IGCC stumbles and falls in the US. The spate of cancellations is becoming a flood

26 November 2007

Citing uncertainty about potential state regulation on greenhouse gas emissions, Atlanta-based Southern Co and the Orlando Utilities Commission have scrapped plans for a 285 MW integrated gasification combined cycle (IGCC) facility at the Stanton Energy Centre, two months after breaking ground on the project in September. Instead, the partners will build a conventional natural gas fired plant.

The $850 million plant is the fourth coal project in Florida to be dropped this year, but the first that was already under construction. A Southern Co spokesman said the possibility of an executive order from Florida governor Charlie Crist (under legislation signed by the Republican governor earlier this year setting statewide greenhouse gas caps for the power sector) that would require power plants to capture and store carbon dioxide emissions ‘raised the level of risk’ for the Stanton project. Ironically, such regulations are usually put in place to create financial incentives for cleaner forms of power generation, such as IGCC

The project was one of four selected by the US Department of Energy under the second round of president Bush’s Clean Coal Power Initiative, a $2 billion, 10-year effort to advance technology to meet growing demand for low-cost power and reduced carbon emissions.

The total cost of Stanton, which would have been a demonstration project for a kind of gasification known as transport gasification, was estimated at $855 million, with the US Department of Energy contributing $293 million of that sum. Southern Co said it expects to record a $50 million pretax impairment loss in the fourth quarter due to the termination of the project.

Stanton is just the latest in a series of high profile coal firing cancellations. In Minnesota, a series of hearings involving the Mesaba IGCC?project developer Excelsior and the purchaser of its output Xcel Energy has resulted in the Public Utilities Commission effectively scuppering the project. In August the Commission came close to terminating the negotiations and putting an end to Excelsior's quest for a forced PPA with Xcel. In the course of the discussion the Commissioners indicated that no utilities need or want Mesaba's energy because it uses coal and is too expensive. They noted that plans for coal-gasification plants have recently been delayed or cancelled in three other states. Technically, Mesaba is still alive, but its health depends on Excelsior’s finding a customer, which is considered highly unlikely, or, just as unlikely, the MPUC changing its mind at the next hearing, which takes place soon.

Xcel Energy is also involved in another cancellation. It had been investigating the feasibility of developing in Colorado a $1 billion-plus IGCC power plant with carbon capture and sequestration. After collecting data and doing some

preliminary engineering studies the company has pulled out of the project, at least for a while. ‘Xcel's technology won’t include a cutting-edge power plant [IGCC] until at least 2016’ according to CEO Dick Kelly at a PUC conference earlier in the year. The reasons given are that the plant will be too costly, and the company can't find a partner to help build it.

Other firms that have dropped coal projects include Tampa Electric Co (TECO) which recently cancelled a planned $2 billion IGCC plant in Florida, also due to uncertainty created by governor Crist's new executive orders, Southwestern Power Group which has cancelled plans to build an IGCC plant in Bowie, Arizona, because of the project's high cost and uncertainty surrounding federal greenhouse gas regulations, and Texas-based Tondu, which has abandoned its Nueces IGCC project and now plans, as do Southwestern Power, to build a gas plant instead.

In 2004 American Electric Power signed an agreement with GE Energy and Bechtel to begin the front-end engineering design process for a commercial-scale IGCC plant in the 600 MW range, known as the ‘Appalachian’. It is understood that American Electric Power has delayed its planned start up date until 2015, although speaking at the recent World Energy Congress CEO Michael Morris said he was comfortable with the costs of the project, which ‘are in line with what we expected’.

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