US hopes for coal gasification ride on one project

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HOUSTON, Oct 23 (Reuters) Much talked-about US efforts to build a coal-fired power plant with near zero emissions are now concentrated in a single project, as the costs and difficulties of the endeavor have mounted and the stakes have risen.

FutureGen, a 1.5 billion dollars public-private venture, aims to design and test the technology required to turn coal into a gas that can be stripped of harmful emissions, then burned to produce electricity and hydrogen. It will also capture carbon dioxide -- widely blamed for global warming -- and store it underground forever.

Plants that burn coal, already used to produce half the electricity consumed in the United States, were poised to make a major comeback after a decade of construction of less-polluting, natural gas-fired units. Dirtier coal regained its luster as a cheap power-plant fuel after gas prices soared in 2005 following two hurricanes that disrupted US supply.

But increased worry about climate change and the potential for new laws to tax carbon emissions have created a backlash against new coal plants, which account for nearly 40 per cent of all US carbon dioxide emissions.

While China and India continue to pursue construction of traditional coal-fired plants, US regulators and utilities this year in Texas, Florida, Oklahoma, Minnesota and Kansas have backed off plans for a dozen new coal-fired plants, citing high costs and regulatory uncertainty about carbon emissions.

Earlier this month, Tampa, Florida-based TECO Energy said its utility dropped plans to build a long-awaited advanced clean-coal plant. While utility executives said they will continue to look for new ways to use coal, the project was too risky at the current time.

The growing risk associated with coal use increases the pressure on FutureGen to succeed.

''For those still in the process of coming to the realization of the importance of the global warming threat, FutureGen may be more important than it seemed a couple of years ago,'' said Scott Anderson, senior policy adviser for climate and air programs at Environmental Defense in Texas.

The FutureGen alliance includes US utilities and coal producers like American Electric Power Co and Peabody Energy , along with international miners Anglo American , BHP Billiton and China's largest coal-based power company, China Huaneng Group.

The U.S. Department of Energy and the industrial alliance have been planning FutureGen since 2003. A decision on which of four finalist sites -- two in Texas and two in Illinois -- will become FutureGen's home is expected in December.

THORNY ISSUES Coal gasification technology uses heat and pressure to convert coal or any carbon material into a synthetic gas which is burned in a turbine to generate electricity. Hot gas leaving the turbine is used to heat water to produce steam to power a steam turbine and generate more power.

The technology allows for the separation of the pollutants currently regulated in the United States -- nitrogen oxide, sulfur dioxide and mercury -- from the gas before burning it.

Carbon dioxide can also be separated.

While gasification is fairly well understood, technical and legal aspects of carbon storage present the thorniest issues for FutureGen, said Jerry Oliver, senior vice president of the alliance.

Putting carbon dioxide underground permanently ''has never been done before,'' Oliver said. ''There's no precedent.'' So far, FutureGen has spent about million, mostly focusing on the behavior of carbon at specific geographic sites under consideration, said a spokesman.

Oliver recently met with state officials to follow up on the competing site proposals which promise millions of dollars in grants, tax incentives, power purchase guarantees and liability protection for stored carbon.

When operational in 2012, technology developed by FutureGen could help transform the nation's plentiful supply of coal into a friendly and affordable fuel to meet growing demand for electricity. But success of the project will not be quick or cheap, said Lawrence Makovich, a vice president with Cambridge Energy Research Associates.

''Reducing carbon in electric production is a very big challenge and it's something that is going to be very expensive,'' Makovich said.

''That's why there is so much government involvement and subsidy,'' he said. ''It's a very important piece of R&D that's moving forward.'' Pieces of the technology are in use or being tested around the world, but no single project combines the processes needed to operate a coal gasification plant and to store carbon permanently at a commercial scale and an economical price, Makovich said.

When FutureGen was proposed, ''there were going to be all kinds of projects that were going to do this,'' said Oliver. ''But none of them are going forward.'' REUTERS ARB RK1001

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