Report: Clean Coal Proposal Costly, Incomplete

By Bill McMorris      
Illinois Statehouse News

    SPRINGFIELD – 9/2/2010 - The push for clean coal technology in Illinois has hit another snag.
    A much anticipated report on a clean coal proposal in central Illinois questions both the costs and benefits of the $3.5 billion project.
   The report, released Wednesday by the Illinois Commerce Commission says Nebraska-based Tenaska Energy's proposed plant is costly, incomplete and potentially harmful to competition in the marketplace.
   "The General Assembly should consider whether the current plant configuration best balances the interests of rate payers and the goals of the Clean Coal Act," it read. "The cost associated with electricity generated by (the plant) is substantially higher than…other types of generation."
   And that may be an understatement, according to commission member John Colgan.
The plant would use technology to convert coal into natural gas with near-zero emissions. Project developers are hoping to funnel carbon through a pipeline to the Gulf states, where it can be used to extract oil from wells.
   While the grand idea may work on paper, it still produces an incomplete picture of the project. Developers came to the $3.5 billion price tag without assessing the costs or carbon sequestration and the potential pipeline–significant gaps, according to Colgan.
    "Their initial report did not have a final decision of how to sequester the carbon," he said. "It is difficult to make a decision without knowing what those costs are going to be."
    The high construction costs and costly nature of producing electricity–about 40 to 50 percent higher than traditional coal production–will have to be pushed on to commercial customers. Residential consumers will not see their rates increased by more than 2 percent over the next 30 years, according to a law passed in 2009.
    That leaves businesses and industries vulnerable to bearing the cost. Colgan says Illinois' competitive markets could dry up as large electricity distribution sources like Exelon force out smaller start-ups.
   "If these alternate sources are forced to buy from Taylorville and this 2 percent cap is reached, they'll have to buy the overflow at a much higher rate," he said.
    Colgan said the federal government has taken a keen interest in clean coal technology, especially in Illinois where carbon sequestration is thought to be ideal. The government is directly financing a $1 billion retrofitting in the FutureGen project and has offered to guarantee $2.7 billion in loans for the Taylorville project.
But private investors are not biting at the prospect of projects like the Taylorville plant–a warning sign about the financial risks associated with clean coal technology, according to Colgan.
    "It's a whole new approach to energy that the federal government threw a lot of stimulus money into, but there's probably not a lot of venture capital out there to support this kind of project," he said.
If the state does not approve the Tenaska plan, it will fall apart, along with federal backing.
    While the ICC did not discuss whether the plant should be built, its message clearly hurts the project's chances of passing the General Assembly.
    "We understand what the General Assembly is trying to do–moving to cleaner technology in a carbon based economy–but there is going to be a rate impact," Colgan said.
    Backers of the project are optimistic lawmakers will look beyond costs and approve the project based on the environmental and technological impacts of clean coal.
    "I am fairly confident we can convince the legislature that the project makes sense on all levels," Taylorville Mayor Greg Brotherton said. "It will stimulate the economy, it is environmentally safe and it uses resources we have widely available to us."
    Opponents like Kevin Wright, president of the Illinois Competitive Energy Association, hope lawmakers will take the report seriously.
    "It should be persuasive with legislators, given the high cost and the rate impact on consumers and the engine of the Illinois economy," he said.
    But Teneska representatives countered that the ICC report seemed to misunderstand the purpose of the project, though their figures were similar.
"The premise under the Clean Coal Law of providing for an initial clean coal facility is that it is important to develop the State's coal resources in an environmentally friendly manner," said the company in a statement.
   "No one has ever tried to tell the General Assembly that the initial clean coal facility is going to be the cheapest option."
    The report was given to lawmakers on Wednesday. They are expected to reach their final decision on the matter later this fall.
   (Story courtesy of Illinois Statehouse News)