois Basin coal, (See Figure 2) the market for these
fuels rests on a technology like IGCC and other gasification
processes, which benefit from high sulfur content and which reduce
emissions simultaneously. The technology's main long-term advantage is
its ability to control greenhouse gas emissions. Integrated
gasification combined cycle technology, combined with the
sequestration of carbon stripped out in the process, is as close to a
perfect solution for environmental emissions as there is. The biggest
challenge will be to make it a reality, in light of the costs to
develop gasification projects and their financial ramifications.
Gasification History
Gasification technology, although new to the power sector, has been
widely used in the chemical industry for decades. Almost ten years
ago, Tampa Electric opened an innovative power plant that turned coal,
the most abundant but the dirtiest fossil fuel, into a relatively
clean gas, which it burns to generate electricity. The plant emitted
significantly less pollution than a conventional coal-fired power
plant, and it was also 10 percent more efficient. Though there are
many gasification plants currently on the drawing board, since that
plant opened, however, no other similar plant has been built in the
United States, mainly due to the price of constructing such a plant,
(about 20% more expensive than to build a conventional pulverized coal
unit) and to the abundant supply of natural gas, which had been, until
recently, a lot cheaper.
In recent years there has been downward pressure on that price
differential. GE Energy, a division of General Electric claims the
technology offers operational cost savings that offset some of the
higher construction costs. In addition, if Congress eventually limits
carbon emissions, as many energy industry experts say they expect them
to do, the technology's operational advantages could make it a
bargain.
There are now several utility executives who are proponents of
gasification, because they assume a carbon constrained world is
inevitable. Duke/PSI, Bechtel, and General Electric Company have
signed a letter of intent to study the feasibility of constructing a
commercial, integrated gasification combined cycle (IGCC) generating
station. This is the first plant of its kind announced under a GE-
Bechtel alliance. However other projects utilizing this same alliance
are close behind. The operating savings for IGCC plants result from a
number of factors, including more efficient combustion (15 percent
more than conventional plants do, resulting in less fuel consumption).
The plants also use about 40 percent less water than conventional coal
plants, a significant consideration in arid locales, and given the
increasing difficulty of securing water rights. Many in the industry
who anticipate stricter pollution limits believe the primary selling
point of IGCC plants is their ability to chemically strip pollutants
from gasified coal more efficiently and cost-effectively, prior to
burning, rather than trying to clean the emissions on the back end.
Supporters of the technology believe that half of coal's pollutants -
including sulfur dioxide and nitrogen oxides, which contribute to acid
rain and smog - can be chemically stripped out before combustion. So
can about 95 percent of the mercury in coal, at about a tenth the cost
of trying to scrub it from exhaust gases racing up a smokestack.
The biggest long-term draw for gasification technology is its ability
to capture carbon before combustion. If greenhouse-gas limits are
enacted, that job will be much harder and more expensive to do with
conventional coal-fired plants. It is estimated that capturing carbon
would add about 25 percent to the cost of electricity from a combined-
cycle plant burning gasified coal, but that it would add 70 percent to
the price of power from conventional plants. Disposing of the carbon
dioxide gas stripped out in the process, however, is another matter.
Government laboratories have experimented with dissolving the gas in
saline aquifers or pumping it into geologic formations under the sea.
The petroleum industry has long injected carbon dioxide into oil
fields to help push more crude to the surface. Refining and
commercializing these techniques is a significant part of a $35
billion package of clean energy incentives that the National
Commission on Energy Policy is recommending.
The recent energy bill has some incentives for industry to adopt
gasification technology, and the Department of Energy will continue
related efforts. These include FutureGen, a $950 million project to
demonstrate gasification's full potential - not just for power plants
but as a source of low-carbon liquid fuels for cars and trucks as
well, and, further out, as a source of hydrogen fuel.
The Integrated Gasification Combined Cycle Process
In the IGCC process, coal or another carbon containing material
(petroleum coke, coal fines, and residual oil) is converted to
synthetic gas, composed mainly of carbon monoxide and hydrogen, which
is cooled, cleaned and fired in a gas turbine. Next the gas turbine
generates hot exhaust that passes through a generator to produce steam
to power a steam turbine, whereby electricity is produced by both the
gas and steam turbine-generators.
The feedstock is prepared and fed to the gasifier in either dry or
slurried form. The feedstock reacts in the gasifier with steam and
oxygen at high temperature and pressure in a reducing (oxygen starved)
environment. This produces the synthesis gas, or syngas, made up of
more than 85% carbon monoxide and hydrogen by volume, and smaller
quantities of carbon dioxide and methane.
Coal gasification is a chemical process that removes potentially
harmful matter such as sulfur and volatile mercury from the synthesis
gas before combustion, when they are much easier and less expensive to
remove. Non-volatile heavy metals can be removed in a non-leachable
slag which can be usable in construction and building industries,
becoming a potential added revenue stream for such a plant. The
removal occurs because of the high temperature in the gasifier, and
results in inorganic materials such as ash and metals into the
vitrified slag material, resembling course sand. With some feedstocks,
valuable metals are concentrated and recovered for reuse. The
synthesis gas that is produced is much cleaner than raw coal, so it
produces lower quantities of particulate matter and nitrogen oxides
when it goes through the combustion process.
IGCC vs. Coal Combustion
There is a dramatic difference in the level of pollution reduction
when comparing an IGCC facility to that of a traditional pulverized
coal plant. A pulverized coal plant produces flue gas and flyash which
compose the majority of the pollutants from the coal. Though the flue
gases can be cleaned using current technology, which is capable of
removing a large portion of the pollutants, it is not without cost,
and those costs can be prohibitive.
Gasification on the other hand removes these pollutants more
effectively and efficiently, without producing the additional wastes
that the coal combustion process does, such as additional carbon
dioxide, and sludges that contain sulfur (up to 5 lbs./lb. of sulfur
removed). The removal of volatile mercury and carbon dioxide is a much
more expensive process in traditional combustion plants, and it
appears that this requirement will soon be looming over the industry,
due to continued environmental constraints. To remove high levels of
mercury from a coal combustion plant, it requires the injection and
removal of powdered activated carbon, and the success depends heavily
on the coal feedstock and other pollution control equipment
An Example of the levels emissions from an IGCC plant compared to a
supercritical pulverized coal plant (SCPC) is in Table 1.
Table 1
Pounds of Pollutants per MWhPollutant IGCC SCPCSO2 0.47 1.19NOx 0.50
0.72PM-10 0.06 0.16
Pollutant IGCC SCPCHg (Volatile Mercury) >90% Removed 30-80%
RemovedSource: Eastman Gasification Services
1) Assumes Eastern bituminous coal with 2.2% sulfur2) For IGCC, NOX is
corrected to 15% O2, For SCPC NOX is corrected to 6% O23) Assumes IGCC
plant is equipped with an amine scrubber, packed activated carbon bed
for Hg, and no SCR4) Assumes SCPC plant is equipped with wet flue
desulfurization
The levels of pollutants for an IGCC can achieve additional reductions
from those shown in Table 1, by using enhanced sulfur removal
technologies such as Rectisol.
IGCC Economics & Financing
One of the hottest topics in the industry these days is coal
gasification and IGCC. At recent industry conferences, the coal
gasification sessions were standing room only. Commercial banks are
interested in the topic as well, but not without reservations. The
attraction is the potentially lucrative offtake agreements from such a
project. Depending on where the plant is situated, as much as 30
percent of a project's revenues can come from non-electricity
production, for such things as hydrogen, nitrogen, sulfur and carbon
sequestration.
One of the biggest problems with the growth of IGCC in the past is
that the turbines and the gasification equipment came from different
vendors, and no one wanted to guarantee the whole package, since there
were uncertainties related to the other's equipment. In 2003, Eastman
Chemical Company's Eastman Gasification Services Company signed a
cooperative agreement with ChevronTexaco under which Eastman was to
provide operations, maintenance, management and technical services to
ChevronTexaco projects. In 2004, GE acquired the Chevron-Texaco
gasification technology, and has paired that up with their existing
turbine business, with guarantees around both. In addition they have
partnered with Bechtel in a consortium, in order to construct the
plants. Eastman Gasification continues to be prepared to provide their
services to these projects. All these collaborative efforts help lend
credibility and financability to these projects, by helping to
eliminate the technology's risk.
The total cost associated with building an IGCC facility is around $1
billion+, with some industry experts claiming that the technology
costs 20% more than a pulverized coal plant. Without substantial
federal and state subsidies, the future of IGCC technology is
considered by some to be dim. In addition, credit ratings may be at
stake for utilities, making airtight commitments with regulators a
necessity, in order to avoid negative rating action. Strategies to
manage the financial and regulatory risks will have to be in place to
help insure this.
According to Eastman Gasification Services Company however, the
capital costs for new coal gasification power plants are now estimated
to be at parity with the newest generation of pulverized coal power
plants. The capital costs for pulverized coal plants have risen in
recent years and are projected to continue in that direction, due to
the increasing severity of federal air pollution regulations. With
coal gasification, there are fewer environmental side effects, and it
is predicted that the costs will actually head downward as
commercialization of the technology moves forward, improvements are
incorporated into future designs and increased operating experience is
realized.
Solid fuel plants have been recently bid for less than $1,000/kW on a
turnkey basis, which is 30-40% of the cost of the first few IGCC
plants. Since then, capital cost reductions have been achieved through
gas turbine performance improvements, gasification system
enhancements, IGCC configuration changes, and finally by moving
further down the learning curve in the EPC process that has provided
additional efficiencies. An example of configurations changes that
have reduced costs is GE's coupling of a 9FA based combined cycle with
high efficiency quench (HEQ) which resulted in a 10% reduction in
costs of electricity. The reduction was due to a large portion of the
high temperature heat exchanger in the gasification plant being
eliminated. GE's next generation of gas turbines, such as the GE "H"
machine, are expected to provide significant performance improvements
and capital cost reductions. These types of improvements will continue
to provide additional economic benefits for IGCC. The capital cost of
an IGCC plant is estimated to be between $1,200 to $1,400/kW and is
expected to go down from there. This range is competitive with the
newest generation of supercritical pulverized-coal plants
When you consider total variable costs for a coal gasification plant
versus any other fossil fuel based electric power generating facility,
(including natural gas) O&M, fuel, waste disposal, and byproducts
credits, they are much better with coal gasification. This is a result
of the higher O&M costs of coal gasification being offset by lower
fuel costs from higher efficiency, lower environmental treatment
costs, and lower waste disposal costs. In addition, with the
production of marketable by-products such as hydrogen, nitrogen, and
sulfur, additional revenue streams can be provided. Finally, with the
looming Clean Air Mercury Rule limiting the emissions from new power
plants, and expected carbon removal requirements likely being
instituted in the future, the costs for removal of these constituents
has to be considered, and it is much less for gasification than other
technologies.
With gas prices increasing to their current levels, the ownership cost
of an IGCC has become competitive with that of conventional, natural
gas-fired combined cycle plants. The range that this remains true is
when natural gas rises above $4/mmBtu. Most forecasts of long range
gas prices indicate that gas will be above this level for the
foreseeable future.
State & Federal Incentives for Development
The Clean Coal Power Initiative (CCPI) is the President's response to
the National Energy Policy recommendations for developing advanced
clean coal technologies to ensure clean, reliable, and affordable
electricity for the future of the U.S. CCPI is a ten year, $2 Billion
DOE program involving multiple solicitations for coal-based power
generation technologies that significantly enhance efficiency,
environmental performance, or economics relative to state-of-the-art
technologies. The purpose of the program is to try to accelerate the
implementation of these new advanced technologies through
demonstration at the commercial-scale level. They require 50% cost
sharing by industry participants.
Many states, whose coal industries have been dramatically affected by
environmental laws requiring reductions in sulfur, have implemented
various incentives, including grants and tax abatement, in order to
encourage the use of coal mined in their state. States whose resources
include high sulfur coal, such as that found in Illinois, western
Indiana and Kentucky, Ohio and various areas in Appalachia have borne
the brunt of the job losses in the coal industry, and have seen the
market for their coal being dramatically reduced. Many of these states
are anxious to put these mines back in business and their unemployed
miners back to work. The incentives were put in place to do that, and
many of these incentives are specifically focused on IGCC, in order to
spur development, while acknowledging the concerns of
environmentalists.
Indiana
Early in 2005, clean energy legislation unanimously passed out of the
Indiana Senate which provides additional incentives for clean coal
gasification plants. Senate Bill 378 provides tax credits for
companies who build and operate integrated coal gasification power
plants in Indiana. The legislation established the Coal Gasification
Technology Investment Tax Credit, which applies to newly constructed
IGCC plants that exclusively use Indiana coal. The amount of the tax
credit would equal 10 percent of a $500 million investment plus 5
percent of the investment above that amount. The tax credit would be
divided over a ten year period.
In April 2005, Indiana's General Assembly passed tax incentives that
would save Duke $75 million on a $1 billion IGCC plant that they are
considering building in a cooperative arrangement with GE/Bechtel, if
it were powered with coal from Indiana's mines.
In 2002 Indiana's governor signed a clean-coal law, whereby electric
utilities either building new generating stations or repowering
existing power plants using Illinois Basin coal are eligible for
potential financial incentives including up to 3% over their normal
rate of return. The Indiana Utility Regulatory Commission (IURC)
determines the actual level of incentives to be awarded on a case-by-
case basis. Since 1987, coal consumption in Indiana has increased by
30 percent, while Indiana's coal production had increased by only 3
percent. Currently over half of the 43 million tons of coal used to
generate electricity is imported into Indiana. If Indiana coal were to
replace 22.5 million tons of the now imported coal, it would add $1.35
billion and 18,000 jobs to that state's economy. Therefore it is
obvious why the state has implemented these incentives.
West Virginia
West Virginia, through using coal as its premier electric generating
source material, receives $13.1 to $17.3 billion of annual economic
output, $4.1 to $5.6 billion of annual household income; and 111,747
to 162,143 jobs. Taken a step further, coal is responsible for $66 to
$114 billion of annual state economic output, $38 to $55 billion of
annual household income and 1.1 to 1.7 million jobs, across the entire
Southern Appalachian region. In other words, coal is a huge part of
their economy, and it is likely to negotiate incentives to use some of
their high sulfur coal
Kentucky
The Kentucky Coal Association (KCA) has declared that economic
incentives to promote Kentucky coal are a priority for the 2006
legislative session and during the interim committee meetings. KCA has
helped pass legislation in the past including severance tax credits
for thin seam coal and incentives for utilities to burn Kentucky coal,
so it is a reasonable expectation that they will be successful in
putting incentives in place.
Numerous governmental programs exist in Kentucky that might benefit an
IGCC facility. These include:
-Enterprise zone programs -Tax increment financing -Tax credits -Job
assessment fee -Industrial revenue bonds
Ohio
The Ohio Coal Development Office (OCDO), within the Ohio Air Quality
Development Authority (OAQDA), co-funds the development and
implementation of technologies that can use Ohio's vast reserves of
high sulfur coal in an economical, environmentally sound manner. Ohio
generates nearly 90 percent of its electricity from coal and is the
third largest consumer of coal and the fourth largest consumer of
electricity in the U.S.
Projects supported by the OCDO are sought through public solicitations
and requests-for-proposals and cost-share is required. Proposals are
reviewed by independent technical reviewers, and then submitted to the
Office's statutorily created Technical Advisory Committee (TAC), a 15-
member group comprised of public and private members having an
interest in coal, power production, and the environment. Projects
favorably recommended by the TAC are submitted to the OAQDA for final
approval, then grant negotiations commence.
Illinois
Illinois has an extensive program in place to provide incentives to
those willing to use high sulfur Illinois Coal which will put
unemployed miners back to work. In recent years, the State of Illinois
passed the Coal Development Act, which has the following provisions:
-Provides $3.5 billion in bonds for coal and energy projects under a
consolidated Illinois State Finance Authority-Allows sales and utility
tax exemptions for new power plant construction started after July 1,
2001-Gives property tax breaks of up to $4 million over 10 years for
new power plants and transmission lines-Orders the Governor Energy
Cabinet to help develop clean-coal technology, help power companies
gain required permits more quickly and look into creating a
transmission corridor from the south to the north part of the State-
Calls for the IEPA to start investigating more limits on SO2, NO2,
mercury, and CO2
The Department of Commerce and Economic Opportunity has pushed coal
infrastructure grants through its Office of Coal Development and
Marketing (OCDM). The coal infrastructure grants aim to increase
domestic and international use of Illinois coal. The Illinois Clean
Coal Review Board, established by Southern Illinois University and
funded initially by monies from the sale of power plants of
Commonwealth Edison Company, provides grants to innovative
technologies seeking to increase utilization of Illinois coal
resources.
In Illinois, programs that might benefit an IGCC generation facility
include:
-Enterprise zone programs -Grants -Temporary property tax relief -Tax
increment financing -Development corporation loan program -Community
development assistance program -Work force development program -
Community block grant program -Linked deposit program -Others
Conclusion
With the costs of BTU's on the rise across the board, including not
only natural gas and crude oil, but coal as well, the overall
challenge in the energy business today comes down to replacing a
higher cost Btu with a lower cost and being able to finance the cost
differential. To do so means the banks and financial community have to
believe that the spread will remain great enough between the sources
for the life of the project, or mechanisms must be in place to protect
these investments.
With recent advances in IGCC technology and development, including the
ability of these facilities to burn high sulfur coal, such as that
found in the Illinois Coal Basin and other high sulfur coal reserves,
while meeting or exceeding all necessary environmental regulations,
Gasification became a viable source of energy. Coupling those advances
with public and governmental support of the technology by way of
loans, grants and tax abatement, the bundling of the turbine provider
with the gasifier so that they can wrap the guarantees, and
improvements in operations, Integrated Gasification Combined Cycle
technology is likely to become the solution to the looming domestic
energy needs of the United States.
These improvements have opened the door to development of new IGCC
generation facilities, such as the one by Duke, AEP, Southern Company,
Exelsior Energy, Steelhead Energy, etc. However, an investigation of
the transmission, fuel, and water availability, as well as, an
understanding of the environmental and stakeholder issues is still
critical to the identification and development of attractive sites,
just as with any power plant option would require. As we have seen,
these pieces can fit together in numerous ways highlighting the
existence of numerous attractive sites in the Illinois Coal Basin and
elsewhere in high sulfur coal territory, where there is potential to
negotiate long term coal contracts for coal whose demand isn't as high
as it once was. Many believe the coal in this region will some day be
the center of a huge energy complex for the U.S. Furthermore, with the
increase in gasification projects that gasify coal and convert it to
either PQNG, ultra-clean diesel or other liquid fuels, gasification is
becoming closer and closer to being a commercial reality. Some of
these gasification projects are even looking to partner with renewable
energy technologies in order to achieve additional economies and
convert non-dispatchable power to a dispatchable source by combining
the technologies.
There is still a capital cost premium for gasification. In the interim
(approximately 3-5 years), before commercialization, operation
improvements and/or new environmental regulations narrow the price
differential gap of gasification's capital costs as compared to those
of other technologies, incentives provided by both state and federal
sources, coupled with long term contracts for the high sulfur coal and
the use of hedging strategies, will be the way the first wave of
gasification plants will get built. In the near term, these projects
may be able to achieve the required economics through the sale of
various byproducts, such as enhanced oil recovery, sulfur, and other
chemicals.
Acknowledgements
I would like to thank Steve Shaw of Power Holdings, LLC and Dennis
Corn of Eastman Gasification Services Company for their insight and
advice.
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