With the exception of a few small demonstration projects, all proposals for new coal plants that would capture and sequester carbon dioxide (CO2) have been confined to integrated gasification combined cycle (IGCC) plants. An announcement by Tenaska in February may change that.
The Omaha-based power project developer has proposed building a large pulverized coal plant that would incorporate carbon capture and sequestration (CCS). The company is developing a site near Sweetwater, Texas, where it hopes to build the Trailblazer Energy Center—a $3 billion, 600 MW supercritical coal plant able to capture up to 90 percent of the CO2 produced. The captured CO2 would be injected into West Texas oil deposits to boost oil production from the Permian Basin.
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Tenaska has filed with the Texas Commission on Environmental Quality for an air permit to build Trailblazer on a 1,900 acre tract in Nolan County. David Fiorelli, president and CEO of Tenaska’s business development group, said a final decision to proceed with the project will be made in 2009 based on a number of factors. They include the availability of local, state and federal incentives; final project cost estimates; and projected market prices for electricity and CO2. He said current estimates of these factors make the project appear to be economically feasible.
If built, Trailblazer could be the first major commercial coal-fired power plant to capture and provide storage of CO2, considered by many to be a greenhouse gas that contributes to global climate change. The captured CO2 would be transported via pipeline to nearby oil fields in the Permian Basin where it would be used for enhanced oil recovery (EOR) and stored in the basin’s geologic formations. EOR using CO2 has been used to increase oil production in West Texas for more than 30 years. The volume of CO2 expected to be sold to oil producers could help recover enough oil to add more than $1 billion a year of oil production to the Texas economy.
High oil prices have spurred the market for CO2 in the Permian Basin, causing demand to outstrip supply. Essentially all the CO2 currently used in West Texas is provided by natural volcanic sources of CO2 found underground in northern New Mexico and southern Colorado. Natural CO2 is piped from those states to West Texas. Demand has reached such a level that those CO2 supply regions have experienced production declines.
“There’s keen interest in CO2 with the attraction of it being produced by an industrial source that would otherwise release it to the atmosphere,” said Fiorelli. He said that other benefits exist too, not the least of which is reduced severance taxes that Texas has to pay to use natural CO2 imported from other states.
Construction work on Trailblazer could begin in 2009 and be completed in 2014. Tenaska has retained firms to conduct preliminary engineering on the power plant and work on aspects of the the facility’s carbon capture and storage.
“We assume there will be some sort of federal climate legislation related to CO2 emissions,” said Fiorelli. That could be some form of the Lieberman-Warner bill that would establish a carbon market and provide incentives for projects like Trailblazer. But whether a carbon bill passes during this Congress or in the next (which convenes next January), Tenaska chose not to wait. “We didn’t want to be saying ‘boy, we wish we had started working on a project like Trailblazer two years ago,’” said Fiorelli. “There’s an advantage in being one of the early movers, so we decided it was worth investing development dollars in a project that would be mature and ready to move quickly into financing and construction should such legislation pass.”
To date, the company has developed four power plants in Texas and owns and operates the Frontier plant near Bryan and the Gateway plant near Mt. Enterprise. A third plant, the Kiamichi Generating Station near Kiowa, Okla., also sends power to Texas. Among Tenaska’s other projects in development is a 630 MW IGCC plant in Taylorville, Ill.
“We have focused on doing something that is as easy to finance as possible,” said Fiorelli. That meant accessing what is viewed as the only established liquid market for CO2 in the United States for EOR in West Texas. Tenaska believes it will be able to get long-term CO2 off-take commitments under much more favorable terms than is possible anywhere else.
Trailblazer would use a supercritical pulverized coal boiler to make electricity and a commercially available amine technology to capture carbon. “We think there’s quite a bit of advantage to using pulverized coal,” said Fiorelli. “With IGCC you have to pick a single gasifier supplier and spend north of $20 million before you find what it’s going to cost. You don’t have competition whereas with a supercritical boiler, you have a much better competitive situation.”
Another consideration for Tenaska was altitude. Higher elevations diminish power output. The relatively high altitude in West Texas (Sweetwater is 2,164 feet above sea level) affects IGCC efficiency, he said.
Powder River Basin (PRB) coal would fuel Trailblazer. The site chosen for development will take advantage of its proximity to potential CO2 markets, existing CO2 pipelines and the confluence of existing rail to bring the coal from the PRB to the West Texas site. “If you wanted the absolute closest access to the West Texas enhanced oil recovery market you’d site the plant 50 or 100 miles farther west,” said Fiorelli. “But it was important to have dual rail.” The site has Union Pacific rails on the north and Burlington Northern Santa Fe rails on the south. “As you move farther west (in the state) you can’t get that advantage without building additional rail,” he said.
CO2 pipeline extensions can be built later by Tenaska or the CO2 off-taker. The existing West Texas CO2 pipeline reaches to within 50 miles of the Sweetwater site. “There could always be a market for CO2 closer to our site that is not currently being met,” he said.
Because West Texas has little water, any base case scenario would also include dry cooling. Dry cooling reduces water consumption about 90 percent. That means Trailblazer would still require about a million gallons of water a day to operate.
Discussions are underway with some regional water supply entities to determine if there might be a way to improve that situation, said Fiorelli.
 The site has dual-rail access to bring coal to the proposed plant from the Powder River Basin. |
“We are considering using some brackish water sources. We are also talking to people to see if we can access some water supplies that are perhaps beyond their reach and beyond ours, too, if acting alone.” He said Tenaska is prepared to go forward with dry cooling otherwise.
Texas grid operator ERCOT is also fast-tracking several new transmission projects to balance load across the control area and connect the rapidly growing wind capacity in West Texas to load centers elsewhere in the state.
Tenaska has discussed Trailblazer with environmental groups that might be expected to oppose coal-fired plants and found them generally supportive of a proposal that would capture and sequester CO2 from the time the plant goes into operation.
The company is also tracking developments in the continued re-thinking of FutureGen. Some Department of Energy funding initially earmarked for FutureGen might conceivably find its way to other carbon capture power projects like Trailblazer. “There are indications the DOE will consider sequestration from technology other than gasification,” Fiorelli said.
What’s more, some FutureGen funding could be re-deployed to Tenaska’s Illinois IGCC project. Fiorelli said that no established EOR market exists in Illinois that could generate a long-term revenue stream. If the Taylorville IGCC could benefit from the FutureGen follow-on program, it likely would inject CO2 into a deep saline aquifer. “That’s not a revenue source, but we have submitted a response to DOE’s request for information,” he said.
Fiorelli said that Texas is working to add non-natural gas generation, primarily additional coal-fired plants, wind and a number of nuclear projects.
“There will be a move towards more non-natural gas-fired generation in Texas,” he said.
That’s what Tenaska, at least, is counting on.—Steve Blankinship
Climate Cost Numbers Cause Rift
Edison Electric Institute (EEI) estimates that seek to quantify the ultimate cost to customers for carbon capture and sequestration have created dissention among utility members. The split divides utilities that generate most of their power with coal from those who don’t.
A report commissioned by EEI on potential costs associated with complying with a federal climate change bill such as Lieberman-Warner predicts large expenses and potentially dire consequences from legislative prescriptions.
Lieberman-Warner, generally viewed as one of the most practical proposal before Congress, advocates cap-and-trade initiatives in which utilities would have to cut greenhouse gas emissions or buy carbon credits as penalties. The study predicted that in time, proposed legislation before Congress could lead to 80 percent increases in the price of residential electricity. The report predicted that under Lieberman-Warner, which many think has the most chance of eventual passage, penalties levied for a ton of carbon could start at more than $60 a ton and reach $535 a ton by 2050.
A letter sent to EEI President Thomas Kuhn and signed by the top executive of eight utilities said they believe “it will be important to accurately estimate the costs associated with the Lieberman-Warner Climate Security Act.” The study was conducted for EEI by CRA International. The letter requests that “a revised CRA study should reflect the provisions of the recently passed energy bill and make realistic assumptions involving carbon trading and other matters.”
The letter was signed by Scott Morris of Avista, Mayo Shattuck of Constellation Energy, J. Wayne Leonard of Entergy, John Rowe of Exelon, Thomas King of National Grid, Peter Darbee of PG&E, Ralph Izzo of Public Service Enterprise Group and Lewis Hay III of FPL Group. FPL Group commissioned a study by the Brattle Group that suggested global warming could be managed in the United States by starting with carbon fees at about $10 a ton. FPL’s study suggested the fees might initially add $7.50 to $10 to the average Florida customer’s monthly electricity bill.
Carbon recently has been trading at about $30 a ton in Europe, where debate exists over whether cap-and-trade based upon prices has been effective in lowering carbon emissions. The most broadly circulated number in the United States for a carbon price that would begin to have an effect is $50 a ton.
An EEI spokesman said the trade group is still fine-tuning the analysis and is not committed to a single analysis or set of numbers. “We simply want to find the best way to achieve major reductions in carbon emissions while minimizing costs to consumers,” said Jim Owen.—Steve Blankinship
Kentucky Mulls Lifting Ban on Nuclear Plants
For longer than any monarch ever ruled a foreign nation, coal has been King in Kentucky. Today, about 90 percent of the state’s electricity comes from coal-fired power plants. So a proposal to end a moratorium on nuclear power plants in the heart of coal country is drawing more than a little attention.
Kentucky legislators are considering lifting a state ban on nuclear plants imposed more than 20 years ago. The move would clear the way to potentially diversify the state’s power generation mix. Sponsors of a state senate bill to lift the ban cited improved ability to safely store nuclear waste on-site at nuclear plants as a reason why other states are receptive to allowing new nuclear construction. Kentucky’s current stance, say backers of the proposed repeal measure, is keeping the state from competing for nuclear power projects.
 Kentucky’s coal association supports generation diversity, including nuclear.< |
Under the state’s moratorium, no nuclear power plant can be built until a long-term federal disposal site has become operational. The ban has endured longer than many expected because development of the Yucca Mountain nuclear waste facility in Nevada, which started in the 1980s, remains unsettled. Yucca Mountain is not expected to be operational until perhaps 2021.
The lack of a long-term disposal site shouldn’t limit the opportunity to explore nuclear power projects in Kentucky, said State Senator Bob Leeper, who introduced the rollback bill.
Kentucky is also a domestic source of uranium in addition to coal. Rob Ervin of the United Steel Workers, which has hundreds of members working in the uranium enrichment field near Paducah, said the safety of nuclear power has come a long way. “Exploring our options and giving us a chance to capitalize on the rebirth of an industry is what this bill is all about,” Ervin said. “Limiting our options based on a moratorium from a bygone era does not.”
The Kentucky Coal Association is not taking a stand on the issue, but does support diversification in the state. Bill Caylor, association president, said he believes Kentucky needs a diverse energy portfolio and that nuclear power should be part of it. He called coal “the bridge to the future” saying it was the cheapest source, thereby giving it an edge. “But this country truly needs more energy resources,” he said.—Steve Blankinship
Windfall Profits Posted as PTC Sunset Nears
Although almost certain to be extended, the production tax credit (PTC) for wind generation (which allows power producers to deduct two cents for each kWh produced from wind) is scheduled to expire at the end of this year. That potential expiration is driving profits for many wind turbine manufacturers, as developers rush to build as much new wind capacity as they can.
Last year, U.S. power providers added more than 5,200 MW of new wind capacity. And the American Wind Energy Association projects that additions this year could equal that amount as power providers rush to finish wind farms before the credit expires.
GE Wind, one of the largest maker of wind turbines in the U.S., and Vestas, among the largest makers of wind turbines in the world, report record orders as rising natural gas prices and state greenhouse-emission laws drive unprecedented demand for wind power. Wind now accounts for 30 percent of new generating capacity and may boost GE’s wind-turbine sales 25 percent to $6 billion this year. Xcel Energy, the biggest provider of wind power in the U.S., is buying 67 GE turbines for one of its projects in Minnesota.
Vestas has opened its first U.S. manufacturing plant, in Colorado, and Siemens opened a plant in Iowa last fall. Meanwhile, GE is partnering with two companies to expand turbine blade production in New York and Iowa.
Early this year, GE Vice Chairman John Rice told an investor conference that GE Wind’s profit margin will eventually be about $1 billion. If it reaches that level this year with sales of $6 billion, the profit margin would be 17 percent, news reports estimated. “Customers are giving billions of dollars of orders already because they’re afraid they’re going to lose their spot in line,’’ said John Krenicki, who heads GE Energy.
GE bought into the wind generation business in 2002 when it acquired Enron’s wind turbine manufacturing assets for less than $300 million. Since 2004, GE Wind’s production has grown 600 percent and sales have quadrupled. It now claims 45 percent of the U.S. market. Since late February, the GE Energy wind business unit has announced $1.7 billion in orders, including its second billion-dollar contract since November with Invenergy Wind.—Steve Blankinship
Kansas Coal Controversy
As promised, Kansas Governor Kathleen Sebelius vetoed a bill that would have allowed two coal-fired power plants to be built by Sunflower Electric Power Corp. in the southwest part of the state.
Within days of her veto last month, however, a new proposal emerged from a legislative committee, which would limit the plants’ carbon dioxide emissions and encourage increased use of wind energy.
The new proposal also included the same provisions Sebelius opposed, including language stripping the state’s secretary of health and environment of some power.
The flashpoint for conflict is Sunflower’s proposed $3.6 billion, 1,400 MW Holcomb power plant, a two-unit coal-fired station. Last autumn the project looked dead after the Kansas Department of Health and the Environment refused to grant an air permit.
But the project developer, with the help of state legislators, sought to sidestep that executive department decision. Earlier this year they began working to write a bill guaranteeing Holcomb’s construction. The bill would need to be veto-proof since the legislature would reverse the decision of Kansas environment secretary, Rod Bremby.
A key objection to Bremby’s decision was that it cited the plants’ potential CO2 emissions as a reason to reject the air permit. Critics of his decision said the state has no specific rules on CO2 emissions. Under the bill that Sebelius vetoed, the state’s air-quality laws would have been amended so agency officials such as Bremby could not reject a permit on similar grounds. Instead, new coal-fired plants would have to meet carbon dioxide emission standards established under the legislation, or face a $3-a-ton tax on emissions. The bill would have set CO2 emissions limits at or a little higher than the emissions expected from the proposed Holcomb plant.
Sunflower officials estimated the new plants would produce 11 million tons of CO2 a year.
Sebelius earlier this year offered that Sunflower build a single 660 MW plant. That plant would sequester CO2 once the technology becomes available. Sunflower rejected the proposal, saying the only way it could build any new capacity was to size the plant so that wholesale buyers in Colorado and Texas could take part of the capacity. Tri-State Generation and Transmission of Colorado and Golden Spread Electric Cooperative of Texas both are considered key to arranging project financing.
In her veto of the earlier bill, the governor objected to provisions limiting the secretary’s power to deny air quality permits for such projects and blocking him from writing new emissions standards without the Legislature’s approval.
Bremby said that rather than impose CO2 limits he plans to encouage utilities to voluntarily cut emissions. Earlierthis year he signed the first such agreement with Westar Energy Inc.—David Wagman
Business Briefs
GE Energy Financial Services plans to invest $5 billion outside the United States to help meet soaring energy demand by the end of 2010. GE has opened offices in Southeast Asia and the Middle East and expanded in India. The company said its investments outside the United States would be increased to 25 percent from 10 percent. Those investments are now spread across 35 developed and emerging countries.
The Nuclear Regulatory Commission approved Southern Co.’s request to increase the generating capacity of the Vogtle nuclear power plant in Georgia by 1.7 percent. The power uprate will increase Vogtle Unit 1 from about 1,109 MW to 1,174 MW, and Unit 2 from about 1,127 MW to 1,173 MW. Plant output will increase through more accurate means of measuring feedwater flow. The feedwater system pumps water from the condenser to the steam generator. The company said it plans to implement Unit 1’s up-rate at the completion of the spring 2008 refueling outage and Unit 2’s up-rate at the completion of the fall 2008 refueling outage.
American Electric Power business unit Appalachian Power received authority from the Public Service Commission of West Virginia to build a 629 MW integrated gasification combined cycle (IGCC) electric generating plant in West Virginia. Regulators granted Appalachian Power a Certificate of Public Convenience and Necessity for the plant, which would be located beside the company’s existing Mountaineer Plant near New Haven, W. Va. The plant’s estimated cost is approximately $2.23 billion.
Four companies have been asked to submit proposals to build new nuclear power plants in Ontario, including AREVA, Atomic Energy of Canada, GE Hitachi Nuclear Energy and Westinghouse Electric Co. Their proposals will be examined by a team including various government ministries, Ontario Power Generation and Bruce Power. The process will also be scrutinized by a review board and a “fairness monitor.”
Progress Energy Florida, a unit of Progress Energy, filed with the Florida Public Service Commission to build two nuclear units. The site, a 3,100 acre plot in Levy County, was selected by Progress Energy in 2006. If approved and built, the project would be among the first nuclear plants in the country to be constructed on a greenfield site in more than 30 years. The company estimates the total cost of the project to be approximately $14 billion for the two units, plus an additional $3 billion for the necessary transmission facilities.
Black & Veatch reported revenues of $3.2 billion in 2007, an approximate 50 percent increase compared to $2.17 billion in 2006. The company’s total employment grew about 11 percent in 2007 to 9,600 people. The company’s energy business saw revenue of more than $1.75 billion.
Construction & Contracts
Siemens awarded WorleyParsons a contract for the engineering phase for the installation of two SGT6-5000F simple cycle units in Peru. The first unit is the Simba Project for EnerSur, a subsidiary of Suez Energy International. The second installation is the Kallpa Unit II Project for Kallpa Generacion S.A, where Siemens previously installed a SGT6-5000F unit. The projects are scheduled for completion in July.
Panda Energy Inc. said it plans to build, own and operate a 500 MW combined-cycle power plant. The natural gas-fueled Panda Sherman generating station would be in Sherman, Texas. Construction would take approximately 24 months. Panda said it has requested an air permit from the Texas Commission on Environmental Quality. The company said it also has recently filed for an air permit to build a 1,000 MW combined-cycle power plant in Temple, Texas.
People & Personnel
Barry Glickman has been named the 14th president of Dresser Waukesha, a unit of Dresser Inc. He is expected to join Waukesha on April 7. Glickman succeeds Thomas J. Laird who left Waukesha in January to assume the presidency of parent company Dresser’s newly created Flow Technologies business, based in Houston.
J. Barnie Beasley, chairman, CEO and president of Southern Nuclear Operating Co., will retire effective Sept. 1, after 39 years of service with the company. Beasley joined the Southern Co. system in 1969 as a student co-op at Georgia Power.
Constellation Energy named Michael J. Wallace vice chairman, where he will lead and expand the development and deployment of the company’s new nuclear strategy and its international partnership, UniStar Nuclear Energy (UNE). The company also named Henry B. “Brew” Barron as president, chief executive officer and chief nuclear officer of Constellation Energy Nuclear Group (CENG). Barron is a former Duke Energy executive with 35 years of energy industry experience. He assumes the duties held by Mike Heffley, CENG’s senior vice president and chief nuclear officer, who is retiring. Wallace has been serving as executive vice president of Constellation Energy and president and chief executive officer of CENG and will transfer those duties to Barron in several months. Wallace will continue to serve as chairman of UNE, a strategic joint venture between Constellation Energy and the EDF Group in France to develop new nuclear plants in North America. He will focus on leading and expanding the company’s new nuclear strategy, including key relationship development. George Vanderheyden continues his role as president and chief executive officer of UNE.
Southern California Edison elected Stuart R. Hemphill as an SCE vice president, responsible for managing and administering SCE’s $2.5-billion portfolio of renewable and alternative power contracts. His organization also handles agreements related to customer generation applications, including distributed generation, photovoltaic and wind technologies. Hemphill joined SCE in 1987 as an engineer in the company’s system planning organization. He holds a master’s degree in business administration from California Polytechnic State University, Pomona and a bachelor’s degree in electrical engineering from California State University, Fullerton.
Pacific Gas and Electric Co. named Barbara Barcon as vice president, finance and chief financial officer. She will be responsible for business planning, management reporting, performance management and coordination of the company’s operating plan. Barcon most recently was senior vice president of The Gores Group-Glendon Partners Private Equity Firm. Prior to that, she served in various roles at Northrop Grumman Corp. and as chief financial officer of the Space Technology Sector. Her previous experience includes serving as chief financial officer of Boeing Satellite Systems, in addition to more than 20 years at Hughes Electronics Co., including as vice president and chief financial officer of Hughes Space and Communications.
Mergers & Acquisitions
General Physics Corp. (GP), the operating subsidiary of GP Strategies Corp., has acquired Performance Consulting Services Inc., a company specializing in performance engineering support, training, combustion optimization, implementation of smart equipment condition monitoring systems and testing services for power plants. PCS, based in Montrose, Colo., generated approximately $4.5 million of revenue in 2007. The purchase price consists of $1.0 million paid in cash and $1.0 million of guaranteed future payments. GP said it may pay an additional $2.3 million, contingent upon GP’s energy group achieving certain revenue targets.
Bruce Power Alberta completed its deal to buy the assets of Energy Alberta Corp. relating to nuclear power plant development. Bruce also filed an application with the Canadian Nuclear Safety Commission to prepare a site for the potential construction of western Canada’s first nuclear power plant. Bruce is considering up to four reactors that could produce 4,000 MWe. The first unit could be ready as early as 2017. The company has not yet chosen a specific reactor design for the site.