[Senate Hearing 110-1200]
[From the U.S. Government Publishing Office]
S. Hrg. 110-1200
CLEAN COAL TECHNOLOGY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SCIENCE, TECHNOLOGY,
AND INNOVATION
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
APRIL 26, 2007
__________
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Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska, Vice Chairman
Virginia JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
Christine D. Kurth, Republican Staff Director and General Counsel
Kenneth R. Nahigian, Republican Deputy Staff Director and Chief Counsel
------
SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND INNOVATION
JOHN F. KERRY, Massachusetts, JOHN ENSIGN, Nevada Ranking
Chairman JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West KAY BAILEY HUTCHISON, Texas
Virginia GORDON H. SMITH, Oregon
BYRON L. DORGAN, North Dakota JOHN E. SUNUNU, New Hampshire
BARBARA BOXER, California JIM DeMINT, South Carolina
MARIA CANTWELL, Washington JOHN THUNE, South Dakota
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri
AMY KLOBUCHAR, Minnesota
C O N T E N T S
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Page
Hearing held on April 26, 2007................................... 1
Statement of Senator Boxer....................................... 5
Statement of Senator Dorgan...................................... 46
Statement of Senator Kerry....................................... 1
Statement of Senator Stevens..................................... 3
Prepared statement........................................... 4
Statement of Senator Thune....................................... 50
Witnesses
Chaisson, Joseph M., Technical and Research Director, Clean Air
Task Force..................................................... 6
Prepared statement........................................... 8
Denis, Roberto R., Senior Vice President, Sierra Pacific
Resources...................................................... 13
Prepared statement........................................... 15
McRae, Gregory J., Hoyt C. Hottel Professor of Chemical
Engineering, Department of Chemical Engineering, Massachusetts
Institute of Technology........................................ 19
Prepared statement........................................... 20
Rencheck, Michael W., Senior Vice President--Engineering,
Projects, and Field Services, American Electric Power.......... 24
Prepared statement........................................... 26
Wilson, John M., Chief Operating Officer, Siemens Environmental
Systems and Services........................................... 35
Prepared statement........................................... 37
CLEAN COAL TECHNOLOGY
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THURSDAY, APRIL 26, 2007
U.S. Senate,
Subcommittee on Science, Technology, and
Innovation,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:02 a.m. in
room SR-253, Russell Senate Office Building. Hon. John F.
Kerry, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. JOHN F. KERRY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Kerry. The hearing will come to order. Thank you
all very much, welcome to our witnesses, thank you, folks, for
taking time to come in today.
I know that we have some other colleagues coming, but I
also have a conflict. The Finance Committee is meeting now, and
a number of members are caught up between them. We're going to
just proceed ahead and we'll see who's here.
Obviously, the subject of climate change and emissions is
increasing in its importance to the country and to the world as
the evidence mounts regarding the impact of greenhouse gas
emissions.
This is a subject that I've followed in this Committee
since 1987, or slightly before, when Al Gore and I held the
first hearings on global climate change. Subsequently we wound
up going down to Rio for the Earth Summit where the voluntary
Framework was entered into in 1992.
So, it's been a journey of 20 years or more, with a lot of
evidence mounting and a lot of knowledge gained in the interim.
The science is pretty clear now, when you sit down with
some of our top scientists from Jim Hansen to Ed Miles or John
Holdren at Harvard or a bunch of folks. The feedback that we're
getting from the climate, from Earth itself, is indicating a
much more rapid, and much more consequential rate of change
than had been predicted. The predictions are coming true, but
in greater degree, and greater intensity.
Senator Stevens, welcome.
So the question we face is of how to deal with this? The
scientists are telling us we have a 10-year window within which
to try to get it right, and that 10-year window has now
narrowed in the sense that the consensus of those scientists
was 2 years ago. Two years ago the consensus was that we could
afford a three-degree centigrade increase in the Earth's
temperature, before you get to the catastrophic tipping point,
as they judge it, and that was deemed to be about 550 parts per
million of greenhouse gases in the atmosphere.
They have now revised that, based on the rapidity and size
of the feedback that they're getting. They now deem it to be a
two-degree centigrade increase that we can tolerate, and a 450
parts per million level of greenhouse gases in the atmosphere.
So, we face an enormous challenge, and the question that we
are all grappling with is how to do this responsibly, minimize
economic dislocation, maximize economic output, growth,
productivity, and lead the world, hopefully, in the creation of
technologies that we can sell to India, to China, less
developed countries, and others.
Obviously there's a lot of money that's already beginning
to chase these technologies. Venture capital is moving in
significant amounts into green technologies. But, at the same
time leading industrialists, leading corporate chieftains, are
telling us that they want the Government to create a certainty
about the direction we're going, and not to have a patchwork
of, California doing this, and New England Regional Compact
doing that, and different states maneuvering. They believe that
it's important to have a standard, and we need to wrestle with
that.
I happen to believe that's true, I just came back from the
Milken Conference out on the West Coast where this was one of
the top topics of conversation with a lot of Wall Street folks
and a lot of business people, all of whom believe that we
probably need to move in that direction of having a cap and
trade, some structure, with perhaps auctions, and create value
and move in that direction.
The big question within that framework is, what's going to
be the new mosaic of American energy sources? And to the
greatest degree, most of us would like to let the marketplace
decide that. I don't think the Government ought to pick the
winner or loser in that effort, but I think we should create
some strong incentives for people to move in certain
directions.
Obviously, coal is a big deal to all of us. We have a lot
of it, it's abundant, it's cheap, we know how to get it, and
there's every indicator that it's going to be a significant
part of the mix. But, to meet the challenge, we're going to
have to find a way to burn it clean. Half of our electricity is
currently generated from coal. That coal currently produces
approximately 1.5 billion tons of carbon dioxide annually.
According to the National Energy Technology Laboratory at
DOE, those numbers are going to get bigger, and get bigger
fast.
Over 150 new coal-fired power plants are proposed for
construction in our country alone. And China, we are told, is
going to build one to two per week. Over their lifetime, those
plants, the new plants that come online, are going to spew an
additional 30 billion tons of carbon dioxide into the air.
We have witnesses today who will share with us their
expertise and their views about what the prospects are as we go
forward. In response to this challenge, today I am introducing
the Clean Coal Act of 2007 which will seek to make certain that
whatever plants we're going to build are going to be built with
the new state-of-the-art technology that we're going to hear
about today from our witnesses.
Recently, one of the world's top climate scientists, Jim
Hansen, called for an end to building new coal-fired powered
plants that use pulverized coal, without the new technologies,
because of what they do with respect to global warming. Jim
Hansen said, ``Coal is the big amount. Until we have that clean
coal power plant, we should not be building them, it is as
clear as a bell.''
The threat of those challenges, I've talked about a little
bit, and I don't want to go on about it. Let me just say that
we look forward to hearing from our 5 witnesses today, Joseph
Chaisson, the Director of Research and Technology for the Clean
Air Task Force, based in Boston; Roberto Denis, the Senior Vice
President for Sierra Pacific Resources, a utility in the
Pacific Northwest; Dr. Gregory McRae, the Bayer Professor of
Chemical Engineering at MIT, and one of the authors of the
recent MIT Coal Study; Michael Rencheck, the Senior Vice
President for Engineering, Projects, and Field Services at
American Electric Power; Mr. John Wilson, Chief Operating
Officer for the Environmental Systems and Services Group at
Siemens Corporation.
Before I introduce Senator Stevens and Senator Boxer, let
me say that I have had a number of conversations in the recent
weeks with Lou Hay at Florida Power and Light, and with AEP's
CEO, and AEP is, as we will hear today, building two new plants
with IGCC technology, in West Virginia and Ohio, and FPL is a
powerful advocate for the notion that we need this cap, as are
other major CEOs from the USCAP effort. They are growing in
number in terms of the companies they represent in the country.
So, there's a movement in this direction, but obviously time is
of the essence, and we need to grab this baton and run with it.
Senator Stevens?
STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA
Senator Stevens. Well, thank you very much, Mr. Chairman. I
have a conflict and will have to leave soon. I did want to hear
the witnesses if we could, but I ask that my statement appear
in the record, if you will.
And, I want to add to it that most people don't realize
that half of the coal in the United States is in Alaska. Access
to it is denied because of a provision that was placed in
Federal law back in the days when the projection was that we
were entering into a new Ice Age, and the decision was made to
prohibit the production of coal in Alaska unless the original
contour of the land was restored. But, if you take out the
coal, you have to melt the ice, and if you melt the ice, it
would be hard to replace the act of God and freeze it back so
that you had the same elevation and the same contour, so we
haven't had a new coal operation in Alaska for a long time.
We are, now, proceeding with the coal gasification plant at
Nikiski in the Kenai peninsula, that will allow the company
known as Agrium to produce fertilizer and ammonia, and also
clean diesel fuel. It is something that, as a project, we're
all looking forward to see if it will work, it is one of the
alternative energy technologies currently being partially
financed by the Federal Government, and I really support that
activity.
I do have some serious questions, however, about the role
of carbon and CO2 in the air, and I hope that one of
these days we'll listen to the scientists from International
Arctic Research Institute who have studied this, this process
of change, now, for 20 years, and they do disagree with the
current concepts that are being pursued by--in this Nation, and
to a certain extent, in Britain, and I think it's time we took
stock of looking at the accuracy of some of the comments that
have been made in the past concerning the impact of global
warming on our economy and its cause.
But, I do ask that my statement be put in the record,
completely. Thank you.
Senator Kerry. Without objection, it will be put in the
record.
[The prepared statement of Senator Stevens follows:]
Prepared Statement of Hon. Ted Stevens, U.S. Senator from Alaska
Mr. Chairman, thank you for holding this hearing today on clean
coal technologies.
In the United States alone, coal-fired power plants satisfy more
than half of the Nation's energy needs and this percentage is likely to
increase in the future. Coal is both abundant, inexpensive, and
represents one of our most important natural resources.
It is a stable commodity and a key component in satisfying the
United States' growing energy demands. Coal production is an important
element to our national security. Without it, we would be increasingly
reliant on unstable or unfriendly nations for our energy needs.
Most people don't realize that half the coal in the U.S. is located
in Alaska. Access to it is denied because of a provision that was
placed in Federal law back in the days when the projection was that we
were entering into a new ice age. The decision was made to prohibit the
extraction of coal in Alaska unless the original contour of the land
was restored. But if you take out the coal you have to melt the ice,
and if you melt the ice it is hard to replace the act of God and freeze
it back so you have the same elevation and the same contours. We
haven't had a new coal operation in Alaska for a long time.
Continued reliance on imported energy from volatile regions of the
world is not a solution. We must increase our domestic production in
order to remain globally competitive and we must do so in an
environmentally responsible manner. New technologies to make this
possible are on the horizon. Carbon capture and sequestration is just
one of many processes already in development. Ground breaking research
is being conducted to develop new ways to burn coal in order to
maximize energy yield and employ cleaner and more efficient processes.
One of these processes, which we will hear about today, is called
Integrated Gasification Combined Cycle or IGCC. The IGCC process is a
promising new technology which has the potential to increase efficiency
by 40 percent. However, this process is not conducive to all regions
because of its limitations on the type of coal which can be used.
Solutions must be found that will accommodate these differences and we
must continue to research and develop other methods.
In my state, Agrium Incorporated is developing coal gasification at
its Nikiski fertilizer plant. This process would allow the plant to
switch from natural gas to coal as a chemical feedstock. This coal
gasification project will allow Agrium to not only produce the
fertilizer and ammonia currently in production but also clean diesel
fuel. In addition, the excess energy produced by this project,
estimated at 75 megawatts, could be injected into the existing power
grid of the surrounding community. Agrium is also evaluating carbon
sequestration, which can be utilized in existing oil and gas fields to
yield additional energy supplies.
Like many of the alternative energy technologies currently in
development, no one single solution will solve the problem of meeting
energy needs in a responsible manner. However, we should continue to
explore the benefits clean coal can continue to offer our economy. I
look forward to hearing our witnesses' testimony and their response and
their insight into how we can achieve this goal.
I do have some serious questions about the role of carbon and
CO2 in the air and I hope that one of these days we will
listen to the scientists from the International Arctic Research
Institute who have studied this process of change for twenty years.
They do disagree with the current concepts that are being pursued in
this Nation and to a certain extent in Britain. I think it is time we
took stock of looking at the accuracy of some of the comments that have
been made in the past concerning the impact of global warming on our
economy and its cause. Thank you.
Senator Kerry. And, Senator, I would be delighted, I think
there's nothing more important than to get at the science, so
I'd be happy to have those folks come in here, have a good
dialogue here with them and with some others that have a
different point of view, because I think we obviously need to
proceed forward intelligently, and whatever theories are out
there, we are all smart enough here to pick our way through
them. So, I'd be delighted to have those scientists come in
here, and we'll try to set that up as soon as we can.
Senator Boxer?
STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM CALIFORNIA
Senator Boxer. Mr. Chairman, thank you so very much for
your leadership, not only in this particular hearing this
morning, but thank you for your leadership in general on global
warming. We need that leadership from many people in the Senate
and the House and the Administration, because as we know, we
face a threat here that's pretty grave.
I'm going to speak, probably as long as Senator Stevens
spoke, no longer than that.
We know that advanced cleaner coal can help us solve one of
the--this, this great threat that is facing us. And, you know,
we've had seven hearings in the Environment Committee, Senator
Kerry, you've been part of a couple of those. The most
disturbing thing, of course, is what could happen if we don't
respond to this, and I won't go through it--it's in my
statement--but what was stunning in new news, was that a
scientist testified that 40 percent of the species on the
planet could be at risk, if the worst predictions come true. We
just can't abide by that.
Global warming puts the web of life that we take for
granted in jeopardy. At current utilization rates we have more
than 250 years worth of coal in the ground right here in the
United States, we are the Saudi Arabia of coal. If we could
figure this out, how to do this in a clean way, we'll be way on
our way to energy independence in a very, I think, responsible
way that will lead the way for the world.
Right now, 40 percent of our greenhouse gas emissions come
from electricity generation. More than half of that comes from
coal-fired power plants. Plans are on the books to build
hundreds of new coal-fired power plants. That's why I think
your legislation, we're analyzing it now, is a very important
contribution to this, because if we don't deal with this we're
going to keep going backward. We can't afford to go backward on
global warming.
So, we have a big challenge, but I think it's doable. Some
of the technologies are commercially available, some are in
operation at pilot projects, others remain in early research.
Some work on all kinds of coal, others do best with only one
kind of coal, so this isn't a kind of a one-size-fits-all
operation.
But, we need additional research. I've been one to say, we
need a Manhattan Project on clean coal. We need to get very
strongly behind that effort, because all the countries in the
world, I think, are looking to us. The Administration keeps
saying, ``We're not going to get anywhere unless China and
India get involved,'' we can't wait. We never wait for other
countries when it comes to the health and safety of our people,
our planet, or our economy.
So, we need to move forward. If we do solve this problem,
it will be exported across the world, we will create jobs, and
our grandchildren will be able to have a similar experience
living on this planet, as we have had.
So, thank you, again, Mr. Chairman for your leadership, I
look forward to working with you continually as we solve this
problem.
Senator Kerry. Thank you, Senator. I reciprocate--you've
been terrific over in the Environment Committee and you're
moving ahead and we're enjoying working together on this and we
look forward to continuing to cooperate.
Folks, thank you, again, for taking time to be here, this
is a very important topic, there's a lot of discussion here, as
you know, about how to do this, so we anxiously look forward to
your testimony.
Mr. Chaisson?
STATEMENT OF JOSEPH M. CHAISSON, TECHNICAL AND RESEARCH
DIRECTOR, CLEAN AIR TASK FORCE
Mr. Chaisson. Mr. Chairman and Members of the Subcommittee,
my name is Joseph Chaisson, I'm the Technical and Research
Director of the Clean Air Task Force, or CATF. Thank you for
the opportunity to testify this morning about advanced coal
technology and the environment.
Founded in 1996, CATF is the only national environmental
advocacy organization with an exclusive focus on protecting the
Earth's atmosphere and human health from air pollution and
climate change.
A major CATF focus is working with state and regional
environmental groups, state governments and private sector
project developers to facilitate early domestic deployment of
advanced coal gasification technology, including carbon capture
and geologic storage, where feasible, today.
We're also exploring how to remove barriers to promising
advanced coal technologies that have not yet entered the
market.
Today, I will address why we need to deploy radically
cleaner coal technology, highlight several recent advanced coal
market developments, list key challenges to deploying cleaner
coal technologies, and outline what I think the Federal
Government could do to address these challenges.
Conventional coal combustion technology is responsible for
some of the most important environmental problems on Earth,
including air pollution that damages human health and
ecosystems, land disruption, depletion of water resources,
toxic solid waste production, and global warming.
Despite these problems, coal will continue to be widely
used throughout the world for many decades, at least.
Therefore, we must act to develop and commercially deploy much
cleaner coal-using technologies, as soon as possible.
The good news is that much commercial activity, typically
too recent to be reflected in available studies, is already
underway in both coal gasification power production, or IGCC,
and in carbon capture and geologic storage.
Some key highlights include, first, the emergence of
Siemens and Mitsubishi as full-systems IGCC vendors, offering
coal gasifiers as well as combustion and steam turbines in an
integrated package, with both of these gasifiers being well-
suited to using low-rank sub-bituminous and lignite coals.
Second, we have several next-generation commercial IGCC
plants under development, and these plants are driving
important engineering design work, including serious
exploration of options for adding carbon capture to these
plants in the future.
Third, we see innovative hybrid coal gasification projects
moving forward by independent power project developers that
combine electricity and substitute natural gas production.
These are very interesting projects.
We also see several promising advanced gas-fired
technologies, moving into the process demonstration stage, it
could be commercially available within the next 2 or 3 years.
And finally, projects using coal gasification, a new
technology with significant implications, including the
potential to avoid most adverse environmental impacts
associated with coal mining, transportation and solid waste
disposal, to significantly lower coal gasification project
costs, and potentially to triple our economic coal reserves.
The first domestic underground coal gasification project is
being developed in Wyoming by the Gas Tech Company.
However, several serious challenges exist to deploying
these very clean coal technologies. First, proposed IGCC
projects face the very significant global run-up in large
energy project construction costs that is impacting and slowing
down most proposed coal plants today.
Second, and very importantly, in the absence of a stringent
cap on carbon dioxide emissions, there is no economic incentive
today to incorporate carbon capture and geologic storage into
most IGCC projects.
Third, Federal advanced coal research, development, and
demonstration programs lack sufficient scope to help promptly
develop and deploy the technologies we need.
And, fourth, and this is actually quite important, we do
not yet have a low-cost practical technology for capturing
carbon dioxide from conventional coal-plant combustion flue
gas, which will be essential to substantially reducing
CO2 emissions from the existing global coal-powered
plant fleet.
Several Federal policies could help overcome these
challenges. First, a production tax credit, or some other form
of equivalent financial incentives for new coal power plants
that include full carbon capture and geologic storage.
Second, a carbon emissions performance standard for new
fossil power plants that would require significant carbon
capture and sequestration for all new coal-powered plants.
Third, an effective carbon emissions cap and trade system;
and fourth, to expand and broaden DOE's advanced coal research,
development and demonstration programs.
In summary, I believe the technology we need to transition
coal to much more environmentally sustainable systems could be
either deployed or developed promptly, if effective Federal
advanced coal technology policies were implemented.
Thank you for this opportunity to testify, and I look
forward to your questions.
[The prepared statement of Mr. Chaisson follows:]
Prepared Statement of Joseph M. Chaisson, Technical and Research
Director, Clean Air Task Force
Introduction
Mr. Chairman and Members of the Subcommittee,
My name is Joseph Chaisson. I am Technical and Research Director of
the Clean Air Task Force (CATF). Thank you for the opportunity to
testify today on advanced coal technology and the environment.
Founded in 1996, CATF is the only major national environmental
advocacy organization with an exclusive focus on protecting the Earth's
atmosphere and human health from air pollution and climate change. This
singular focus enables CATF to field deep analytic and strategic
resources equal to the significant and complicated atmospheric
challenges we face over the next fifty years.
Over the past several years, one of CATF's major activities has
been to work with state and regional environmental groups, state
governments and private project developers in several parts of the
country to facilitate early domestic deployment of coal gasification
technology--with carbon capture and geologic sequestration (storage)
where currently feasible. We have briefed numerous Congressional
offices--accompanied by state environmental partners--about the promise
of coal gasification technology. Another related CATF focus has been
exploring how to remove barriers to promising advanced coal
gasification and carbon capture technologies that have not yet entered
the market. This ``hands on'' project facilitation and market entry
work provides us with a useful perspective on what is happening on the
ground in today's marketplace.
In this testimony, I will briefly restate the importance of moving
forward radically cleaner coal technology than is deployed today;
highlight current market developments on the ground which the
Subcommittee may not be aware of; and, finally, discuss key challenges
to radically cleaner technology, and what the Federal Government might
do to help tackle those challenges.
I. The Current and Projected Environmental ``Footprint'' of Coal
Coal-fired power generation is today one of the planet's most
environmentally destructive activities. It is responsible for most of
the Nation's sulfur dioxide emissions that, even after recent
regulatory reductions, will still take 15,000 lives prematurely in the
U.S. each year by EPA's own estimate. It contributes substantially to
nitrogen oxides, which add to smog, haze, and crop and ecological
damage. It emits most of the Nation's manmade mercury air pollution.
Current coal mining practices have scarred land and threatened water
and habitat. Coal power generation consumes and discharges enormous
quantities of water, while generating nearly 100 million tons of toxic
wastes each year, the disposal of which is not regulated by the Federal
Government. Finally, coal power generation is responsible for nearly 40
percent of the planet's man-made emissions of carbon dioxide that
contribute to global warming.
Despite these problems, coal-fired power generation is likely to be
relied on for decades to come and is projected to expand dramatically.
World electric demand is expected to triple by 2050, coming largely
from developing countries like China and India. Most analyses agree
that this underlying demand growth will substantially outpace even the
most aggressive energy efficiency policies. Renewable energy, while it
should and will be widely deployed, faces significant physical,
environmental and economic challenges that will practically limit its
share of total electrical supply for several decades. Natural gas is
relatively expensive and its reserves are far more limited than coal.
Finally, nuclear power faces considerable hurdles of scale, economics
and environmental opposition. For these reasons among others, China is
building as much new coal capacity each year as the entire U.K. power
grid, and coal power generation in India is projected to grow rapidly--
matching current U.S. coal consumption by 2020 and China's current coal
consumption by about 2030. The United States faces both growing demand
for electricity and an aging power plant fleet; coal will remain
economically attractive to meet some portion of electricity demand
growth and to replace some existing power plants.
Turning to climate, numerous analyses performed or commissioned by
such bodies as the Intergovernmental Panel on Climate Change, the
European Union, the National Commission on Energy Policy, academic
institutions such as Harvard, MIT, and Princeton University as well as
environmental organizations such as Friends of the Earth-U.K. have
concluded that, even with aggressive energy efficiency, renewable
energy development and in some cases nuclear expansion, coal-fired
power generation is likely to remain a significant part of any 2030-
2050 global power supply. Accordingly, each of these studies has
identified the critical importance of transitioning coal use to
technologies that minimize health-related air emissions and allow for
the removal and storage of carbon dioxide, and to begin to demonstrate
and scale up those technologies on a commercial basis as soon as
possible.
In short, the planet is unlikely to be able to live without coal
for some time to come. But, at the same time, the planet, from an
environmental standpoint, can't stand to live with coal as it is
currently used to produce electricity. This leaves only one path
forward: we need to change how we use it--and we need to do so as
quickly as possible.
II. What Is to Be Done?
An environmentally responsible coal policy would do the following:
Ban the construction of new coal combustion plants due to
their inherently unacceptable air, water, solid waste and
climate impacts.
Rapidly commercialize the use of integrated coal
gasification combined cycle (IGCC) for electric power
generation, because it has a much smaller environmental
footprint for air emissions and waste than does coal
combustion.
Rapidly demonstrate the feasibility of large-scale geologic
storage of carbon dioxide and then require all new coal power
plants to capture and sequester at least 90 percent of their
coal carbon content.
Demonstrate and deploy advancements such as underground coal
gasification, that could further shrink IGCC's environmental
footprint by substantially minimizing mining impacts and waste
management.
Reform coal mining practices worldwide, impose effective
Federal regulation of coal plant solid waste disposal and
reduce coal generation water use and associated impacts to the
minimum practical levels.
Increase the energy efficiency of IGCC power generation to
the maximum practical levels over time.
Establish effective carbon dioxide emissions controls.
Commercializing IGCC is of special importance. Because it is an
inherently cleaner process--the gas it produces from coal must be free
of most contaminants to power a gas turbine--IGCC reduces deadly sulfur
and nitrogen oxide emissions to very low levels--approaching those
achievable by natural gas combined cycle power plants. Gasification is
the only coal power generation technology that can virtually eliminate
mercury air emissions and capture most of the coal mercury content in a
concentrated form that can potentially be sequestered from
environmental release; IGCC is the only way we can continue to use coal
to produce power without adding significantly to the global mercury
burden. Total solid waste from gasification is typically half the
volume generated by conventional coal plants, and gasification water
use is substantially lower as well.
Underground coal gasification (UCG), a promising further
advancement in IGCC would gasify the coal directly within the deep,
unmineable coal seams. This process can potentially eliminate the
environmental impacts of current coal mining and transportation
practices, as well as significantly reduce the challenges of coal waste
management.
Finally, IGCC is the key enabling technology for capture and
storage of carbon dioxide from coal power generation and will be
essential to meeting any reasonable climate stabilization target. While
it is possible to retrofit a coal combustion plant with carbon capture
technology, it is expensive and inefficient to do so today, costing
twice as much for plants using bituminous coal as capturing carbon from
an IGCC plant and reducing plant efficiency by as much as 40 percent.
While development of more cost-effective coal-combustion carbon capture
alternatives is important, current efforts are very early in the
technology development stage, and it is unclear whether and when cost-
effectiveness will be fully demonstrated for this technology. If we are
to turn the world coal tide to a near-zero carbon footprint in the next
20 years, IGCC power generation is likely to be the most availing path
forward based on current information.
III. Recent Market Developments
The good news about cleaner coal power and carbon capture is the
many recent coal gasification market developments, nearly all of which
are too new to be reflected in academic studies and many of which are
being conducted by companies not well represented by Washington trade
groups or research organizations. When we ``look out the window'' at
these market developments, we see a substantially different situation
than is typically presented in available studies or by traditional
institutions.
Key highlights include the areas listed below. It should be noted
that the coal gasification market developments described below do not
reflect a complete survey of recent developments, but rather are
intended to illustrate the contrast between the relatively static and
out-of-date study characterizations of coal gasification technology
with today's rapid pace of market development.
Emergence of New ``Full System'' IGCC Vendors
Prior to last summer, GE was the sole ``full systems'' IGCC vendor
capable of offering all major IGCC components (that is, gasifier,
combustion turbines and steam turbines) in a single package. Since that
time, Siemens and Mitsubishi have developed full system commercial IGGC
offerings, significantly expanding vendor choice for potential IGCC
project developers. Siemens emerged as a full systems vendor last
summer when the company acquired the Future Energy gasifier. NRG's
recent selection of Mitsubishi as the technology supplier for their
proposed domestic IGCC plants introduced the entry of Mitsubishi as a
full systems vendor.
Emergence of New Coal Gasifiers
Up until last summer, there were only three serious commercial coal
gasifier offerings: the GE (Texaco technology), ConocoPhillips (E-Gas
technology) and Shell gasifiers. These gasifiers have different
characteristics that affect their suitability for various coal types,
with Shell appearing most suited to low-rank coals (sub-bituminous and
lignite). These gasifiers are also estimated to vary significantly in
cost. Nearly all IGCC studies and academic literature have been
restricted to analysis of these gasifiers.
Several additional coal gasifiers have moved into the marketplace
over the past year:
The Future Energy gasifier, developed in the former East
Germany and recently acquired by Siemens, should be well suited
to low rank coals and shows promise of being quite economically
competitive.
The British Gas Lurgi (BGL) gasifier is an evolution of the
Lurgi gasifiers used extensively in South Africa and at the
Dakota Gasification plant in the U.S. This gasifier should also
be well suited to low-rank coals.
The Mitsubishi gasifier is partially oxygen blown, should
also be well suited to low-rank coals and shows promise of
being quite economically competitive.
As all three of these gasifiers are well suited to low-rank coals,
they provide a much more competitive set of market offerings for
projects using these coals and should reduce pre-inflation low-rank
coal IGCC project costs. This point is particularly important as some
critics have suggested that some conventional gasifiers are not well-
suited to low rank coals, and that there may not be an economic path
for low-rank coal use.
``Next Generation'' IGCC Plant Development
At least four ``next-generation'' IGCC projects are moving forward
in the U.S., in addition to the ``hybrid'' coal gasification plants
described below. These projects are AEP's Meigs plant in Ohio and
Mountaineer plant in West Virginia, Duke Energy's Edwardsport plant in
Indiana and BP's Carson Refinery Hydrogen project in California.
These projects all use the most advanced available combustion
turbine (for example, GE's 7FB) and are a major ``scale-up'' from the
several IGCC plants built at refineries in Europe about 5 years ago.
They are also much larger than the two early demonstration plants built
in the U.S. (Wabash Station in Indiana and Polk Station in Florida)
about a decade ago. These projects will typically have about 600 MW of
generating capacity. The BP Carson project will use petroleum coke (a
coal-like refinery waste product) and will include 90 percent carbon
capture, which reduces plant output to about 500 MW. The BP Carson
project will be the first commercial project in the U.S. to include and
demonstrate ``full'' carbon capture.
Several additional ``next-generation'' plants may also be moving
forward, but at a slower pace, including additional AEP-proposed plants
in Kentucky and NRG's proposed Huntley plant in New York State.
These ``next generation'' plants are important for several reasons,
including lower inflation adjusted costs and higher operating
efficiencies. They also are driving significant detailed engineering
design work, including in the case of Duke and AEP, serious engineering
analysis of options for adding carbon capture to these plants at some
future time, and provisions that can economically be built into the
initial plant to facilitate carbon capture retrofit. The good news is
that this very significant amount of engineering work will provide much
more detail than is currently available on next generation costs,
performance and carbon capture retrofit feasibility. The bad news is
that this information remains proprietary and is not yet available in
open literature.
``Hybrid'' Projects
Some independent IGCC project developers like the ERORA Group and
Summit Power are developing coal gasification projects that produce
both electric power and substitute natural gas, typically allocating
about 50 percent of the project coal syngas to each of these products.
The ERORA group is developing projects in Illinois (Taylorville) and
Kentucky (Cash Creek) and Summit Power is developing projects in Oregon
and Texas.
These developers are pursing ``hybrid'' projects because they have
economic advantages over next-generation ``power only'' IGCC plants,
including reduced overall project cost, high availability--particularly
in projects using several of the new Siemens gasifiers--and attractive
overall project economics for power generating companies that have
existing natural gas power plants by allowing them to have coal-based
fuel pricing for both their new coal generation and some portion of
their existing natural gas generation.
Some of these projects are close to final permitting and full
financing. Several projects plan to include some carbon capture and
will initially use the captured carbon for enhanced oil recovery (EOR).
At least one project is exploring full carbon capture and
sequestration. In many respects these projects reflect efforts by
project developers to overcome current economic barriers to stand-alone
IGCC plants.
Advanced Coal Gasifiers
Several innovative coal gasification technologies are conducting
process demonstrations and could be commercially available within the
next 2 years. Two examples among several such systems being developed
include Great Point Energy's catalytic coal gasifier (a technology
originally explored in the 1970s) and Texas Syngas' molten metal bath
gasifier. Both technologies can potentially be produced modularly in a
factory and both appear to have potential to reduce gasification costs
compared with traditional gasifier designs.
Underground Coal Gasification
Underground coal gasification (``UCG'') is just beginning to be
recognized as a potential option for utilizing coal. UCG is a
gasification process conducted in deep coal seams. Injection and
production wells are drilled into the coal seam and are then linked
together. Once linked, air and/or oxygen is injected and the coal is
ignited in a controlled manner to produce hot, combustible coal syngas
that is captured by the production wells, brought to the surface and
cleaned for power generation and/or production of liquid hydrocarbon
fuels or substitute natural gas. This technology has been used at a
minor level since the early 2000s and DOE conducted many pilot UCG
projects in the 1970s.
A successful modern pilot project was conducted about 6 years ago
in Chinchilla, Australia by the Ergo Exergy Technologies, Inc. and the
first modern commercial UCG electric power production project started
up this January in Mpumalanga, South Africa. I understand that two
commercial UCG projects producing hydrogen for chemical plants have
been developed in China. The GasTech Company is developing the first
North American pilot UCG project in Wyoming. The initial GasTech
project will be conducted in the Powder River basin and will use a coal
seam 950 feet deep. Current estimates are that the pre-clean-up syngas
will be produced for about $1.90/mmbtu (as compared with current U.S.
gas forward prices of about $8.00/mmbtu for the next several years).
UCG technology is potentially quite significant for several
reasons:
1. It can avoid most of the adverse environmental impacts
associated with coal mining and transportation;
2. It leaves coal residuals (ash and some other constituents)
underground;
3. It can potentially reduce coal gasification costs--perhaps
significantly; and
4. It can open up large amounts of deep coal reserves that are
currently not economic to mine. Lawrence Livermore National
Laboratory (LLNL) estimates that UCG could potentially triple
domestic economic coal reserves.
5. Carbon capture costs may be somewhat lower than with above-
ground gasification and a significant fraction of captured
carbon can potentially be stored in the underground
gasification cavities created by a UCG project.
Once this technology emerges from the pilot/demonstration stage,
which will be necessary to clarify technology costs, it may be deployed
rapidly if it proves to be more economic than conventional pulverized
coal plants or advanced above-ground gasification system IGCC's. LLNL
has recently produced a summary of current UCG knowledge that is
available at https://eed.llnl.gov/co2/11.php.
IV. A Key Technology Gap
Developing a practical and very-low cost method of capturing carbon
dioxide from existing power plant flue gases would be an enormous boost
to global efforts to reduce carbon dioxide emissions and may be the
only practical opportunity to significantly reduce future carbon
dioxide emissions from the rapidly developing coal power plant
``fleet'' in China and India. Current technologies that can accomplish
this task are too expensive and consume far too much energy to be
practical to apply broadly throughout the world. While current research
in this area is focused primarily on what are essentially incremental
improvements in existing technology systems, a ``break through''
technology is needed. Potential ``high-risk/high-reward'' breakthrough
technologies, like structured fluids, have been identified (in this
case by MIT researchers) but there appear to be no relevant sources of
Federal support for such research.
V. Challenges to Advanced Technology Deployment
Several problems are constraining rapid deployment of advanced coal
gasification technologies and associated carbon capture, including the
recent substantial increase in large energy project costs; the lack of
an economic incentive to build IGCC projects with full carbon capture
today; and Federal advanced coal research, development and deployment
programs that are not adequately funded or sufficiently broad.
Recent Large Energy-Project Cost Inflation
For several reasons, including massive infrastructure development
in China and very large investments in Persian Gulf oil and gas
projects, the construction cost of large energy projects has
significantly increased over the past two to three years. In some
cases, this cost inflation may have doubled project costs--including
some domestic proposed coal plants. While it is not clear how long
costs will continue to rise or for how long they will remain inflated,
it does not appear that this cost-inflation period will be short.
The current cost-inflation environment will also affect the
economics of carbon capture and sequestration for new coal projects,
raising the estimated costs from roughly 1.5 cents/kwh to about 2.5
cents/kWh. This suggests that if this cost environment prevails, carbon
capture will begin to be economic at a carbon emissions price of about
$40 per ton of CO2, at least initially.
No Economic Incentive To Build New Coal Plants With Full Carbon Capture
Today
While the technology exists to develop new coal IGCC plants with
full carbon capture and sequestration today, as is being demonstrated
by BP's Carson project, there is no economic basis to do so except
possibly in the very few cases (like BP's Carson project) where all
captured carbon can be used for enhanced oil recovery. This
disincentive to adding CCS to new coal plants will continue until
captured and sequestered carbon is worth roughly $40/ton of carbon
dioxide.
Limitations of Federal Advanced Coal Research, Development and
Demonstration Programs
We have not conducted a serious review of the relevant Federal
``clean coal'' research, development and demonstration programs, but we
have observed several ``disconnects'' between such programs and both
promising market activity and needed ``breakthrough'' technology. We
note that all EPAct financial support for new IGCC projects has been
awarded to next-generation commercial IGCC projects, which in nearly
all cases are being proposed by large investor-owned utilities. In
contrast, no innovative ``hybrid'' IGCC/SNG projects being developed by
independent project development companies were awarded financial
support. We also note that none of the promising advanced coal
gasifiers being developed that we are aware of are receiving
significant DOE support nor are these advanced gasifier concepts listed
in the various technology evolution ``road maps'' developed by DOE and
others. And as we noted above, no Federal programs exist today that
would provide financial support for new IGCC project developers seeking
to include full carbon capture and sequestration in their projects.
MIT's Future of Coal Study reviewed current DOE clean coal
research, development and demonstration programs and outlines one
approach to expanding and better targeting these programs. We see MIT's
proposals as a good starting point for discussion, but believe they
would not be sufficient to address all research, development and
demonstration gaps or ``disconnects'' we have observed.
VI. What Can the Federal Government Do to Accelerate Deployment of
Needed Technology?
Several Federal actions could accelerate development and
deployment of the advanced coal technology needed to address climate
change and dramatically reduce coal's environmental impacts:
1. Establish a production tax credit or some other form of
equivalent financial incentives for new coal power plants with
full carbon capture and sequestration. These incentives would
be in effect until a national carbon emissions reduction
program has been established that creates a carbon emissions
allowance price sufficient to offset carbon capture and
sequestration costs. At current energy project prices, such a
production tax credit would likely need to be at least 2.5
cents per kWh.
2. Establish a carbon emissions performance standard at some
future date for new fossil power plants that would require
significant carbon capture and sequestration for new coal power
plants.
3. Establish effective carbon emissions controls.
4. Significantly expand and broaden DOE's advanced coal
research development and demonstration programs.
The recent MIT Future of Coal Study outlines one approach for
expanding DOE's advanced coal programs and suggests that such programs
need to be funded at levels as high as $800-$900 million per year.
Beyond MIT's recommendations, it would be useful to review current
research and market activity in this field to identify promising
technologies that are slipping through the cracks in current DOE
programs to help develop more effective programs. It is also critically
important that appropriate support be established for developing
``breakthrough'' technology in critical areas like practical, low cost
carbon capture at existing power plants.
In summary, I believe that the technology we need to transition
coal use to much more environmentally sustainable systems could be
either deployed or developed promptly if effective Federal advanced
coal technology policies were implemented.
Senator Kerry. Thank you, sir, we look forward to it.
Mr. Denis?
STATEMENT OF ROBERTO R. DENIS, SENIOR VICE PRESIDENT, SIERRA
PACIFIC RESOURCES
Mr. Denis. Thank you very much, Chairman Kerry, Members of
the Committee. I'm Roberto Denis, I'm Senior Vice President of
Sierra Pacific Resources, a holding company that serves the
electrical needs of 1.2 million customers throughout most of
Nevada.
Our company has been taking significant steps to lessen our
carbon footprint, while at the same time, investing in new
technologies to meet our ever-increasing demand for energy.
Nevada is a high-growth state. We have been adding about
55,000 new customers per year, at an annual growth of 5
percent, an envy in the industry.
Over the next several years, we intend to invest more than
$1 billion annually to add new generating capacity, and
transmission infrastructure.
In 1997, Nevada enacted one of the Nation's first renewable
portfolio standard laws. As a state and as a company, we are
committed to renewable energy. As evidence of this commitment,
by year-end, Sierra Pacific Resources will lead the Nation in
generation of solar and geothermal energy in relation to the
total electric energy sold to consumers, even exceeding
California.
However, Sierra Pacific Resources cannot meet our future
energy demands solely from renewable projects. We are building
over 2,800 megawatts of new, efficient natural gas generation.
This will cause our company to become about 75 percent
dependent on natural gas for the electricity that we deliver.
Last year, we announced that we were pursuing the
development of the Ely Energy Center, a four-unit coal-powered
complex totaling 2,500 megawatts. The first two units will
utilize the newest, commercially available, supercritical
generation, highly efficient and emissions controls technology.
These two units will be followed by two more Integrated
Gasification Combined Cycle, or IGCC units, once those units
become commercially viable.
Ely will also be the catalyst for the development of wind-
to-energy in the mountains of eastern Nevada. Ely will make a
$600 million, 250-mile transmission line economically possible,
providing the means for wind energy to reach consumers.
It is also important to point out, as new generation is
developed, Sierra Pacific Resources is decommissioning older,
less efficient coal and natural gas units, a move that
mitigates our CO2 emissions. These combined actions
will ensure that even when the first two coal units of the Ely
Energy Center are completed, our company's carbon footprint
will mirror that of a utility that burns 100 percent natural
gas.
We particularly urge Congress to be mindful that the most
knowledgeable source of our collective ability to capture and
store CO2, the Electric Power Research Institute,
estimates that even with the most aggressive technology
development actions that can be realistically contemplated, we
will not have the ability to capture and sequester carbon on a
commercial scale until 2020. Thus, a policy--any policy choices
should recognize that our economically viable generation
strategies must include clean supercritical coal generation,
and when viable, IGCC.
As recognized in the recent MIT study, instead of excluding
the most viable domestic energy source, we must focus on
seeking technological solutions to mitigate the adverse effect
of the current and future use of coal. In such regards, we're
working with EPRI and 25 other utilities to fund a pilot-scale
demonstration project in Wisconsin of a promising new
CO2 capture technology for pulverized coal. While
integrated gasification combined cycle technology offers
promise in the near-term, it has been shown to be more economic
using eastern bituminous coals.
The use of IGCC with eestern sub-bituminous coals, which
have different characteristics and contain higher moisture, has
not yet been proven commercially viable, particularly at the
higher altitude sites available in our State.
I would like to quote Dr. Bryan Hannegan's recent testimony
before the Senate Energy and Natural Resources Committee.
``EPRI stresses that no single advanced coal generating
technology . . . has clear-cut economic advantages across the
range of U.S. applications. The best strategy for meeting
future electricity needs while addressing climate change
concerns and economic impacts lies in developing multiple
technologies from which power producers--and their regulators--
can choose the best, when suited, to local conditions and
preferences.''
In conclusion, innovative technological advances must be
supported and encouraged to the maximum extent feasible. But,
in the meantime, we should not curtail the construction of new
generation needed to serve our customers. Walking away from
coal-powered generation altogether would mean higher prices for
consumers, and even a greater national reliance on energy
imports.
We must be careful to avoid arbitrary efforts to pre-ordain
winners in the race to develop new generation technologies. Our
industry is large, and geographically diverse, and winners must
be market-driven if we are to serve our customers well.
Thank you.
[The prepared statement of Mr. Denis follows:]
Prepared Statement of Roberto R. Denis, Senior Vice President,
Sierra Pacific Resources
Introduction
Chairman Kerry, Senator Ensign, Members of the Committee, thank you
very much for the opportunity to be with you today. My name is Roberto
Denis and I'm Senior Vice President of Energy Supply for Sierra Pacific
Resources, a holding company that serves most of the electrical energy
needs of Nevada. Our company has been taking significant steps to
lessen our carbon footprint while at the same time meeting the ever
increasing demand for energy in one of fastest growing regions of the
country. There are many factors that make this an especially difficult
task. These involve managing the tradeoffs between renewable energy and
fossil fuel plants, different fuel types, self generation versus market
purchases, the commercial application of current and emerging
technologies and of course, the cost of energy to our customers.
Company Profile
Sierra Pacific Resources is the holding company for two utility
subsidiaries, Nevada Power Company and Sierra Pacific Power Company
that provide electricity to 1.2 million electricity customers in Nevada
and around the Lake Tahoe area of California. We are interconnected to
the western transmission grid and are significant participants in the
western power markets since we currently purchase about half the energy
we deliver. It is noteworthy that Nevada was a major victim of the
meltdown in the western markets several years ago when Enron and others
were found to be illegally manipulating the power purchase market in
California.
Our state's high growth rate is also a very important
consideration. We have been adding about 55,000 new customers per year,
an annual growth rate of 5 percent, which is much higher than the
electric industry as a whole. Investing to meet this growth is a
constant challenge. Our company owns nine power plants with a diverse
mix of fuels including coal and natural gas. For 10 years, Nevada has
had a renewable portfolio standard in place and we have been
contracting for geothermal, wind and solar energy and expect to be
making direct investments in renewable energy projects as well for
years to come. Because of our state's rapid economic growth plus the
hard lessons learned from being over reliant on the power purchase
markets during the Enron years, Sierra Pacific Resources is committed
to delivering a diverse power portfolio that protects against the
volatility of fluctuating fuel costs and swings in the purchased power
markets. Over the next several years we intend to invest more than $1
billion annually to add to our generating capacity and build the
infrastructure necessary to support the strong growth.
Renewable Energy: An Important Source of Power
Our utility in northern Nevada, Sierra Pacific Power Company leads
the Nation in use of renewable energy as a percentage of total energy
consumed. In 1997, Nevada enacted one of the Nation's first Renewable
Portfolio Standard (RPS) laws. It required all electric providers in
the state to acquire renewable electric generation or purchase
renewable energy credits so that 1 percent of the energy consumption of
each utility was produced from renewable sources.
In 2001, the state amended the RPS law to become the country's most
aggressive renewable portfolio standard. The law then required that 15
percent of all electricity consumed in Nevada be derived from new
renewables by the year 2013, with 5 percent of that amount coming from
solar energy. In June 2005, the Nevada legislature extended the
deadlines and raised the requirements of the RPS to 20 percent of sales
by 2015. The bill also allows utilities to receive credits toward
meeting the state's RPS by investing in certain energy efficiency
measures capped at one-quarter of the total standard in any particular
year. The law phases in the renewable energy commitment over time as
follows: 9 percent by 2007, increasing to 12 percent by 2009, 15
percent by 2011, 18 percent by 2013 and 20 percent by 2015.
We are committed to renewable energy and believe that such
investment needs to be stimulated; in that regard, we call upon
Congress to extend the Investment Tax Credit (ITC) and the Production
Tax Credit (PTC) for all types of renewable energy for at least 8 years
and to remove the outdated provision which excludes utilities from
participating in the ITC for renewables. This nation needs the
financial strength of the Nation's utility industry if we are to
substantially attract the investment of large sums of capital to
renewable energy.
This year, state regulators approved three new geothermal contracts
that will bring an additional 73 megawatts of renewable energy to our
customers. Two major Nevada solar projects, including the largest solar
thermal plant built anywhere in the past 15 years, will this year begin
delivering a total of 74 megawatts of power. Just this past Monday, I
attended an event at Nellis Air Force Base in Las Vegas celebrating the
beginning of construction for the largest solar photovoltaic system
ever to be built in North America. I can assure that our company, in
cooperation with our state leaders, is doing everything possible to be
at the forefront of renewables development. By year end, Sierra Pacific
Resources will lead the Nation in the generation of solar and
geothermal energy in relation to total electric energy consumed.
Energy Conservation Programs
Sierra Pacific Resources places a high priority on helping our
customers conserve energy. It is our goal to achieve 50 percent of our
energy savings from our residential customers. Our demand side
management (DSM) program will result in the installation of 2 million
compact fluorescent light bulbs each year. This is accomplished through
a buy down subsidy we provide local retailers who sell these energy
saving light bulbs. We perform energy efficiency audits for our
customers and help almost 23,000 per year to improve the efficiency of
residential AC units. We continue to work with the gaming properties to
convert the bright lights along the famous Las Vegas strip to efficient
lighting. We have a program to improve energy efficiency of swimming
pools and outdoor water features. One-quarter of the RPS goal of 20
percent by 2015 may come from DSM programs. Below is a projection of
our DSM goals by company.
Includes Both Sierra Pacific Power Company and Nevada Power Company
------------------------------------------------------------------------
2007 2008 2009
------------------------------------------------------------------------
Budget 36,553,000 45,265,000 44,886,000
MWh Saved 205,220 242,417 233,750
Sales MWh 28,771,765 29,639,965 30,756,233
Customers 1,127,132 1,160,946 1,195,774
$/Customer $32.43 $38.99 $37.53
kWh Save as % of Sales 0.71% 0.82% 0.76%
------------------------------------------------------------------------
Fossil Fueled Generation
Despite years of experience coupled with one of the most aggressive
renewable energy programs in the nation, it must be noted that Sierra
Pacific Resources cannot meet our future energy demands solely from new
wind, solar or geothermal. By 2008, we expect to be about 75 percent
reliant on natural gas as the source of fuel for the power we sell.
This dependence is due to the addition of more than 2,800 megawatts of
new, efficient combined cycle natural gas generation. We are concerned
however about the price stability of natural gas which was the fuel
choice for the majority of new power plant additions during the past
decade.
Ely Energy Center
Last year we announced that we were pursuing the development of the
Ely Energy Center, a four unit coal power complex totaling 2,500
megawatt in eastern Nevada. This facility will utilize the newest high
efficiency, supercritical boilers, water saving dry cooling and the
latest emission-control technologies. The first two, 750-megawatt units
located near Ely, Nevada will not be completed until 2011 and 2013,
respectively. The project is an important part of our company's ongoing
strategy to maintain a balanced energy portfolio that is in the best
interests of the state. Ely will also be the catalyst for the
development of more renewable energy resources (particularly wind
energy in the mountains of eastern Nevada) by providing transmission
access to northern and southern Nevada via a proposed 250-mile
transmission line between our two companies. This transmission line
that would not be economically justifiable to serve a stand alone
renewable energy project. Therefore, this project and its associated
transmission should provide the opportunity to develop additional
renewable projects that would not otherwise be developed in Nevada.
It also is important to point out that, as new generation is
developed, Sierra Pacific Resources is decommissioning older, less-
efficient coal and natural gas plants, a move that conserves the use of
natural resources and mitigates our CO2 emissions. After the
Ely facility is built, we are planning to retire three aging coal units
at the Reid Gardner Station in southern Nevada. And, with the
anticipation of Ely, Nevada Power will not participate in efforts to
restart the coal-fired Mohave power plant that was shuttered in 2006.
These actions combined with the aggressive development of renewables
will insure that even when the first two units of the Ely Energy Center
are completed, our company's carbon footprint will mirror that of a
utility that burns 100 percent natural gas.
Climate Change Legislation
As you can tell, we at Sierra Pacific Resources have not been
waiting for Congress to impose carbon controls before we developed our
own carbon mitigation and reduction program. In addition to striving to
meet a 20 percent RPS goal and replacing our older natural gas units
with highly efficient combined cycle plants and building new state-of-
the-art supercritical coal units, we have also implemented aggressive
energy conservation programs. All of these measures will be needed if
we are to face the challenge. Like Sierra Pacific Resources, many other
utilities in the Nation are also moving to implement carbon reduction
strategies.
Should Congress eventually conclude however that these voluntary
efforts are not sufficient; we would favor Federal legislation which
imposes an economy-wide approach to carbon control with trading
mechanisms for allowance distribution. Should Congress impose a cap and
trade regime as is reflected in most of the legislation that has been
introduced, we believe that caps must be applied with great care to
avoid inequitable distribution of carbon allowances.
As the fastest growing state for nineteen of the past twenty years
and with expected high growth anticipated far into the future, a simple
cap would, relative to other states, severely and unfairly disadvantage
Nevada's economy. Additionally, Nevada has for many years imported a
large proportion of its electricity. After the serious market disaster
created by the California energy crisis and with all western states
growing far faster than the electric supply can accommodate, it is
clear that consideration must be given in any capping mechanism to both
the historic use of carbon by a utility (really by a group of
customers) (whether self generated or not) and the growth of the
state's economy. If Congress adopts a cap and trade system, it must
allocate carbon emission allowances for growth states (as was done for
SO2 allowances in the 1990 Clean Air Act Amendments) and for
power purchased and not just self generated. CO2 emission
allowances must be distributed taking into account both historic and
projected use of carbon.
CO2 Capture and Sequestration and IGCC Technologies
We particularly urge the Congress to be mindful that the most
knowledgeable source about our collective ability to capture and store
CO2, the Electric Power Research Institute (EPRI), estimates
that even with the most aggressive technology development actions that
can be realistically contemplated, there will be no ability to
effectively capture and sequester carbon until at least 2020.
Thus, any policy choices that may be made by the Congress should
recognize that every economically viable set of generation strategies
to serve the electric needs of the U.S. economy until then must include
coal, clean supercritical coal or when viable, IGCC. As recognized in
the recent MIT study, instead of excluding the most viable domestic
energy source, we must focus on seeking technological solutions to
mitigate any adverse effect of the current and future use of coal.
Much has been said of the recent MIT study on the future of
generation in a carbon constrained world. It is important to remember
that the MIT study did not recommend that the United States should stop
building coal-fired generation. Its conclusion, with which we agree,
was that new coal units must utilize the best commercially available
technologies and must be built to accommodate retrofits when new large
scale carbon capture and sequestration (CCS) technologies are
demonstrated feasible. Our new Ely coal complex will do just that. The
first two units are being designed so that when CCS is available we
will have a physical facility that can be retrofitted to enable us to
capture the CO2 and identified the land for a CO2
storage site. Additionally, we are working with the Electric Power
Research Institute (EPRI) and 25 other utilities to fund a pilot-scale
demonstration project in Wisconsin of a promising new CO2
capture technology for pulverized coal units. American Electric Power
has already announced plans for scale-up of this technology at two of
its coal-fired plants in West Virginia and Oklahoma. We hope we will be
able to deploy these emerging technologies by the time the final two
units of our Ely complex are scheduled to be constructed.
While integrated gasification combined cycle (IGCC) offers promise
in the near term, it has been shown to be more economic using eastern
bituminous coals. The use of IGCC with western subbituminous coals
which have different characteristics and contain higher moisture has
not yet been proven commercially viable. Quoting from recent testimony
given by EPRI's Mr. Stuart Dalton:
``The COE cost premiums . . . vary in real-world applications,
depending on available coals and their physical-chemical
properties, desired plant size, the CO2 capture
process and its degree of integration with other plant
processes, plant elevation, the value of plant co-products, and
other factors. Nonetheless, IGCC with CO2 capture
generally shows an economic advantage in studies based on low-
moisture bituminous coals. For coals with high moisture and low
heating value, such as subbituminous and lignite coals, a
recent EPRI study shows PC with CO2 capture being
competitive with or having an advantage over IGCC.'' \1\
---------------------------------------------------------------------------
\1\ EPRI House Testimony Carbon Capture and Sequestration, March 6,
2007 (Subcommittee on Energy and Air Quality).
---------------------------------------------------------------------------
The Pinon Pine Clean Coal Technology Project
Indeed, Sierra Pacific has a history with gasification of coal. In
1992, near Reno, we partnered with U.S. Department of Energy in one of
the few western Clean Coal Technology Projects. The Pinon Pine Project
attempted to extract synthetic gas from coal under pressure and burn
the synthetic gas stream in gas fired turbines. Because of significant
challenges, the Pinon Pine Project was not completed until late 2001
and at a cost of $335 million. It was never able to operate
commercially because of problems we encountered with the first-of-a-
kind technologies used in the plant. Ultimately, the plant was
abandoned and converted to a pure natural gas facility. Our company
ventured and lost millions of dollars on this experiment.
I would like to quote from Dr. Bryan Hannegan's recent restimony
before the Senate Energy and Natural Resources Committee given on March
22, 2007. In expressing EPRI's view on the MIT report he said:
``EPRI stresses that no single advanced coal generating
technology (or any generating technology) has clear-cut
economic advantages across the range of U.S. applications. The
best strategy for meeting future electricity needs while
addressing climate change concerns and economic impact lies in
developing multiple technologies from which power producers
(and their regulators) can choose the one best suited to local
conditions and preferences.''
I would also like to submit with my testimony a copy of the EPRI
report entitled ``Technologies for a Carbon Constrained World'' that
was first released to the public in February 2007.
[This information is being retained in Committee files.]
Conclusion
Clearly, innovative technological advances must be supported and
encouraged and successful outcomes must be embraced, but in the
meantime we should not stop the development of new generation needed to
serve customers today and in the immediate future. Walking away from
coal-powered generation altogether would mean higher prices for
consumers and an even greater national reliance on energy imports. Our
nation's energy independence must include the use of coal, our most
plentiful energy resource, in the production of new, environmentally
responsible electric generation. We must be careful to avoid arbitrary
efforts to pre-ordain winners in the race to develop new generation
technologies. Ours is a large and geographically diverse industry and
winners must be market driven if we are to best serve our customers. We
believe this is an appropriate and responsible approach to addressing
environmental concerns while keeping our commitment to deliver reliable
power to our customers. Thank you.
Senator Kerry. Thank you very much, Mr. Denis.
Dr. McRae?
STATEMENT OF GREGORY J. McRAE, HOYT C. HOTTEL
PROFESSOR OF CHEMICAL ENGINEERING, DEPARTMENT OF CHEMICAL
ENGINEERING MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Dr. McRae. Senator Kerry and members of the Committee,
thank you very much for this opportunity to address you on this
important topic.
My name is Greg McRae, I am a Professor of Chemical
Engineering at MIT, and I'm one of the co-authors of the recent
MIT report on the future of coal, where we set out to address
what are the issues about how we might burn this fuel in an
environmentally responsible way.
Our study involved many colleagues from across MIT, as well
as advisory groups from outside of MIT, in fact, our first
panelist Joe Chaisson was, in fact, a member of one of our
advisory committees.
The key premise that drove our report was, in fact, the
need to think about global climate, and warming, and the need
to think about--by mid-century--that we're going to have to
sequester several gigatons of carbon, or carbon dioxide. The
size of the problem is enormous, and one of the things that we
were interested in is how do we actually go about developing a
strategy for coping with these problems.
A key conclusion, and you touched on it in your
introduction, is that coal is an important part of this
problem. And while we fully support and are actively involved
in a lot of developments associated with solar and wind and
biomass conversion, the key issue is that in order to meet our
energy demands today, in fact, there are very few other fuel
sources that we can supply at scale, other than coal. And so
the key question is, how do we use this important fuel in an
environmentally friendly way?
And so, we believe that there are two crucial issues that
need to be addressed in order to use coal as a fuel in the
future. The first is the issue of sequestration. Our belief is
that there's a critical need for demonstration projects at
scale to show that you can safety store and capture
CO2 in a way that imposes no risk to the community.
We believe that most of the technology that's available to do
this exists already, what's missing is the opportunity to do it
at scale.
And just to give you a sense of the size of the problem, a
typical 500 megawatt coal-fired power plant will produce about
ten to twelve thousand tons a day of carbon dioxide, that's
roughly 4 million tons a year. There are about, roughly, 500
power plants of this size in the United States. The biggest
sequestration experiment that's going on right now is less than
1 million tons a year. And so, in order to be able to develop
the regulatory framework, the monitoring framework, and to
build public confidence that you can safely mitigate and store
carbon, we believe that it's crucial that we immediately start
to look at three or four demonstration projects at scale, in
the order of a million tons per year.
We view this as an important investment--almost as an
insurance policy--because this provides us with the information
and data that we will need to build these systems at scale over
the longer time period.
The second part associated with sequestration is the issue
of capture of CO2 in the first place. And again,
while we believe that many of the existing technology exists to
be able to do that, and there are exciting developments taking
place on a daily basis, again, we believe that these should be
done at scale. We do not believe that focusing on IGCC per se
is the right way to go.
We, in fact, think that we need to look at a spectrum of
technologies from pressurized oxified combustion processes,
chemical looping combustion systems--there are many, many other
technologies that are potentially out there that could
significantly lower the cost of CO2 capture, but the
issue is how to do it at scale. And, we believe that, again,
that you need demonstration projects to show that you can, in
fact, capture CO2 at that scale.
The third point is that we basically need to put the two
pieces of the problem together--how do you actually capture
CO2 at scale, and how do you sequester it at scale?
And, again, our belief is that the demonstration project should
be supported with adequate monitoring, so that the data that's
going to be available to help, builds public confidence that
this is a viable option for mitigating carbon in the future.
We believe that there are many opportunities for the United
States to become leaders in the supply of this important
technology to the rest of the world. These, and many other,
topics are discussed in our report, and I thank you very much
for the opportunity to discuss these this morning. Thank you.
[The prepared statement of Dr. McRae follows:]
Prepared Statement of Gregory J. McRae, Hoyt C. Hottel Professor of
Chemical Engineering, Department of Chemical Engineering,
Massachusetts Institute of Technology
Senator Kerry and Members of the Committee, good morning and thank
you for the opportunity to address you on this important topic. My name
is Gregory McRae and I am a professor of chemical engineering at the
Massachusetts Institute of Technology. In addition to my research and
teaching on energy and environmental issues I am also one of the co-
authors of the recent MIT Report called the Future of Coal--Options for
a Carbon Constrained World.\1\ This study involved eleven colleagues
from various disciplines at MIT as well as an external advisory group
that represented diverse perspectives on the problem. This morning I
would like to draw your attention to a few of the key recommendations
from the report related to clean coal technology.
Four key premises drove our study:
1. There is a pressing need to address the global warming
problem. The risks are real and the United States and other
governments should take action to restrict the emissions of
carbon dioxide (CO2) and other greenhouse gases
(GHG).1,2
2. Our second and equally important premise is that coal will
continue to play a large and indispensable role in a greenhouse
gas constrained world because it is cheap, abundant, and in the
short term one of the fuel sources that can meet, at scale, the
growing demands for electricity.
3. We believe that CO2 capture and sequestration
(CCS) are the critical enabling technologies that would
significantly reduce CO2 emissions associated with
coal combustion. Much of the needed technology exists
(CO2 capture, transport and storage) but there is a
critical need for several large scale demonstration projects to
give policymakers and the public confidence that a practical
carbon mitigation control option exits.
4. A key conclusion based on experience in other RD&D programs
is that the government should not pick a ``technology winner''
per se, but rather create an environment that will enable the
development of a diverse range of cost effective options to
reduce green house gas emissions.
These and other issues are discussed in much more detail in.\1\ In
this morning's testimony I will focus on two key technical
recommendations related to the future use of coal.
The Driving Force for Change
The risk of adverse climate change from global warming is serious
forced in part by growing greenhouse gas emissions. While projections
vary, there is now wide acceptance among the scientific community that
global warming is occurring, that the human contribution is important,
and that the effects may impose significant costs on the world economy.
As a result, governments are likely to adopt carbon mitigation policies
that will restrict CO2 emissions; many developed countries
have taken the first steps in this direction. For such carbon control
policies to work efficiently, national economies will need to have many
options available for reducing greenhouse gas emissions. The Future of
Coal \1\ addresses one option, the continuing use of coal with reduced
CO2 emissions.
Coal is an especially crucial fuel in this uncertain world of
future constraint on CO2 emissions. Because coal is abundant
and relatively cheap ($1-$2 per million Btu, compared to $6-$12 per
million Btu for natural gas and oil)--it is often the fuel of choice
for electricity generation, and perhaps for extensive synthetic liquids
production in the future in many parts of the world. Its low cost and
wide availability make it especially attractive in major developing
economies for meeting their pressing energy needs. On the other hand,
coal faces significant environmental challenges in mining, air
pollution (including both criteria pollutants and mercury) and
importantly, emissions of carbon dioxide (CO2). Indeed coal
is the largest contributor to global CO2 emissions from
energy use (41 percent), and its share is projected to increase.
The U.S. has 27 percent of the total global recoverable coal
reserves, enough for about 250 years at current consumption. Over 50
percent of U.S. electricity was generated from coal last year. It is
important to understand the magnitude of CO2 emissions
associated with power generation. A single 1,000 MWe coal-
based power plant emits between 5 and 8 million tonnes of
CO2 per year. A few statistics give a sense of the enormity
of the challenge.\4\
There are the equivalent of more than five hundred 500
megawatt, coal-fired power plants in the United States with an
average age of 35 years.
China is currently constructing the equivalent of two 500
megawatt, coal-fired power plants per week, a capacity
comparable to the entire U.K. power grid each year.
At present the largest sequestration project is injecting
one million tons/year of carbon dioxide (CO2) from
the Sleipner gas field into a saline aquifer under the North
Sea.
By mid-century, given the expectation that coal use will grow
substantially, the annual sequestration of several gigatonnes of carbon
dioxide is the scale needed for a major impact on climate change
mitigation,. This translates into sequestration of the CO2
emissions from many hundreds of utility scale plants worldwide. Each
plant will need to capture millions of metric tonnes of CO2
each year. Over a fifty-year lifetime, one such plant would inject
about a billion barrels of compressed CO2 for sequestration
5,6
Recommendation 1--Large Scale Demonstration of Carbon Dioxide Capture
and Storage (CCS)
Carbon dioxide capture and sequestration (CCS) is the critical
enabling technology that would reduce CO2 emissions
significantly, while also allowing coal to meet the world's pressing
energy needs. What is needed is a successful large-scale demonstration
of the technical, economic, and environmental performance of the
technologies that make up all of the major components of a large-scale
integrated CCS system--capture, transportation, and storage.
We have confidence that megatonne scale injection at multiple well-
characterized sites can start safely now, but an extensive program is
needed to establish public confidence in the practical operation of
large scale sequestration facilities over extended periods, and to
demonstrate the technical and economic characteristics of the
sequestration activity.1,6
An important additional objective of the demonstration program is
to create an explicit and rigorous regulatory process that gives the
public and political leaders confidence in effective implementation of
very large scale sequestration. A regulatory framework needs to be
defined for sequestration projects, including site selection, injection
operation, and eventual transfer of custody to public authorities after
a period of successful operation.
Present government and private sector sequestration projects are
inadequate to demonstrate the practical implementation of large scale
sequestration on a timely basis.
Thus, we believe that the highest priority should be given to a
program that for demonstrating CO2 sequestration at
megatonne scale in several geologies, following ``bottom-up'' site
characterization. For the United States, this means about three
megatonne/year projects with appropriate modeling, monitoring and
verification (MMV), focusing on deep saline aquifers. Each
demonstration project should last about eight to 10 years. We estimate
the cost for the total program to be about $500M over a decade, not
including the cost of CO2 acquisition. The CO2
costs are likely to be considerable and highly variable depending on
the acquisition strategy (natural reservoirs, capture from existing
plants, supply from large scale demonstrations of new coal combustion
and conversion plants).1,6
We estimate that for new plant construction, a CO2
emission price of approximately $30/tonne (about $110/tonne C) would
make CCS cost competitive with coal combustion and conversion systems
without CCS. This would be sufficient to off set the cost of
CO2 capture and pressurization (about $25/tonne) and
CO2 transportation and storage (about $5/tonne). This
estimate of CCS cost is uncertain; it might be larger and with new
technology, perhaps smaller.
The pace of deployment of coal-fired power plants with CCS depends
both on the timing and level of CO2 emission prices and on
the technical readiness and successful commercial demonstration of CCS
technologies. The timing and the level of CO2 emission
prices is uncertain. However, there should be no delay in undertaking a
program that would establish the option to utilize CCS at large scale
in response to a carbon emission control policy that would make CCS
technology economic. Sequestration rates of one to two gigatonnes of
carbon (nearly four to eight gigatonnes of CO2) per year by
mid-century will enable appreciably enhanced coal use and significantly
reduced CO2 emissions.
In addition to the value of the scientific and engineering data
that will emerge from this sequestration demonstration program, we
should not underestimate the value of demonstrating the ability to
successfully manage the program over an extended time. Such practical
implementation experience will be important for public confidence in
committing to very large sequestration over many decades.
Our highest priority recommendation is that as soon as possible the
Congress, the Department of Energy, and other private and public sector
entities work to launch a sequestration demonstration program with the
characteristics identified above, including those associated with
development of the regulatory system. A sense of urgency has been
absent and this needs to change.
Recommendation 2--Avoid Picking ``Technology Winners''
Our second recommendation is for the U.S. Government to provide
incentives to several alternative coal combustion and conversion
technologies that employ CCS. At present, integrated gasification
combined cycle (IGCC) is the leading candidate for electricity
production with CO2 capture because it is estimated to have
lower cost than pulverized coal with capture. For lower rank coals this
choice may not be so clear, particularly as the traditional
CO2 capture technology continues to improve.
Thus, it is too early to declare IGCC the winner for all situations
at this time.1,5 History teaches us that one single
technology is almost never the winner in every situation. However,
neither IGCC nor other coal technologies have been demonstrated with
CCS at large scale. CO2 capture will add significantly to
the Cost of Electricity (COE), independent of which approach is taken.
It is critical that the government RD&D program not pick a
technology ``winner'' especially at a time when there is great coal
combustion and conversion development activity underway in the private
sector in both the United States and abroad. Approaches with capture
other than IGCC could prove as attractive with further technology
development for example, oxygen-fired pulverized coal combustion,
especially with lower quality coals. Of course, there will be
improvements in IGCC as well. R&D is needed on sub-systems, for example
on improved CO2 separation techniques for both oxygen and
air driven power systems and for oxygen separation from air. The
technology program would benefit from an extensive modeling and
simulation effort in order to compare alternative technologies and
integrated systems as well as to guide development. Novel separation
schemes such as chemical looping should continue to be pursued at the
process development unit (PDU) scale. The reality is that the diversity
of coal type, e.g., heat, sulfur, water, and ash content, imply
different operating conditions for any application and multiple
technologies will likely be deployed.
The U.S. Department of Energy (DOE) program needs considerable
strengthening and diversification in looking at a range of basic
enabling technologies that can have major impact in the years ahead,
particularly in lowering the cost of coal use in a carbon-constrained
world. This work needs to be done at laboratory or process development
unit scale, not as part of large integrated system demonstrations. A
significant increase in the DOE coal RD&D program is called for, as
well as some restructuring.
Government assistance is needed for a portfolio of coal combustion
and conversion demonstration projects with CO2 capture--
IGCC, oxyfuel retrofits, new combustion technologies, coal to synthetic
natural gas, chemicals and fuels are examples. Given the technical
uncertainty and the current absence of a carbon dioxide emissions
charge, there is no economic incentive for private firms to undertake
such projects at any appreciable scale. The DOE coal program is not on
a path to address our priority recommendations namely--enabling
technology, sequestration demonstrations, coal combustion and
conversion demonstrations with capture. The level of funding falls far
short of what is required and perhaps as a result the program is
imbalanced.
The flagship project FutureGen is consistent with our priority
recommendation to initiate integrated demonstration projects at scale.
However, we are concerned that the project needs more clarity in its
objectives. Specifically, a project of this scale and complex system
integration should be viewed as a demonstration of commercial viability
at a future time when a meaningful carbon policy is in place. Its
principal call on taxpayer dollars is to provide information on such
commercial viability to multiple constituencies, including the
investment community. To provide high fidelity information, it needs to
have freedom to operate in a commercial environment.
We believe that the Congress should work with the Administration to
clarify that the project objectives are commercial demonstration, not
research, and reach an understanding on cost-sharing that is grounded
in project realities and not in arbitrary historical formulas. In
thinking about a broader set of coal technology demonstrations,
including the acquisition of the CO2 needed for the
sequestration demonstration projects, we suggest that a new quasi-
government corporation should be considered.
The 2005 Energy Policy Act contains provisions that authorize
Federal Government assistance for coal plants containing advanced
technology projects with or without CCS. We believe this assistance
should be directed only to plants with CCS, both new plants and
retrofit applications on existing plants.
Recommendation 3--Regulatory Action
Success at capping CO2 emissions ultimately depends upon
adherence to CO2 mitigation policies by large developed and
developing economies. We see little progress to moving toward the
necessary international arrangements. Although the European Union has
implemented a cap-and-trade program covering approximately half of its
CO2 emissions, the United States has not yet adopted
mandatory policies at the Federal level. U.S. leadership in emissions
reduction is a likely prerequisite to substantial action by emerging
economies. Recent developments in the American business sector and in
Congress are encouraging.
A more aggressive U.S. policy appears in line with developing
public attitudes. Our study has polled the American public, following a
similar poll conducted for the earlier MIT study on nuclear power.
Americans now rank global warming as the number one environmental
problem facing the country, and seventy percent of the American public
think that the U.S. Government needs to do more to reduce greenhouse
gas emissions. Willingness to pay to solve this problem has grown 50
percent over the past 3 years.
Conclusion
In conclusion the central message of the MIT study on the Future of
Coal is that demonstration of technical, economic, and institutional
features of carbon capture and sequestration at commercial scale coal
combustion and conversion plants, will (1) give policymakers and the
public confidence that a practical carbon mitigation control option
exists, (2) shorten the deployment time and reduce the cost for carbon
capture and sequestration should a carbon emission control policy be
adopted, and (3) maintain opportunities for the lowest cost and most
widely available energy form to be used to meet the world's pressing
energy needs in an environmentally acceptable manner.
Mr. Chairman, thank you again for inviting my testimony on this
important topic.
References
1. The Future of Coal--Options for a Carbon Constrained World,
Massachusetts Institute of technology, 2007. (See the website http://
web.mit.edu/coal for the report and the executive summary).
2. Ernest J. Moniz and John M. Deutch, Hearing on the MIT
Interdisciplinary Study: The Future of Coal, Options for a Carbon-
Constrained World, Comments made to the Senate Committee on Energy and
Natural Resources, 22 March 2007, Washington, D.C.
3. Intergovernmental Panel on Climate Change, Climate Change 2007:
The physical science basis, Summary for Policy makers, http://
www.ipcc.ch/.
4. A few statistics from \1\ that illustrate the scale of the
problem.
50 percent of the electricity generated in the U.S. is from
coal.
Today fossil sources account for 80 percent of energy
demand: Coal (25 percent), natural gas (21 percent), petroleum
(34 percent), nuclear (6.5 percent), hydro (2.2 percent), and
biomass and waste (11 percent). Only 0.4 percent of global
energy demand is met by geothermal, solar and wind.
There are the equivalent of more than five hundred, 500
megawatt, coal-fired power plants in the United States with an
average age of 35 years.
China is currently constructing the equivalent of two, 500
megawatt, coal-fired power plants per week and a capacity
comparable to the entire U.K. power grid each year.
One 500 megawatt coal-fired power plant produces
approximately 3 million tons/year of carbon dioxide
(CO2).
The United States produces about 1.5 billion tons per year
of CO2 from coal-burning power plants.
At present the largest sequestration project is injecting
one million tons/year of carbon dioxide (CO2) from
the Sleipner gas field into a saline aquifer under the North
Sea.
5. James R. Katzer, Coal-Based Power Generation with CO2
Capture and Sequestration, Comments made to the Senate Committee, on
Commerce, Science, and Transportation, Science, Energy, and Innovation
Subcommittee, March 20, 2007, Washington, D.C.
6. Julio Friedmann, Technical Feasibility of Rapid Deployment of
Geological Carbon Sequestration, Comments made to the House Energy and
Commerce Committee, Energy and Air Quality Subcommittee. 2007:
Washington, D.C.
Senator Kerry. Well, we welcome it. Thank you very much.
Mr. Rencheck?
STATEMENT OF MICHAEL W. RENCHECK, SENIOR VICE
PRESIDENT--ENGINEERING, PROJECTS, AND FIELD
SERVICES, AMERICAN ELECTRIC POWER
Mr. Rencheck. Good morning, Mr. Chairman and Members of the
Committee. Thank you for inviting me to participate in this
hearing.
I am Mike Rencheck, Senior Vice President of Engineering,
Projects, and Field Services for American Electric Power.
American Electric Power is one of our nation's largest
utilities with more than 5 million customers in 11 states. We
are also one of the Nation's largest power generators, with
more than 38,000 megawatts of generating capacity from a
diverse fleet.
But of particular note for today, AEP is one of the largest
coal-fired generators in the U.S., and we have implemented a
portfolio of voluntary actions to reduce and avoid and offset
greenhouse gases during the past decade.
Coal generates over 50 percent of the electricity used in
the U.S., and is extensively used worldwide. As the demand for
electricity increases significantly, coal use will increase as
well. In the future, coal-fired electric generation must be
zero emission, or near-zero emission. This will be achieved
through new technologies that are being developed today, and
are not yet commercially proven, or commercially available.
Like most companies in our sector, AEP needs new generation. We
are investing in a new clean coal technology that will enable
AEP, and our industry, to meet the challenge of reducing
greenhouse gases in the near-term, and for the long-term. This
includes plans to build new, integrated gasification combined
cycle plants, IGCC plants, and two state-of-the-art, ultra
supercritical coal units. These will be the first of the new
generation of ultra supercritical plants in the U.S.
AEP is also taking the lead in commercializing carbon
capture technology for use on new generation, and more
importantly, for retrofitting the existing generation fleet.
We signed a Memorandum of Understanding with Alstom for
post-carbon capture combustion technology, using Alstom's
chilled ammonia system. Starting with a commercial performance
verification project in mid- to late-2008 in West Virginia--a
project that will also include storage and capture of carbon
dioxide in a saline aquifer, we will move then--after that's
completed--to the first commercial-size project at one of our
450-megawatt coal plants, our Northeastern plant, in Oklahoma,
in 2011.
This would capture about 1.5 million metric tons of
CO2 a year, which will be used for enhanced oil
recovery. We are also working with Babcock & Wilcox to take its
oxy-coal combustion technology from the drawing board, to a
commercial-scale application in the next decade.
AEP is very comfortable leading the way on technology. We
have had a long and impressive list of technological firsts
during our first 100 years, being in existence. But, we have
identified one very important caveat during our century of
technological achievement, and engineering excellence--
providing a technology to be commercially viable, and having
that technology ready for widespread commercial use, are two
very different things. It takes time to develop off-the-shelf
commercial offerings for technology to be widely deployed.
AEP is not calling for an indefinite delay in the enactment
of mandatory climate change legislation until advanced
technology, such as carbon capture and storage is developed,
however, as the requirements become more stringent during the
next 10 to 20 years, and we move beyond the ability of current
technology to deliver those reductions, it is essential that
requirements for deeper reductions allow sufficient time for
the demonstration and commercialization of technologies.
How can you help? It is also important to establish
specific public funding, as well as incentives for private
funding, for the development of commercially viable technology
solutions, as well as providing the legal and regulatory
structures to facilitate development.
AEP believes that IGCC and carbon capture technology need
to be advanced, but the building of IGCC and the timely
development of commercially viable carbon capture technologies
will require additional public funding.
AEP and others in our sector have already invested heavily
in the research and early development of the technologies that
may eventually be commercially viable solutions to address
greenhouse gases. For this reason, separate investment tax
credits are needed to facilitate both construction of IGCC
plants now, and the development of carbon capture technologies
for future use.
Of significance here, the final decider on the type of
power generation that can be built in many states is the public
utility commission of that state. That commission determines
how, or if, a utility can recover the cost of new generation,
or retrofits of existing generation.
How do you reconcile a Federal mandate for expensive
greenhouse gas mitigation with states that desire to cap energy
costs? The utilities and their shareholders remain caught in
the middle, and need your help to research, develop, and build
this type of generation.
American industry has long been staffed by excellent
problem solvers, I am confident that we will be able to develop
technologies to efficiently address emissions of greenhouse
gases, in an increasingly cost-effective manner. We have the
brain power, we need time, funding assistance, and legal and
regulatory support.
Thank you very much.
[The prepared statement of Mr. Rencheck follows:]
Prepared Statement of Michael W. Rencheck, Senior Vice President--
Engineering, Projects, and Field Services, American Electric Power
Good morning, Mr. Chairman and distinguished Members of the Senate
Subcommittee on Science, Technology, and Innovation.
Thank you for inviting me here today. Thank you for this
opportunity to offer the views of American Electric Power (AEP) and for
soliciting the views of our industry and others on climate change
technologies.
My name is Mike Rencheck, Senior Vice President--Engineering,
Projects and Field Services of American Electric Power (AEP).
Headquartered in Columbus, Ohio, we are one of the Nation's largest
electricity generators--with over 36,000 megawatts of generating
capacity--and serve more than five million retail consumers in 11
states in the Midwest and south central regions of our Nation. AEP's
generating fleet employs diverse sources of fuel--including coal,
nuclear, hydroelectric, natural gas, and oil and wind power. But of
particular importance for the Committee members here today, AEP uses
more coal than any other electricity generator in the Western
hemisphere.
AEP's Technology Development
Over the last 100 years, AEP has been an industry leader in
developing and deploying new technologies beginning with the first high
voltage transmission lines at 345 kilovolt (kV) and 765 kV to new and
more efficient coal power plants starting with the large central
station power plant progressing to supercritical and ultrasupercritical
powers plants. We are continuing that today. We implemented over 11
selective catalytic reactors (SCRs), 9 Flue Gas Desulphurization units
with others currently under construction, and we are a leader in
developing and deploying mercury capture and monitoring technology. In
addition, we continue to invest in new clean coal technology plants and
R&D that will enable AEP and our industry to meet the challenge of
significantly reducing GHG emissions in future years. For example, AEP
is working to build two new generating plants using integrated
gasification combined cycle (IGCC) technology in Ohio and West
Virginia, as well as two highly efficient new generating plants using
the most advanced (e.g., ultrasupercritical) pulverized coal combustion
technology in Arkansas and Oklahoma. We are also supporting a leading
role in the FutureGen project, which once completed, will be the
world's first near-zero CO2 emitting commercial scale coal-
fueled power plant. We are also working to progress specific carbon
capture and storage technology.
AEP's Major New Initiative to Reduce GHG Emissions
Just this past month, AEP announced several major new initiatives
to reduce AEP's GHG emissions and to advance the commercial application
of carbon capture and storage technology and oxy-coal combustion. Our
company has been advancing technology for the electric utility industry
for more than 100 years. AEP's recent announcement continues to build
upon this heritage. Technology development needs are often cited as an
excuse for inaction. We see these needs as opportunities for action.
AEP has signed a memorandum of understanding (MOU) with Alstom, a
worldwide leader in equipment and services for power generation, for
post-combustion carbon capture technology using Alstom's chilled
ammonia system. It will be installed at our 1,300-megawatt Mountaineer
Plant in New Haven, W.Va. as a ``30-megawatt (thermal) commercial
performance verification'' project in mid to late 2008 and it will
capture up to 100,000 metric tons of carbon dioxide (CO2)
per year. Once the CO2 is captured we will store it. The
Mountaineer site has an existing deep saline aquifer injection well
previously developed in conjunction with DOE and Battelle. Working with
Battelle and with continued DOE support, we will use this well (and
develop others) to store and further study CO2 injection
into deep geological formations.
Following the completion of commercial verification at Mountaineer,
AEP plans to install Alstom's system on one of the 450-megawatt coal-
fired units at its Northeastern Plant in Oologah, Oklahoma, as a first-
of-a-kind commercial demonstration. The system is expected to be
operational at Northeastern Plant in late 2011, capturing about 1.5
million metric tons of CO2 a year. The CO2
captured at Northeastern Plant will also be used for enhanced oil
recovery.
AEP has also signed an MOU with Babcock and Wilcox to pursue the
development of oxy-coal combustion that uses oxygen in lieu of air for
combustion, which forms a concentrated CO2 post combustion
gas that can be stored without additional post combustion capture
processes. AEP will work with B&W on a ``30-megawatt (thermal) pilot
project in mid-2007 then use the results to study the feasibility of a
scale 100-200 Mw demonstration.'' The CO2 from the
demonstration project would be captured and stored in a deep saline or
enhanced oil recovery application.
Just last month, AEP voluntarily committed to achieve an additional
five million tons of GHG reductions annually beginning in 2011. We will
accomplish these reductions through a new AEP initiative that will add
another 1,000 Mw of purchased wind power into our system, substantially
increase our forestry investments (in addition to the 62 million trees
we have planted to date), as well as invest in domestic offsets, such
as methane capture from agriculture, mines and landfills.
AEP Perspectives on a Federal GHG Reduction Program
While AEP has done much, and will do much more, to mitigate GHG
emissions from its existing sources, we also support the adoption of an
economy-wide cap-and-trade type GHG reduction program that is well
thought-out, achievable, and reasonable. Although today I intend to
focus on the need for the development and deployment of commercially
viable technologies to address climate change and not on the specific
policies issues that must be addressed, AEP believes that legislation
can be crafted that does not impede AEP's ability to provide reliable,
reasonably priced electricity to support the economic well-being of our
customers, and includes mechanisms that foster international
participation and avoid creating inequities and competitive issues that
would harm the U.S. economy. AEP supports reasonable legislation, and
is not calling for an indefinite delay until advanced technology such
as carbon capture and storage (CCS) is developed. However, as the
requirements become more stringent during the next ten to twenty years,
and we move beyond the ability of current technology to deliver those
reductions, it is essential that requirements for deeper reductions
coincide with the commercialization of advanced technologies.
Phased-in Timing and Gradually Increasing Level of Reductions
Consistent with Technology Development that is facilitated by
Public Funding
As a practical matter, implementing climate legislation is a
complex undertaking that will require procedures for measuring,
verifying, and accounting for GHG emissions, as well as for designing
efficient administration and enforcement procedures applicable to all
sectors of our economy. Only a pragmatic approach with achievable
targets, supported by commercial technology, and reasonable
timetables--that does not require too many reductions within too short
a time period--will succeed. Past experience with the Clean Air Act
Amendments of 1990 (which involved a vastly simpler SO2
allowance trading system for just the electric power sector), strongly
suggests that a minimum of 5 years will be necessary to have the
administrative mechanisms in place for full implementation of the
initial GHG emission targets.
AEP also believes that the level of emissions reductions and timing
of those reductions under a Federal mandate must keep pace with
developing technologies for reducing GHG emissions from new and
existing sources. The technologies for effective carbon capture and
storage from coal-fired facilities are developing, but are not
commercially engineered to meet production needs, and cannot be
artificially accelerated through unrealistic reduction mandates.
While AEP and other companies have successfully lowered their
average emissions and emission rates during this decade, further
substantial reductions will require the wide-scale commercial
availability of new clean coal technologies. AEP believes that the
electric power industry can potentially manage much of the expected
economic (and CO2 emissions) growth over the course of the
next decade (2010-2020) through aggressively deploying renewable
energy, further gains in supply and demand-side energy efficiency, and
new emission offset projects. As stated above, AEP supports reasonable
legislation, and is not calling for an indefinite delay of GHG
reduction obligations until advanced clean coal technology is
developed. However, as the reduction requirements become more
stringent, and move beyond the ability of current technologies to
deliver those reductions, it is important that those stringent
requirements coincide with the commercialization of advanced
technology. This includes the next generation of low- and zero-emitting
technologies. In the case of coal, this means demonstration and full-
scale deployment of new IGCC units with carbon capture, new
ultrasupercritical or oxy-coal plants with carbon capture and storage,
as well as broad deployment of retrofit technologies for carbon capture
and storage at existing coal plants. The next generation of nuclear
technology will also play an important role in meeting significant
reduction targets.
However, today's costs of new clean coal technologies with carbon
capture and storage are much more expensive than current coal-fired
technologies. For example, carbon capture and storage using current
inhibited monoethanolamine (MEA) technology is expected to increase the
cost of electricity from a new coal-fired power plant by about 60-70
percent and even the newer chilled ammonia carbon capture technology we
plan to deploy on a commercial sized scale by 2012 at one of our
existing coal-fired units will result in significantly higher costs. It
is only through the steady and judicious advancement of these
applications during the course of the next decade that we can start to
bring these costs down, in order to avoid substantial electricity rate
shocks and undue harm to the U.S. economy.
Simply put, our Nation cannot wait a decade or longer to begin the
development and commercialization of IGCC and carbon capture and
sequestration technologies. The need for new electric generating
capacity is upon us now. The need is real and it is pressing.
Unfortunately, the deployment of advanced coal electric generation
technology, such as IGCC, is expensive now and will only become more so
if development is postponed.
AEP believes that IGCC is the best commercially-ready technology
for the future inclusion of CCS but that the timely development of
commercially viable CCS technologies will require additional public
funding. Our IGCC plants will incorporate the space and layout for the
addition of components to capture CO2 for sequestration, but
AEP does not plan to incorporate CCS equipment until after the plants
are operating and the technology is demonstrated and proven.
Our IGCC plants will be among the earliest, if not the first,
deployments of large-scale IGCC technology. The cost of constructing
these plants will be high, resulting in a cost of generated electricity
that would be at least twenty percent greater than that from
conventional pulverized coal (PC) combustion technology. As more plants
are built, the costs of construction are expected to come into line
with the cost of PC plants.
To help bridge the cost gap and move IGCC technology down the cost
curve, there is a need for continuation and expansion of the advanced
coal project tax credits that were introduced by the Energy Policy Act
of 2005. All of the available tax credits for IGCC projects using
bituminous coal were allocated to only two projects during the initial
allocation round in 2006. More IGCC plants are needed to facilitate
this technology. AEP believes an additional one billion dollars of
section 48A (of the Internal Revenue Code) tax credits are needed, with
the bulk of that dedicated to IGCC projects without regard to coal
type.
Along with an increase in the amount of the credits, changes are
needed in the manner in which the credits are allocated. Advanced coal
project credits should be allocated based on net generating capacity
and not based upon the estimated gross nameplate generating capacity of
projects. Allocation based upon gross, rather than net, generating
capacity potentially rewards less efficient projects, which is
antithetical to the purpose of advanced coal project tax incentives.
AEP also believes that the Secretary of Energy should be delegated a
significant role in the selection of IGCC projects that will receive
tax credits.
On a critical note, the inclusion of carbon capture and
sequestration equipment must not be a prerequisite for the allocation
of these additional tax credits due to the urgent need for new electric
generating capacity in the U.S. AEP also believes that this requirement
is premature and self-defeating, since the technology to capture and
sequester a significant portion of an IGCC project's CO2
does not currently exist. The addition of yet-to-be-developed carbon
capture and sequestration technology to an IGCC project would cause the
projected cost of a project to increase significantly, making it that
much more difficult for a public utility commission to approve.
AEP also believes that additional tax incentives are needed to spur
the development and deployment of greenhouse gas capture and
sequestration equipment for all types of coal-fired generation. We
suggest that additional tax credits be established to offset a
significant portion of the incremental cost of capturing and
sequestering CO2. These incentives could be structured
partly as an investment tax credit, similar to that in section 48A (of
the Internal Revenue Code), to cover the upfront capital cost, and
partly as a production tax credit to cover the associated operating
costs.
In summary, AEP recommends a pragmatic approach for phasing in GHG
reductions through a cap-and-trade program coincident with developing
technologies to support these reductions. The emissions cap should be
reasonable and achievable. In the early years of the program, the cap
should be set at levels that slow the increase in GHG emissions.
Allowing for moderate emissions increases over the first decade is
critical due to limitations on currently available GHG control options
and technologies. The stringency of the cap would increase over time--
first stabilizing emissions and then requiring a gradual, long-term
decline in emissions levels. The cap levels should be set to reflect
projected advances in new carbon-saving technologies, which advances
AEP believes can be facilitated by Federal incentives. In the case of
the electric power sector, additional time is necessary to allow for
the deployment of new nuclear plants as well as the demonstration and
deployment of commercial-scale gasification and advanced combustion
facilities fully integrated with technologies for CO2
capture and storage. Substantial GHG reductions should not be required
until after the 2020 time-frame.
Requiring much deeper reductions sooner would very likely harm the
U.S. economy. For AEP and the electric sector, the only currently
available strategy to achieve substantial absolute CO2
reductions prior to 2020 without the full-scale deployment of new
technologies will inevitably require much greater use of natural gas,
in lieu of coal-fueled electricity, with the undesirable effects of
higher natural gas prices and even tighter supplies.
Technology is the Answer to Climate Change
The primary human-induced cause of global warming is the emission
of CO2 arising from the burning of fossil fuels. Put simply,
our primary contribution to climate change is also what drives the
global economic engine.
Changing consumer behavior by buying efficient appliances and cars,
by driving less, and by similar steps, is helping to reduce the growth
of GHG emissions. However, these steps will never be nearly enough to
significantly reduce CO2 emissions from the burning of coal,
oil and natural gas. Such incremental steps, while important, will
never be sufficient to stabilize greenhouse gases concentrations in the
atmosphere at a level that is believed to be capable of preventing
dangerous human-induced interference with the climate system, as called
for in the U.S.-approved U.N. Framework Convention on Climate Change
(Rio agreement).
For that, we need major technological advances to effectively
capture and store CO2. The Congress and indeed all Americans
must come to recognize the gigantic undertaking and significant
sacrifices that this enterprise is likely to require. It is unrealistic
to assume, and wrong to argue, that the market will magically respond
simply by the imposition of severe caps on CO2 emissions.
The result will not be a positive response by the market, but rather a
severe impact on the economy. Not when what we are talking about, on a
large scale, is the capture and geologic storage of billions and
billions of tons of CO2 with technologies that have not yet
been proven anywhere in the world.
CCS should not be mandated until and unless it has been
demonstrated to be effective and the costs have significantly dropped
so that it becomes commercially engineered and available on a
widespread basis. Until that threshold is met, it would be
technologically unrealistic and economically unacceptable to require
the widespread installation of carbon capture equipment. The use of
deep saline geologic formations as the primary long-term geologic
formations for CO2 storage has not yet been sufficiently
demonstrated. There are no national standards for permitting such
storage reservoirs; there are no widely accepted monitoring protocols;
and the standards for liability are unknown (and whether Federal or
state laws would apply), as well as who owns the rights to these deep
geologic reservoirs remains a question. Underscoring these realities,
industrial insurance companies point to a lack of scientific data on
CO2 storage as one reason they are disinclined to insure
early projects. In a nutshell, the institutional infrastructure to
support CO2 storage does not yet exist and will require
years to develop. In addition, application of today's CO2
capture technology would significantly increase the cost of an IGCC or
a new efficient pulverized coal plant, calling into serious question
regulatory approval for the costs of such a plant by state regulators.
Further, recent studies sponsored by the Electric Power Research
Institute (EPRI) suggest that application of today's CO2
capture technology would increase the cost of electricity from an IGCC
plant by up to 50 percent, and boost the cost of electricity from a
conventional pulverized coal plant by up to 60-70 percent, which would
again jeopardize state regulatory approval for the costs of such
plants.
Despite these uncertainties, I believe that we must aggressively
explore the viability of this technology in several first-of-a-kind
commercial projects. AEP is committed to help lead the way, and to show
how this can be done. For example, as described earlier in this
testimony, AEP will install carbon capture controls on two existing
coal-fired power plants, the first commercial use of this technology,
as part of our comprehensive strategy to reduce, avoid or offset GHG
emissions.
AEP is also building two state-of-the-art advanced
ultrasupercritical power plants in Oklahoma and Arkansas. These will be
the first of the new generation of ultrasupercritical plants in the
U.S.
AEP is also advancing the development of IGCC technology. IGCC
represents a major breakthrough in our work to improve the
environmental performance of coal-based electric power generation. AEP
is in the process of permitting and designing two of the earliest
commercial scale IGCC plants in the Nation. Construction of the IGCC
plants will start once traditional rate recovery is approved.
IGCC technology integrates two proven processes--coal gasification
and combined cycle power generation--to convert coal into electricity
more efficiently and cleanly than any existing uncontrolled power
plants can. Not only is it cleaner and more efficient than today's
installed power plants, but IGCC has the potential to be retrofitted in
the future for carbon capture at a lower capital cost and with less of
an energy penalty than traditional power plant technologies, but only
after the technology has been developed and proven.
AEP is also a founding member of FutureGen, a groundbreaking
public-private collaboration that aims squarely at making near-zero-
emissions coal-based energy a reality. FutureGen is a $1.5 billion, 10-
year research and demonstration project. It is on track to create the
world's first coal-fueled, near-zero emission electricity and hydrogen
plant with the capability to capture and sequester at least 90 percent
of its carbon dioxide emissions.
As an R&D plant, FutureGen will stretch--and indeed create--the
technology envelope. Within the context of our fight to combat global
climate change, FutureGen has a truly profound mission--to validate the
cost and performance baselines of a fully integrated, near zero-
emission coal-fueled power plant.
The design of the FutureGen plant is already underway, and we are
making great progress. The plant will be on-line early in the next
decade. By the latter part of that decade, following on the
advancements demonstrated by AEP, FutureGen and other projects, CCS
technology should become a commercial reality.
It is when these technologies are commercially demonstrated, and
only then, that commercial orders will be placed on a widespread basis
to implement CCS at coal-fueled power plants. That is, roughly around
2020. Widespread deployment assumes that a host of other important
issues have been resolved, and there is governmental and public
acceptance of CCS as the proven and safe technology that we now believe
it to be. AEP supports rapid action on climate change including the
enactment of well thought-out and achievable legislation so that our
Nation can get started on dealing with climate change. However, the
complete transformation of the U.S. electricity system will take time,
and we can't put policy ahead of the availability of cost-effective
technology. The development of technology must coincide with any
increase in the stringency of the program.
What will happen if the Congress does the opposite, and mandates
deep reductions in the absence of a proven, viable technology? It is
the proverbial road of good intentions, and only dangerous consequences
can follow. The most immediate would be a dramatic--and very likely
costly--increase in the use and price of natural gas by the utility
sector, since there would be no other identifiable alternative. This
would have significant adverse impacts on consumers and workers by
driving up the cost of gas for home heating and cooking, and would
further increase costs to any industry dependent upon natural gas as a
feedstock, such as chemicals and agriculture with a further exporting
of jobs overseas.
A huge challenge that our society faces over the remainder of this
century is how we will reduce the release of GHG emissions from fossil
fuels. This will require nothing less than the complete reengineering
of the entire global energy system over the next century. The magnitude
of this task is comparable to the industrial revolution, but for this
revolution to be successful, it must stimulate new technologies and new
behaviors in all major sectors of the economy. The benefits of projects
like FutureGen and the ones AEP is pursuing will apply to all countries
blessed with an abundance of coal, not only the United States, but also
nations like China and India.
In the end, the only sure path to stabilizing GHG concentrations
over the long term is through the development and utilization of
advanced technologies. And we must do more than simply call for it. Our
nation must prepare, inspire, guide, and support our citizens and the
very best and the brightest of our engineers and scientists; private
industry must step up and start to construct the first commercial
plants; and our country must devote adequate financial and
technological resources to this enormous challenge. AEP is committed to
being a part of this important process, and to helping you achieve the
best outcome at the most reasonable cost and timelines possible. Thank
you again for this opportunity to share these views with you.
______
NEWS from AEP
Media Contact:
Pat D. Hemlepp
Director, Corporate Media Relations
Analysts Contact:
Julie Sloat
Vice President, Investor Relations
For Immediate Release
AEP to Install Carbon Capture on Two Existing Power Plants; Company
Will Be First to Move Technology to Commercial Scale
As climate policy advances, ``it's time to advance technology for
commercial use,'' CEO says Columbus, Ohio, March 15, 2007--American
Electric Power (NYSE:AEP) will install carbon capture on two coal-fired
power plants, the first commercial use of technologies to significantly
reduce carbon dioxide emissions from existing plants.
The first project is expected to complete its product validation
phase in 2008 and begin commercial operation in 2011.
``AEP has been the company advancing technology for the electric
utility industry for more than 100 years,'' said Michael G. Morris, AEP
chairman, president and chief executive officer. ``This long heritage,
the backbone of our company's success, makes us very comfortable taking
action on carbon emissions and accelerating advancement of the
technology. Technology development needs are often cited as an excuse
for inaction. We see these needs as an opportunity for action.''
``With Congress expected to take action on greenhouse gas issues in
climate legislation, it's time to advance this technology for
commercial use,'' Morris said. ``And we will continue working with
Congress as it crafts climate policy. It is important that the U.S.
climate policy be well thought out, establish reasonable targets and
timetables, and include mechanisms to prevent trade imbalances that
would damage the U.S. economy.''
Morris will discuss AEP's plans for carbon capture during a
presentation today at the Morgan Stanley Global Electricity & Energy
Conference in New York. A live webcast of the presentation to an
audience of investors will begin at 12:10 p.m. EDT and can be accessed
through the Internet at http://www.aep.com/go/webcast. The webcast will
also be available after the event. Visuals used in the presentation
will be available at http://ww.aep.com/investors/present.
AEP has signed a memorandum of understanding (MOU) with Alstom, a
worldwide leader in equipment and services for power generation and
clean coal, for post-combustion carbon capture technology using
Alstom's Chilled Ammonia Process. This technology, which is being
piloted this summer by Alstom on a 5-megawatt (thermal) slipstream from
a plant in Wisconsin, will first be installed on AEP's 1,300-megawatt
Mountaineer Plant in New Haven, W.Va., as a 30-megawatt (thermal)
product validation in mid-2008 where up to 100,000 metric tons of
carbon dioxide (CO2) will be captured per year. The captured
CO2 will be designated for geological storage in deep saline
aquifers at the site. Battelle Memorial Institute will serve as
consultants for AEP on geological storage.
Following the completion of product validation at Mountaineer, AEP
will install Alstom's system on one of the 450-megawatt (electric)
coal-fired units at its Northeastern Station in Oologah, Okla. Plans
are for the commercial-scale system to be operational at Northeastern
Station in late 2011. It is expected to capture about 1.5 million
metric tons of CO2 a year. The CO2 captured at
Northeastern Station will be used for enhanced oil recovery.
Alstom's system captures CO2 by isolating the gas from
the power plant's other flue gases and can significantly increase the
efficiency of the CO2 capture process. The system chills the
flue gas, recovering large quantities of water for recycle, and then
utilizes a CO2 absorber in a similar way to absorbers used
in systems that reduce sulfur dioxide emissions. The remaining low
concentration of ammonia in the clean flue gas is captured by cold-
water wash and returned to the absorber. The CO2 is
compressed to be sent to enhanced oil recovery or storage.
In laboratory testing sponsored by Alstom, EPRI and others, the
process has demonstrated the potential to capture more than 90 percent
of CO2 at a cost that is far less expensive than other
carbon capture technologies. It is applicable for use on new power
plants as well as for the retrofit of existing coal-fired power plants.
AEP has signed an MOU with The Babcock & Wilcox Company (B&W), a
world leader in steam generation and pollution control equipment
design, supply and service since 1867, for a feasibility study of oxy-
coal combustion technology. B&W, a subsidiary of McDermott
International, Inc. (NYSE:MDR), will complete a pilot demonstration of
the technology this summer at its 30-megawatt (thermal) Clean
Environment Development Facility in Alliance, Ohio.
Following this demonstration, AEP and B&W will conduct a retrofit
feasibility study that will include selection of an existing AEP plant
site for commercial-scale installation of the technology and cost
estimates to complete that work. Once the retrofit feasibility study is
completed, detailed design engineering and construction estimates to
retrofit an existing AEP plant for commercial-scale CO2
capture will begin. At the commercial scale, the captured
CO2 will likely be stored in deep geologic formations. The
plant, with oxy-coal combustion technology, is expected to be in
service in the 2012-2015 time-frame.
B&W, in collaboration with American Air Liquide Inc., has been
developing oxy-coal combustion, a technology that utilizes pure oxygen
for the combustion of coal. Current generation technologies use air,
which contains nitrogen that is not utilized in the combustion process
and is emitted with the flue gas. By using pure oxygen, oxy-coal
combustion excludes nitrogen and leaves a flue gas that is a relatively
pure stream of carbon dioxide that is ready for capture and storage.
B&W's and Air Liquide's collaborative work on oxy-coal combustion began
in the late 1990s and included pilot-scale development at B&W's
facilities with encouraging results, burning both bituminous and sub-
bituminous coals.
The oxy-coal combustion process, as envisioned, uses a standard,
cryogenic air separation unit to provide relatively pure oxygen to the
combustion process. This oxygen is mixed with recycled flue gas in a
proprietary mixing device to replicate air, which may then be used to
operate a boiler designed for regular air firing. The exhaust gas,
consisting primarily of carbon dioxide, is first cleaned of traditional
pollutants, then compressed and purified before storage. B&W, working
with Air Liquide, can supply the equipment, technology and control
systems to construct this new value chain, either as a new application
or as a retrofit to an existing unit.
The Alstom technology provides a post-combustion carbon capture
system that is suitable for use in new plants as well as for
retrofitting to existing plants. It requires significantly less energy
to capture CO2 than other technologies currently being
tested.
The B&W technology provides a pre-combustion boiler conversion
option for existing plants that promotes the creation of a pure
CO2 stream in the flue gas.
Both pre- and post-combustion technologies will be important for
companies facing decisions on carbon reduction from the wide variety of
coal-fired boiler designs currently in use.
AEP anticipates seeking funding from the U.S. Department of Energy
to help offset some of the costs of advancing these technologies for
commercial use. The company will also work with utility commissions,
environmental regulators and other key constituencies in states that
have jurisdiction over the plants selected for retrofit to determine
appropriate cost recovery and the impact on customers.
``We recognize that these projects represent a significant
commitment of resources for AEP, but they are projects that will pay
important dividends in the future for our customers and shareholders,''
Morris said. ``Coal is the fuel used to generate half of the Nation's
electricity; it fuels about 75 percent of AEP's generating fleet. By
advancing carbon capture technologies into commercial use, we are
taking an important step to ensure the continued and long-term
viability of our existing generation, just as we did when we were the
first to begin a comprehensive, system-wide retrofit program for sulfur
dioxide and nitrogen oxide emissions controls. We have completed the
sulfur dioxide and nitrogen oxide retrofits on more than two-thirds of
the capacity included in the program and we are on schedule to complete
all retrofits by shortly after the end of the decade.''
``By being the first to advance carbon capture technology, we will
be well-positioned to quickly and efficiently retrofit additional
plants in our fleet with carbon capture systems while avoiding a
potentially significant learning curve.''
AEP has led the U.S. electric utility industry in taking action to
reduce its greenhouse gas emissions. AEP was the first and largest U.S.
utility to join the Chicago Climate Exchange (CCX), the world's first
and North America's only voluntary, legally binding greenhouse gas
emissions reduction and trading program. As a member of CCX, AEP
committed to gradually reduce, avoid or offset its greenhouse gas
emissions to 6 percent below the average of its 1998 to 2001 emission
levels by 2010. Through this commitment, AEP will reduce or offset
approximately 46 million metric tons of greenhouse gas emissions by the
end of the decade.
AEP is achieving its greenhouse gas reductions through a broad
portfolio of actions, including power plant efficiency improvements,
renewable generation such as wind and biomass co-firing, off-system
greenhouse gas reduction projects, reforestation projects and the
potential purchase of emission credits through CCX.
American Electric Power is one of the largest electric utilities in
the United States, delivering electricity to more than 5 million
customers in 11 states. AEP ranks among the Nation's largest generators
of electricity, owning nearly 36,000 megawatts of generating capacity
in the U.S. AEP also owns the Nation's largest electricity transmission
system, a nearly 39,000-mile network that includes more 765 kilovolt
extra-high voltage transmission lines than all other U.S. transmission
systems combined. AEP's utility units operate as AEP Ohio, AEP Texas,
Appalachian Power (in Virginia and West Virginia), AEP Appalachian
Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public
Service Company of Oklahoma, and Southwestern Electric Power Company
(in Arkansas, Louisiana and east Texas). AEP's headquarters are in
Columbus, Ohio.
* * * * * * *
This report made by AEP and its Registrant Subsidiaries contains
forward-Looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. Although AEP and each of its
Registrant Subsidiaries believe that their expectations are based on
reasonable assumptions, any such statements may be influenced by
factors that could cause actual outcomes and results to be materially
different from those projected. Among the factors that could cause
actual results to differ materially from those in the forward-looking
statements are: electric load and customer growth; weather conditions,
including storms; available sources and costs of, and transportation
for, fuels and the creditworthiness of fuel suppliers and transporters;
availability of generating capacity and the performance of AEP's
generating plants; AEP's ability to recover regulatory assets and
stranded costs in connection with deregulation; AEP's ability to
recover increases in fuel and other energy costs through regulated or
competitive electric rates; AEP's ability to build or acquire
generating capacity when needed at acceptable prices and terms and to
recover those costs through applicable rate cases or competitive rates;
new legislation, litigation and government regulation including
requirements for reduced emissions of sulfur, nitrogen, mercury,
carbon, soot or particulate matter and other substances; timing and
resolution of pending and future rate cases, negotiations and other
regulatory decisions (including rate or other recovery for new
investments, transmission service and environmental compliance);
resolution of litigation (including pending Clean Air Act enforcement
actions and disputes arising from the bankruptcy of Enron Corp. and
related matters); AEP's ability to constrain operation and maintenance
costs; the economic climate and growth in AEP's service territory and
changes in market demand and demographic patterns; inflationary and
interest rate trends; AEP's ability to develop and execute a strategy
based on a view regarding prices of electricity, natural gas and other
energy-related commodities; changes in the creditworthiness of the
counterparties with whom AEP has contractual arrangements, including
participants in the energy trading market; actions of rating agencies,
including changes in the ratings of debt; volatility and changes in
markets for electricity, natural gas and other energy-related
commodities; changes in utility regulation, including the potential for
new legislation or regulation in Ohio and/or Virginia and membership in
and integration into regional transmission organizations; accounting
pronouncements periodically issued by accounting standard-setting
bodies; the performance of AEP's pension and other post-retirement
benefit plans; prices for power that AEP generates and sell at
wholesale; changes in technology, particularly with respect to new,
developing or alternative sources of generation; other risks and
unforeseen events, including wars, the effects of terrorism (including
increased security costs), embargoes and other catastrophic events.
______
Background: American Electric Power's Actions to Address Climate
Change GHG Reduction Commitment
American Electric Power (AEP) was the first and largest U.S.
utility to join the Chicago Climate Exchange (CCX) and make a legally
binding commitment to gradually reduce or offset its greenhouse gas
emissions to 6 percent below the average of 1998-2001 emission levels
by 2010.
As a founding member of CCX, AEP committed in 2003 to reduce or
offset its emissions gradually to 4 percent below the average of 1998-
2001 emission levels by 2006 (1 percent reduction in 2003, 2 percent in
2004, 3 percent in 2005 and 4 percent in 2006). In August 2005, AEP
expanded and extended its commitment to a 6 percent reduction below the
same baseline by 2010 (4.25 percent in 2007, 4.5 percent in 2008, 5
percent in 2009 and 6 percent in 2010). Through this commitment, AEP
expects to reduce or offset approximately 46 million metric tons of
greenhouse gas emissions.
Operational Improvements
AEP has been able to reduce its carbon dioxide (CO2)
emissions by improving plant efficiency for its fossil-fueled plants
through routine maintenance and investments like turbine blade
enhancements (installing new turbine blades) and steam path
replacements that improve the overall heat rate of a plant and, in
turn, reduce CO2 emissions. A one-percent improvement in
AEP's overall fleet efficiency can reduce the company's greenhouse gas
emissions by 2 million metric tons per year.
AEP has also reduced its CO2 emissions by improving the
performance and availability of its nuclear generation. AEP's D.C. Cook
Nuclear Plant in Michigan set plant records for generation and capacity
factor in 2005. The plant had a capacity factor (energy generated as
compared to the maximum possible) of 96.8 percent in 2005 and generated
17,471 gigawatt-hours (GWH) of electricity. Additionally, AEP will
invest $45 million to replace turbine motors in one unit at D.C. Cook
in 2006, which will increase that unit's output by 41 megawatts.
As a member of the U.S. EPA's Sulfur Hexafluoride (SF6) Emissions
Reduction Partnership for Electric Power Systems, AEP has significantly
reduced emissions of SF6, an extremely potent greenhouse gas, from 1999
levels of 19,778 pounds (a leakage rate of 10 percent) to 2004
emissions of 1,962 pounds (a leakage rate of 0.5 percent).
Managing Forests and Agricultural Lands for Carbon Sequestration
To reduce carbon dioxide (CO2) concentrations in the
global atmosphere, AEP has invested more than $27 million in
terrestrial sequestration projects designed to conserve and reforest
sensitive areas and offset more than 20 million metric tons of
CO2 over the next 40 years. These projects include
protecting nearly 4 million acres of threatened rainforest in Bolivia,
restoring and protecting 20,000 acres of degraded or deforested
tropical Atlantic rainforest in Brazil, reforesting nearly 10,000 acres
of the Mississippi River Valley in Louisiana with bottomland hardwoods,
restoring and protecting forest areas in the Sierra Madres of
Guatemala, and planting trees on 23,000 acres of company-owned land.
Deploying Technology for Clean Coal Generation
AEP is focused on developing and deploying new technology that will
reduce the emissions, including greenhouse gas emissions, of future
coal-based power generation. AEP announced in August 2004 its plans to
build commercial-scale integrated gasification combined cycle (IGCC)
plants to demonstrate the viability of this technology for future use
of coal in generating electricity. AEP has filed for regulatory
approval in Ohio and West Virginia to build a 629-megawatt IGCC plant
in each of these states. The plants are scheduled to be operational in
the 2010 to 2011 timeframe and will be designed to accommodate retrofit
of technology to capture and sequester CO2 emissions.
Developing Technology for CO2 Capture and Storage
AEP's Mountaineer Plant in New Haven, W.Va., is the site of a $4.2
million carbon sequestration research project funded by the U.S.
Department of Energy, the Ohio Coal Development Office, and a
consortium of public and private sector participants. Scientists from
Battelle Memorial Institute lead this climate change mitigation
research project, which is designed to obtain data required to better
understand and test the capability of deep saline aquifers for storage
of carbon dioxide emissions from power plants.
AEP is a member of the FutureGen Alliance, who, along with the
Department of Energy, will build ``FutureGen,'' a $1 billion, near-zero
emission plant to produce electricity and hydrogen from coal while
capturing and disposing of carbon dioxide in geologic formations.
Additionally, AEP funds research coordinated by the Massachusetts
Institute of Technology Energy Laboratory and the Electric Power
Research Institute that is evaluating the environmental impacts,
technological approaches, and economic issues associated with carbon
sequestration. The MIT research specifically focuses on efforts to
better understand and reduce the cost of carbon separation and
sequestration.
Renewable Energy and Clean Power
AEP strongly supports increased renewable energy sources to help
meet our Nation's energy needs. AEP is one of the larger generators and
distributors of wind energy in the United States, operating 311
megawatts (MW) of wind generation in Texas. The company also purchases
and distributes an additional 373.5 megawatts of wind generation from
wind facilities in Oklahoma and Texas. Additionally, AEP operates 2,285
megawatts of nuclear generation and 884 megawatts of hydro and pumped
storage generation.
More than 125 schools participate in AEP's ``Learning From Light''
and ``Watts on Schools'' programs. Through these programs, AEP partners
with learning institutions to install 1 kW solar photovoltaic systems,
and uses these systems to track energy use and demonstrate how solar
energy is a part of the total energy mix. Similarly, AEP's ``Learning
From Wind'' program installs small-scale wind turbines to provide wind
power education and renewable energy research at educational
institutions.
Biomass Energy
Until the company sold the plants in 2004, AEP co-fired biomass in
4,000 MW of coal-based power generation in the United Kingdom
(Fiddler's Ferry and Ferry Bridge). AEP has been evaluating and testing
biomass co-firing for its smaller coal-fired power plants in the United
States to evaluate potential reductions in CO2 emission
levels.
Energy Conservation and Energy Efficiency
AEP is implementing ``Energy Efficiency Plans'' to offset 10
percent of the annual energy demand growth in its Texas service
territory. In 2003 alone, AEP invested more than $8 million to achieve
over 47 million kilowatt-hours (kWh) of reductions from installation of
energy efficiency measures in customers' homes and businesses. Total
investments for the four-year program will exceed $43 million,
achieving more than 247 million kWh of energy efficiency gains.
2005 EPA Climate Protection Award
In May 2005, the EPA selected AEP to receive a 2005 Climate
Protection Award for demonstrating ingenuity, leadership and public
purpose in its efforts to reduce greenhouse gases. EPA began the
Climate Protection Awards program in 1998 to recognize outstanding
efforts to protect the Earth's climate.
Senator Kerry. Thank you very much, Mr. Rencheck, we
appreciate that.
Mr. Wilson?
STATEMENT OF JOHN M. WILSON,
CHIEF OPERATING OFFICER,
SIEMENS ENVIRONMENTAL SYSTEMS AND SERVICES
Mr. Wilson. Thank you very much. Greetings, Chairman Kerry,
and the Committee.
My name is John Wilson, I am the Chief Operating Officer
for Siemens Environmental Systems and Services. It's a company
created out of a 90-year-old air pollution control business.
I'm really pleased to be able to give the overall
presentation from the practical side for air pollution control
here for clean coal.
Today I'm speaking on behalf of Siemens power generation,
it's a $10 billion organization, part of the $100 billion
global infrastructure supplier. And, what I'd like to do, is
really like to let you know about Siemens Power Generation
first.
We've basically grown by consolidating many of the well-
known companies out in the industry--Westinghouse,
Wheelabrator, Bonus Energy, as well as the industrial turbine
business of Alstom. And what we invest right now, every year,
is about $600 million a year in R&D in the energy sector, so
we're fully vested in this energy sector.
Siemens recognizes that clean coal doesn't have to be an
oxymoron, either, because that's our business. We basically
focus on the safe environmental use of coal today, and in the
future.
So, what we've done, is we basically participate with DOE
and bring our expertise to funding on clean coal technology
programs like the hydrogen fuel gas turbine, like
CO2 separation technologies, membrane technologies,
oxy-fuel combustion, and ultra supercritical steam turbines. So
we participate in that, all of these efforts because we believe
that coal is going to be a part of our global future. As you
mentioned, it's 50 percent today, in terms of electricity
generation, growing to 60 percent by 2030, according to the
Energy Administration.
So, that's 325,000 megawatts, essentially, of installed
base out there that's already operating--it's not going to go
away--that's basically going to be there in providing our
needs. It take decades, essentially for these plants to
amortize their value, and my business is actually focused on
cleaning up the emissions at these plants.
We fundamentally are now in a boom, where we have State
regulatory commissions, with consent decrees that are forcing
higher levels of emissions controls on the existing plants. And
so, what we see today, is that with the appropriate engineering
design, we're able to design emissions control systems that
basically are on par with the proposed IGCC plants that are out
there today.
There's a real potential for improvement, essentially, out
there today in the existing fleet, because we see the
opportunity and capability to retrofit these plants with
additional controls that aren't deployed today. If you want to
permit a new plant today, you have to have a full suite of
environmental controls for a new source review, but
fundamentally, the existing plants that are out there are not
necessarily all compliant with that, and they're just now being
upgraded.
So, with the fact that there's a lot of technology out
there, we also focus--as we've said--across the whole
technology spectrum--gasification and gas-turbine technology
for IGCC, emissions control, and ultra supercritical combustion
based technologies. So, we provide essentially whatever the
market asks for in terms of technology.
But clearly efficiency, or CO2 avoidance, is
superior to CO2 capture--either post-combustion or
pre-combustion. So, we see the efficiency improvements in the
existing fleet as one of the areas that we could look at.
Because, clearly, with the average fleet efficiency of 33
percent--and now plant technologies that are in excess of 40
percent efficient--there's a great deal of improvement
potential for the existing fleet, both in emissions and also in
efficiency.
Gasification is a real option, too. Basically, Siemens has
over 320,000 hours of operation on gasification (or integrated
gasification combined cycle) plants around the world. We've
also recently acquired one of the leading gasification
technologies. This technology is very favorable and works very
well on Western coals, higher moisture coals and lower-quality
coals. So, we're also part of the overall gasification
technology business.
But clearly the CO2 policy issue not only
involves important advanced technology questions but also the
ultimate cost to the consumer and the economy. For example,
current estimates suggest that CO2 capture and
storage will add several cents a kilowatt to existing utility
bills.
So, fundamentally, Siemens believes that the long-term
storage of carbon, is one of the critical areas--that we have
to focus on in the regulatory environment.
So, in closing, I want to make it clear that there are
existing technologies out there today to make the coal, much
cleaner coal and that we are providers of most of these
technologies. In addition, we'd like to see further R&D
development across the suite of technologies because there is
no clear ``winner'' technology today. We need investment and
demonstration programs in all of these technologies because it
takes years to prove out the right technology and the right
application. We also support the development of industry-wide
performance-based/efficiency-based standards as well as a
reevaluation of the new source rules. These changes would
facilitate the deployment of newer, more advanced coal-based
technologies which would result in improved environmental
performance, including CO2.
Thank you very much.
[The prepared statement of Mr. Wilson follows:]
Prepared Statement of John M. Wilson, Chief Operating Officer, Siemens
Environmental Systems and Services
Greetings, Chairman Kerry and Ranking Member Ensign and
Subcommittee members. My name is John Wilson; I am the Chief Operating
Officer of Siemens' Environmental Systems and Services business unit
which was created out of a company with over 90 years of experience in
air pollution control technology. I am honored to be here today to
discuss the current state of clean coal technology from an
infrastructure suppliers' perspective.
Today I am speaking primarily on behalf of the power generation
business at Siemens. For the last several years, I was the vice
president of strategy for the Power Generation Group, headquartered in
Orlando, Florida, and Erlangen Germany, which is a 10 billion dollar
segment of Siemens 100 billion dollar global infrastructure business.
Before I speak specifically to clean coal issues, I'd like to
direct the Subcommittee's attention to a unique global project and
recently published report entitled ``Megacity Challenges'' that is
based upon research conducted by two independent organizations with the
support of Siemens. The goal of the project was to carry out research
at the megacity level to gather data as well as perspectives from
mayors, city administrators and other experts on infrastructure
challenges, like energy supply and delivery systems, in which this
Subcommittee takes great interest. Over 500 public and private sector
experts from 25 cities were interviewed. The results were fascinating,
including the projection that by 2030 over 60 percent of the world's
population will live in cities. The key megatrends identified in this
report that are guiding Siemens' priorities are: healthcare challenges,
urbanization and associated mobility challenges, scarcity of clean and
reliable natural resources such as clean air and water, and reliable
energy supplies. Siemens has been investing in the technologies that
address these massive shifts that are driving the current and future
needs of society. In addition to the energy infrastructure technologies
that I will focus upon today, other examples of our forward-looking
technologies include efficient lighting, automation and controls,
intelligent traffic controls, water purification and efficient
technologies for buildings and rapid transit.
Siemens' power generation business has grown to its current size by
consolidating some of the best known names in the power generation
industry, such as Westinghouse, KWU, Parsons, Wheelabrator, Bonus
Energy, and the Alstom industrial turbine business. Our technology
portfolio in this business sector is comprehensive, and we will invest
over $600 million in research and development in the next fiscal year
in technology enhancements that will improve both efficiency and
overall performance.
Siemens recognizes that clean coal does not have to be an oxymoron,
because there are many technologies that can facilitate the safe
environmental use of coal, both today, and into the future, as an
integral part of a balanced energy supply portfolio. As part of our
strategy, we have been working jointly with the Department of Energy on
several key efficiency and CO2 capture technologies which
will play a role in the continued use of coal. Areas of cooperative
research include:
Development of hydrogen fueled gas turbines for gasification
plants, possibly one approach for reducing the carbon footprint
of power generation (FutureGen Alliance);
Ion Transport Membrane (ITM) for improved efficiency in gas
separation.\1\ Efficient, low cost gas separation is a key
enabling technology as part of a CO2 mitigation
strategy;
---------------------------------------------------------------------------
\1\ A cooperative venture with Air Products, Inc.
Oxy-Fuel Turbine: This is a new turbine design that
capitalizes on advances in gas separation and hydrogen turbine
design, providing a unique pathway for CO2
---------------------------------------------------------------------------
separation, and ultimately, CO2 sequestration;
USC (ultra supercritical) steam turbine materials--
developing better materials for more efficient, higher
temperature and pressure steam turbines.
The continued usage of coal will be an integral part of any
solution in power generation in our lifetimes, because coal currently
provides 50 percent of the United States' generation needs. According
to the Energy Information Agency, this usage will grow to almost 60
percent by 2030. Compare this demand trend to that for renewable
energy, which, excluding hydropower, makes up a little more than 2
percent of capacity in the United States. For some of the world's
largest economies, coal represents the dominant domestic energy
resource. Today, Siemens' generating equipment provides over 25 percent
of electricity worldwide, and we also provide services to our customers
to maintain and upgrade their equipment.
The United States' fleet of 325,000 megawatts of coal-fired
generating capacity was built over generations, and cannot be replaced
quickly. Unlike commodities or consumer goods, power plants are massive
in scale, take years to build, and require decades to recover their
costs. Economics and regulatory requirements demand that we efficiently
extract the most energy from this installed base. Currently, in the
United States, the average age of a coal-fired power plant exceeds 40
years (and is increasing).
SOX, Mercury, NOX and Particulate Matter
Today with appropriate engineering design, we can routinely reduce
criteria pollutants from these existing power plants by 90 percent
compared to an uncontrolled power plant; for some pollutants 99 percent
reduction is the norm. Modern air pollution control technologies that
are readily available today, with no substantial investment in research
and development, can reduce emissions of criteria pollutants from any
coal-fired plant to levels that are projected to be achieved by
integrated gasification combined cycle (IGCC) plants. The attached
table in Appendix One compares the performance of retrofit air
pollution controls to IGCC performance. Even though the performance is
basically the same at this point, Siemens recognizes the need to invest
in multiple technological pathways, and so Siemens not only provides
the technology for the world's highest efficiency supercritical steam
power plants, along with total emissions controls, it also has gas
turbines and gasification technology for IGCC plants (to be discussed
later herein).
Although substantial fossil fuel plant upgrades are available, in
fact very little of the fleet has the emissions control that would be
required for a new power plant. For example, while most units have
particulate controls, about one-third of capacity has SO2
scrubbers, most have low-NOX burners, and only one-third of
the capacity in the Eastern United States has advanced NOX
controls.\2\ Our business in retrofitting SO2 air pollution
controls to existing plants has recently boomed in the U.S., with many
states regulating existing units under consent decrees.
---------------------------------------------------------------------------
\2\ Recent communication with U.S. EPA
---------------------------------------------------------------------------
Today, all new plants will include either wet or dry flue gas
desulphurization as required by the Clean Air Act Amendments. Trading
in SO2 credits is an incentive for the implementation of
new, high efficiency flue gas desulphurization (FGD) systems. FGD
systems also efficiently recycle the sulfates extracted from the
process streams. Over 90 percent of the sulfates extracted from FGDs
are recycled for use as wallboard in the construction industry. The
largest single-stage FGD system in the United States utilizes Siemens
technology, and was installed at the Big Bend Plant near Tampa,
Florida.
In addition to sulfur, burning coal can generate a great deal of
particulate matter, or dust. The technology of capturing dust has been
available for decades as electrostatic precipitators--or bag houses--
that have been widely applied in the power generation sector. According
to the American Coal Ash Association, nearly 71 million tons of fly ash
is collected today, with over 40 percent of this is recycled for uses
in concrete products, cement, and agriculture.
More recently, small particulate matter and aerosols less than 2.5
microns in size have been identified as serious health hazards, and
therefore, to meet even tighter ambient air quality standards, there
has been a renewed interest in improving the performance of these
emission control devices. Siemens emissions control technology products
include wet electrostatic precipitator (WESP) designs that can meet the
most stringent requirements. WESPs and bag house filtration systems can
yield greater than 99 percent particulate capture and achieve
compliance with the most stringent air quality requirements.
Mercury is a unique chemical element exhibiting no health benefits
at any concentration (lead is another); mercury can damage the central
nervous system, endocrine system, kidneys, and other organs. In the
United States, mercury has been identified as a hazardous air pollutant
to be regulated. Today, coal plants in the United States emit between
30 and 50 tons of mercury per year. Siemens provides technology to
capture mercury, incorporating some of the same design features for
particulate capture.
NOX, which contributes to visible smog and is a
respiratory health concern, is also emitted from automobiles and is one
of the more challenging pollutants to control because it is formed from
the nitrogen and oxygen in the atmosphere at high heat. Several
technologies are now available for NOX control, including
third- and fourth-generation low NOX burners that minimize
the creation of NOX, and selective catalytic reduction
technologies, or multi-pollutant technologies, that convert
NOX back to stable nitrogen and water vapor. Siemens offers
new, advanced burner designs to reach 75 percent NOX
reduction compared to uncontrolled emissions, and can provide advanced
catalysts, or multi-pollutant technology, to reduce NOX by
over 95 percent.
Carbon Dioxide and Other Greenhouse Gases
Any fossil fuel used in any application will have CO2
emissions associated with the process. Because of CO2's
potential role in global warming, reducing or mitigating emissions is a
central strategy for Siemens. Siemens offer the tools to manage all the
emissions from power plants. And while emissions of CO2 are
linked to climate change, other emissions including methane and
particulates are also factors of concern for climate change. The
technology to address emissions of criteria pollutants that impact
climate change (NOX, CH4, particulates) are
available as described above.
Carbon dioxide, however, is radically different. None of the
current capture technologies that are used for the priority pollutants
can be directly applied to CO2 capture. The best way today
to address the reduction of CO2 in the power generation
fleet is the same as for automobiles, by essentially increasing the
output of the fleet without increasing the fuel used. The current
United States fossil fleet operates at approximately 33 percent
efficiency (with the remainder of that energy lost as heat to the
environment). If we could improve that fleet efficiency by even just 1
percentage point, we could reduce CO2 emissions by 50
million tons per year, with no loss in net generation. The most
efficient coal plants today can reach well over 40 percent efficiency,
and if the entire United States fleet were operating at that
efficiency, nearly one-quarter of the CO2 emissions from
power generation would be eliminated.\3\ Siemens offers advanced
technology to improve the efficiency of any power plant, thus
indirectly reducing the CO2 generated for each unit of
electricity produced.
---------------------------------------------------------------------------
\3\ Approximately 500 million tons of CO2 reduction if
the fossil fleet were to operate at 42.5 percent efficiency.
---------------------------------------------------------------------------
Integrated Gasification Combined Cycle (IGCC)
As an alternative to the discussed technologies to capture
emissions post-combustion, some of the next generation of clean coal
power plants are proposing pre-combustion coal gasification to capture
these same pollutants during the fuel processing steps. The most
desirable part of the fuel is the energy content in the form of CO and
hydrogen, which is extracted in gasification, leaving behind most of
the pollutants. Siemens offers gasification for applications such as
power generation (IGCC) as well as for production of synthetic fuels.
Siemens has demonstrated 320,000 hours of gas turbine operation
with gasification processes at scales ranging from 8 MW to over 300 MW.
Our current product strategy is to provide a 630 MW IGCC plant here in
the United States. To broaden its portfolio in this sector, Siemens
recently acquired one of the longest demonstrated and commercially
offered technologies for gasification for the production of
petrochemical liquids or for conversion to synthetic natural gas, and
for power generation applications.
The DOE clean coal initiative has focused on pre-combustion capture
of emissions, along with CO2 capture. The debate on pre-
combustion versus post-combustion capture has now fully developed, with
the industry planning demonstration projects for both technologies
underway. One feature of gasification is that carbon can be effectively
extracted from the concentrated high pressure gas stream leaving the
gasifier, resulting in reduced energy losses and less adverse impact on
the cost of electricity. Post-combustion capture operates similarly
using solvents, like an amine, or ammonia, to capture the
CO2 from the exhaust gases at much lower pressures, after
they have had all the other pollutants removed. Neither of these
processes has been commercially demonstrated on a full-scale power
generation facility, however we are working to demonstrate this
application on existing power plants.
Nearly every scenario we have explored reveals that all
CO2 recovery comes at a cost of energy, sometimes
substantial amounts of energy. Increased research, along with
demonstration projects are needed to find ways to reduce the energy
intensity of CO2 capture and removal for both pre-combustion
and post-combustion capture. Equally important, we must also resolve
the issue of carbon storage, because if there is no long-term storage
for the carbon, then CO2 capture and recovery is moot. We
agree with the MIT study, The Future of Coal, that CO2
Capture and Storage (CCS) is ``the critical enabling technology that
would reduce CO2 emissions significantly while also allowing
coal to meet the world's pressing energy needs''.
As an Original Equipment Manufacturer (OEM), we are also aware that
our customers and end-users are sometimes reluctant to upgrade or
repair facilities to improve plant efficiency which may trigger new
reviews. Output-based efficiency standards could be used as a tool to
encourage upgrades and to improve environmental and output performance.
Such an approach has been used for gas turbine emission regulations in
the recent New Source Performance Standards updated in February 2005.
To close, Siemens believes that there are currently many
technologies to provide the Nation with cleaner coal power generation,
and that what is needed is a meaningful commitment from the Government
to encourage greater efficiencies. We urge increased support for
research, development and deployment of more efficient end-use
technologies, low or zero-emitting technologies, and cost effective
carbon capture and storage technologies. We also urge support for
incentives to encourage private sector risk taking for the development
and deployment of these technologies.
Appendix One
Comparison of Retrofit Projects and IGCC
------------------------------------------------------------------------
Parameter Units Recent AQCS IGCC
------------------------------------------------------------------------
SO2 % Removal 95-99 99
SO2 Lb/MMBtu 0.03-0.18 0.03
PM Lb/MMBtu 0.010-0.015 0.011
PM10 Lb/MMBtu 0.015-0.03 0.011
HCL Lb/MMBtu 0.00001-0.003 0.0006
HCL % Removal 97-98 95
HF Lb/MMBtu 0.00001-0.00026 N/A
Mercury Lb/TBTu 0.28-2.2 0.56-0.74
Lead Lb/TBTu 0.9-16.2 10.2
------------------------------------------------------------------------
Senator Kerry. Thank you, Mr. Wilson, very, very much. I
appreciate that. I want to follow up with you on some of the
tech notions that you just put forward.
But, before I do, let me try to get the big picture here a
little bit if we can. I thought one of the most important
points put forward, you've all talked about the technology
that's out there, we've got technology, but the big question
is, how to sequester? Big question--how to capture carbon? And
what we can do to do that rapidly.
The date, 2020, rang a bell. This is an issue where you
kind of can't be half-pregnant. If you believe the scientists,
I assume you all accept, you're all accepting the science, or
are you simply doing this because you see it coming? Let me
just establish that as a front line. Do you accept the science
on global climate change, Mr. Chaisson?
Mr. Chaisson. Yes.
Senator Kerry. Mr. Denis?
Mr. Denis. Yes.
Senator Kerry. Dr. McRae?
Dr. McRae. Yes.
Senator Kerry. Mr. Rencheck?
Mr. Rencheck. Yes.
Mr. Wilson. Yes.
Senator Kerry. OK. So, if you accept the science, and you
have 2,000-plus scientists from around the globe, including
some of, what we consider to be our smart folks, from Jim
Hansen and John Holdren, Ed Miles, Bob Correll, others, all
coming together, and if those scientists are telling us, with
alarm, that the indicators that they see are moving more
rapidly, and with greater impact, species movement already
showing up, millions of acres of forest with bug infestation
that didn't used to exist because they'd die, because of the
cold, now they don't. No ducks for hunting in South Carolina or
Arkansas, because migratory patterns have changed--I mean, you
run the list. All of the feedback is coming back faster, ice
melting, et cetera, et cetera, et cetera. Question marks about
oceans currents' impact on climate, all of these things.
So, here you are, you've got the science, and those same
scientists are telling us, ``You've got a 10-year window,'' to
get on the track where you're able to get the 3.2 reduction you
need going out to 2050, or if you don't get 3.2 percent, you're
going to have to get a much higher percentage faster in out-
years.
To know whether or not we can capture or have capture
online by 2020 or sometime seems unacceptable when measured
against the 10-year window. Can you speak to that? Let me throw
one other ingredient out there. Back when we negotiated the
Clean Air Act in 1990, I was part of those negotiations and we
were working to put the SO2, acid rain provisions
in. The industry came in, and everybody said, ``Oh, we can't do
this, it's going to take us 10 years, it's going to cost eight
billion bucks, don't make us do it, you'll kill the industry.''
The environmental community said, ``No, no, no, it's not going
to take 8 years, it's going to take 4 years, it'll cost about
$4 billion, and we must do it, we can afford it.''
To the credit of George Herbert Walker Bush, Bill Reilly,
and John Sununu, we did it. They bought the science, they said,
``We have to do it.'' Guess what? It took half the time that
the environmental community thought it would, and half the
money. Why? Because nobody was capable of predicting what
happens once you make the Federal commitment, once you create
the standard, once you have moved all of these industries
toward a now-existing marketplace. And nobody is able to
predict the rapidity with which the technology then takes over
and provides you with something.
Aren't we in that kind of situation here, folks? Where
we've got to put up whatever we think it takes for those
demonstration projects, for the tax credit, for the science,
and guarantee we're setting a goal, and we've got to get this
done within 10 years. I'd like everybody to comment.
Mr. Chaisson. Certainly. I mean, I think that from our
perspective, the issue here is, how do you transition from
where we are today, to where you need to be in 2020? And I
guess, our view would be that you need a suite of policies, no
one policy will do it.
On a national scale, requiring that all new coal plants
have carbon capture and sequestration wherever they might be
located, and having the knowledge to do nationwide geologic
sequestration is probably something that's going to take 10
years--perhaps 2018.
There has been a lot of expert testimony presented in the
Energy Committee or whatever, about the geologic demonstration
projects. In the short-term, you have a lot of companies like
BP and others, I'm sure several of the folks pursuing IGCC
projects today would be perfectly happy to do carbon capture
early, in carefully selected situations, with financial
incentives to, to support the cost of doing that. Given the
recent run-up in energy project costs, we're going to need to
see CO2 allowance prices somewhere in the $40 a ton
range to actually offset the cost of adding carbon capture and
storage, so the third piece we need is an effective carbon cap
and trade system, but it's going to take awhile for that to
ramp up to $40.
So, from our view, the complementary policies would be,
first of all, financial incentives for the companies willing to
move right now--and I think we'd find that many would be
willing to move right now--that would cover the cost of carbon
capture and storage between their plants starting up, and us
eventually getting to, say, $40 a ton of CO2 with a
cap and trade system.
A second piece would be something along the lines of your
proposed legislation, Senator Kerry--an absolute date by which
all new coal plants will simply have to have carbon capture and
storage--that puts people on notice today, their behavior will
change based on that, and that will be a date certain, rather
than a questionable date as to when, when we might reach $40 a
ton. But behind all that, I think the foundation is, an
effective carbon cap and trade system, which will eventually
drive prices sufficient to offset any need for financial
support.
Senator Kerry. Anybody else?
Mr. Denis. Certainly, Senator.
Certainly, like yourself, I wish we could have this
tomorrow, and not 10 years from now. But, I believe that we do
have to be realistic in the timeframe that it takes to
develop--not only the technology, but to be able to establish
the framework under which we can store the carbon that is going
to be sequestered.
I have to observe that, really, the focus really should be
on the development of technology--whether it's 1 year, 2 years,
10 years or twelve years. You know, yesterday, the DOE even
said it was 2045, which I believe it's a date that's
unacceptable to everybody. Nevertheless, the development of
technology really needs to move forward. And the reason I say--
--
Senator Kerry. What if we can't capture it? What if we
can't store it? What if you can't find a sufficient storage
capacity, it leaks, or it's just too costly or geologically
problematic?
Mr. Denis. That is problematical, and that is a quandary
that we have. However, I do believe that current research has
it that there can be found some geological structures where the
carbon, the CO2 can be stored.
It is not in all parts of the country. There are some parts
of the country that are unsuitable for this, so we need to talk
about infrastructure that may be needed to transport such
CO2 to those areas that are geologically safe.
Senator Kerry. Obviously we can't store it in some places,
because we're using it now to push fuel. We actually tap into
naturally produced CO2 in order to improve our
capture of oil out of old wells and things, so I assume, I
don't know what the amount is, but I know there's a sufficient
capacity.
Mr. Denis. And we have to deal with the liability loss
associated with such capture, and Congress needs to address
that, also.
But, one of the reasons I say we really need to address the
technology is, because the focus, and our discussion centers
around coal. But we really can't overlook the fact that a
modern gas plant produces 50 percent of the carbon dioxide that
a coal plant does. So, the problem is wider than just coal, the
problem is carbon dioxide. So, the technology that gets
developed for coal, hopefully is some technology that's also
applicable to some of the gas generation that exists, because
even if we replace all the coal units with, or do away with
coal units, and have just gas units, we will still have half of
the problem, and that half of the problem is still a large
problem.
Senator Kerry. Senator Boxer's asked for some time, and I
have no problem with that, I can come back.
Senator Boxer. I don't have to leave until eleven.
Senator Kerry. No, that's OK, I'll let you do it now, and
I'll come back afterwards and follow up, make sure we do.
So, Senator Boxer?
Senator Boxer. Mr. Chairman, thank you so much, I wish I
could stay all morning, but I have another Committee I need to
go to.
Again, Senator Kerry, thank you for doing this.
I don't know if you share my view, but Mr. Denis, you said
that you don't believe we'll have the ability to capture and
sequester carbon till at least 2020, that was your initial----
Mr. Denis. That, we will have the viable commercial means
to do so in a large scale.
Senator Boxer. OK, but you said at least 2020.
Mr. Denis. Yes, ma'am.
Senator Boxer. Now, I just have to say to my Chairman,
that's 3 years after scientists tell us we've reached a tipping
point. So, just speaking for myself, I can't speak for anybody
else, we need a better attitude about this. It's just not
realistic. I mean, really.
And I don't, in any way want to minimize what we're facing.
We've done a lot in this country when we've put our mind to it.
I want to see what it is you think we can do as policymakers to
help.
And, I guess I'll ask Mr. Wilson, since he's out there now,
already, putting out some technologies that are helpful. Do you
think we need a Manhattan-like Project? To do more model
projects, to help us find the way here? Because I don't see how
we wait until at least--at least--2020.
Mr. Wilson. Clearly, a more intensive effort would be
highly valuable in terms of demonstrating these technologies at
the commercial scale.
Here is the challenge we face. All of these plants, are
basically massive in scale; they take years to build and years
to prove out their operational efficiency and their
performance. At the same time, these facilities must
demonstrate economic viability within the regulatory climates,
(i.e., a guaranteed rate of return), along with all of the
other elements associated with business investments. Without
significant Federal guarantees, in many cases, these projects
will not move ahead. If you're talking about a Manhattan-type
Project, then we have to have a Manhattan-type Project, not a
business as usual scenario which is how most of these plants
have to operate today.
Senator Boxer. Would you support a Manhattan-like Project
in this area?
Mr. Wilson. Of course, we would support--I mean, we're a
technology provider, and we will provide to any, any need that
was identified in terms of what our customers want.
Senator Boxer. Mr. Rencheck, you were a bit more optimistic
than Mr. Denis, I think, trying to find some out here, because
in your statement you said, ``Over the last 100 years, AEP has
been an industry leader in developing and deploying new
projects.'' You said that you have a Memorandum of
Understanding for post-carbon capture using Alstom's chilled
ammonia system, it will be installed at your 1,300 megawatt
plant in New Haven, West Virginia as a ``commercial performance
verification project in mid- to late-2008, it will capture up
to 100,000 metric tons of carbon dioxide.'' Once the
CO2 is captured, you'll store it. So, you hope to do
that by 2008.
Mr. Rencheck. Yes, ma'am.
Senator Boxer. So, are you a little bit more optimistic
than is Mr. Denis on future of the sequestration issue?
Mr. Rencheck. We believe technology is the answer, and AEP
is pushing technology on several fronts, we talk about an IGCC
plant being constructed, new, more efficient coal plants, being
the ultra supercritical coal plant, the oxy-coal plant for
combustion, and we also are looking at back-end retrofit
technologies, like carbon capture and sequestration using the
chilled ammonia process.
Senator Boxer. So, are you more optimistic than is Mr.
Denis, that we could solve this before 2020? He said at least,
at the earliest 2020.
Mr. Rencheck. We are working to solve it very quickly.
Senator Boxer. Good, good.
Mr. Rencheck. Technology will evolve, and in R&D efforts,
sometimes you take a few steps forward, and it stalls, and you
have to take a few steps back. So, we are working to make that
reality at AEP----
Senator Boxer. Could you use more incentives?
Mr. Rencheck. We definitely need incentives from the
Government. We could use additional investments up to $1
billion a year in the R&D program for DOE. We could use
investments in areas for understanding geological
sequestration.
At our Mountaineer Facility, for example, in 2004, we have
drilled a well, a 9,200-foot well, where we have studied the
geological structure underneath the plant, looking for saline
aquifers that could store carbon. We've done that with the DOE
and Battelle, and we believe we've identified porosity of the
geological structure that would enable carbon capture to take
place there. We want to test that out with these projects.
We're going to need help, we're going to need additional
funding to study that.
Senator Boxer. Well, I appreciate your work, your attitude,
it's very helpful. I have one last question if I might?
Senator Kerry. Yes, absolutely.
Senator Boxer. And then I'll leave.
Mr. Wilson, you say that you are working every day, your
company is, to get cleaner coal going, and you have success.
I'm trying to understand where we are right now, with the
technologies you're using. So, you say you have cleaner coal,
does this mean, you're not only dealing with carbon, but
NOX, SOX and mercury, as well?
Mr. Wilson. We're dealing predominantly with
NOX, SOX and mercury, because we--all of
the technologies we have, basically, are capture technologies,
filtration technologies, which are able to clean all of the
pollutants out of the exhaust stream to where you'd have--you
basically have no, negligible pollutants left.
Senator Boxer. OK.
Mr. Wilson. With respect to CO2, the only real
option available is to improve the overall efficiency of the
plant so that it uses less fuel, therefore produces less
kilowatts per unit output. The capture and sequestration
objective is clearly the issue that the whole panel was talking
about----
Senator Boxer. OK.
Mr. Wilson.--which does need additional work, and a lot of
additional work, to get----
Senator Boxer. So, you're not doing any of the work of
carbon capture?
Mr. Wilson. Not predominantly, not yet.
Senator Boxer. So, you're doing cleanup of NOX,
SOX and mercury, and not to minimize that, that's
absolutely crucial under the Clean Air Act, and it's important
to our families, but----
Mr. Chairman, I think what you've identified today is
really critical, here. And I think this panel is so
interesting, because you really do have, I believe, different
attitudes on how we can move forward.
I hope we can get bipartisan support to really move forward
on this. Because, without solving this problem, it's going to
create obstacles for us. I've learned a lot, and I thank you so
much for your leadership, and I'm sure we will be doing more of
this together. Thank you.
Senator Kerry. We will, indeed, thank you very, very much.
I'll let the others ask some questions, and then I'll come
back afterwards. Who was next? I think, yes, Senator Dorgan?
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much.
We have, in my State, lignite coal, something around 800
years worth of lignite coal reserves, and my guess is that we
are going to continue to use coal--the question isn't whether,
I mean, I don't think we have much choice--but the question is
how do we use it, and do we use it in a way--especially
combined with new technology, to make it much, much less
difficult for our environment.
In, I would say to the Chairman, we have--I believe--the
only coal gasification plant in the country, in North Dakota,
it produces synthetic natural gas from lignite coal. And the
production of synthetic natural gas from lignite coal is a--
it's using old technology, the plant was built about 25 years
ago, but it's an unbelievable plant, very productive, and we
take CO2 from that plant, put it in a pipe in the
world's--I believe--the world's largest application of
CO2 sequestration. We put it in a pipe, and move it
to the oil fields of Alberta, Canada, invest it in the ground,
to make more productive marginal oil wells in Canada. So, you
have beneficial use of CO2, even as you sequester.
Now, that obviously is not a solution for all of that which
we have to deal with, but it's a demonstration that there are
some things you can do that make some sense.
I'd just like to ask a couple of questions, because I--I
think we're going to use coal. The question is, can we--in a
robust way--invest in technology to get to the point where we
have zero emissions coal-fired electric generating plants? Do
we do it by capturing and storing CO2? Or do we do
it by, hopefully, with some technology that is an avoidance
technology, with the production of CO2? I don't know
what the technology will give us.
But, here's the situation, what I want to ask you about.
The President and the Administration says, ``Let's go with
FutureGen,'' big old project, really a big project. In fact, in
Fiscal Year 2008, the Fossil Energy and Coal Request is $426
million, by the President, that's a $1 million increased over
the previous year. So, essentially, flat funding for fossil
energy and coal--which is mostly research. And flat funding for
that at a time--it seems to me--when we ought to be saying,
``Wait a second, we can't hardly run fast enough to catch up to
this, we need to be really aggressive.'' Flat funding for that,
and then we have $108 million for FutureGen, which is 20--fully
25 percent of that which we're going to put into fossil energy
and coal research.
So, tell me your thoughts on that, is that what we ought to
be doing? Or, is that kind of a slow motion approach to finding
our top speed, using technology to address these questions?
Yes, sir?
Mr. Chaisson. Senator, a couple of responses. First all, on
the DOE program funding, I think the MIT report does a pretty
good job of reviewing that, and I think--for all practical
purposes--they're talking about something like $1 billion a
year being, sort of minimum. And I think both Professors
Deutsch and Moniz testified, or have stated that, when they
both have been at DOE, running those programs, you know, many
years ago, at least Professor Deutsch, in those-year dollars,
the program was actually larger than that. So, it's just sort
of getting it back to what it used to be.
I think, in addition, as far as near-term carbon capture,
whether it be in North Dakota, or Indiana, we're going to--it
costs two and a half cents a kilowatt hour to add carbon
capture to a plant today. And, as I said, you're going to have
to get to $40 a ton of CO2 before you offset that. I
think there are a lot of companies--not every company--but
there are many companies that would do this today, if there was
some way to bridge that financial gap between having to add two
and a half cents cost today with no ability to offset those
costs, and some future point in time where that would be
offset, because of the CO2 benefits.
Senator Dorgan. But, the implication of your answer is that
the technology is there, it's just a matter of cost. I don't
think that's the case. I mean, it's true, we can capture in
certain areas, but capture and storage--it seems to me--
requires much, much, much more technology. And, the pursuit of
that technology is going to require substantially new
investment. And, it looks to me like the President's budget is,
perhaps, less than half of what is necessary, with no increase
from the previous year, which suggests that this is not a
priority. I think it's a huge priority.
Others? Yes, sir, Mr. Rencheck?
Mr. Rencheck. We need additional support in funding, I
recommend approximately a billion dollar a year, consistent
with the MIT folks. And, we also support FutureGen, and we
think it's important for the further development of the IGCC
technology. We are working now, off of a platform technology to
go commercial that was developed in the early eighties, to mid-
nineties, we'll take that to a commercial scale with today's
present technology and prove it in operation, but then
FutureGen takes it to the next step, where it will, truly,
involve the invention of new technology, such as a hydrogen
combustion turbine that will truly enable them to generate
electricity, separate out CO2, and capture.
We also need monies to study the geologies. As you know,
different areas of the country have different formations, and
at times, the formations aren't consistent within a region. So,
we have to drill more holes, understand more about the geology,
and start injection projects in those areas, so we can
understand how CO2 will behave in those rock
formations.
Senator Dorgan. Are any of you bullish on where we're
headed here? Are you bullish on technology?
Mr. Wilson. Yes.
Senator Dorgan. OK.
Mr. Wilson. Yes, I'm bullish on technology and I----
Senator Dorgan. Give me some encouragement, would you, Mr.
Wilson?
Mr. Wilson. Yes, the point I just wanted to make is we've
always been an advocate of higher funding, essentially, on the
development programs, we're a participant in virtually every
DOE program that comes out. And we provide our expertise,
essentially, into these programs. And we are very bullish that,
if we want to accomplish a greater goal, we certainly think we
can.
It's the political will that has to be behind it in order
for funding, and also for the demonstration project that my
compatriots all talk about. Is that their significant projects
have to be demonstrated, in order for them to be commercially
viable, and adopted wholesale.
So that, we believe, yes, indeed, I'm bullish, that the
technology is there. The question is, it has to be brought to
the scale that utility plants operate at.
Senator Dorgan. And I'm not suggesting, by the way--just to
finish this thought--I'm not suggesting that the demonstration
through FutureGen of IGCC is irrelevant, it is not. I'm not
suggesting it's not valuable, it is. What I am saying is that,
even as we do this, and claim a significantly larger part of
our budget, and our appropriations for FutureGen, we're not
seeing the ramp up of a country that says there's an urgent
need to deal with coal research, and the research on carbon
capture, so that we open up and unlock the opportunities to be
able to continue to use our coal. That's my, that's my problem
with this.
And so I, let me thank Senator Kerry, for leadership in
this area. I think all of us--Senator Thune, myself, and
others--all of us have to figure out that this is urgent. I
mean, this isn't something, this isn't like every other
problem.
If we're going to be able to continue to use these
resources in the future, given the intersection we've now come
to with respect to energy and climate change, if we're going to
continue to use these resources, we had better figure out that
these minds of ours--the fertile minds of, that exist here in
this country that have unlocked a lot of mysteries through
scientific inquiry and research, we can do the same with
technology in coal development.
But it requires significant investment. And it is not
coming in this budget. So, we have to be attentive--that's why
I think this hearing is very important.
I appreciate--I interrupted you, Mr. Chaisson, I'm sorry
for interrupting you----
Mr. Chaisson. That's fine.
Senator Dorgan.--but let me thank the Chairman for the
time, and I thank all of the witnesses for your presentations.
I was chairing another hearing so I, but I had read your
presentations, and I appreciate your contributions.
Senator Kerry. Senator Dorgan, thank you very much.
Couldn't, couldn't agree with you more. Part of the purpose of
this hearing and the others we're holding is to raise the level
of urgency about this.
And, as I said, you can't be half-pregnant on this thing.
Either you accept the science, and then you've got to, if
you're accepting the science for valid reasons, to act on it.
And, we're not. So, we have a huge challenge.
Let me establish something quickly before I turn to Senator
Thune.
Senator Dorgan spoke about the capture of CO2
that's taking place now, and the piping that takes on, and I
had mentioned earlier, we're able to pipe CO2
naturally out of the Earth, and we're using it also for
enhanced oil recovery, I guess it's called.
What's the restraint here, on the capture? You keep saying,
``Well, we're going to have to develop the ability to be able
to capture out of the IGCC,'' can you share with us, what do we
get out of IGCC, what's left to get, and why can't we get that
other piece yet?
Mr. Rencheck, go ahead.
Mr. Rencheck. Yes, on an IGCC plant, the fundamentals of
the way it works with the flue gas stream, when you shift the
gas reaction into hydrogen and CO2, you now have to
combust the hydrogen. That CO2 adds mass flow into
the gas turbine, so it's like adding horsepower into a car
engine--when you remove that, you generate much less
electricity, and then you have to supply energy for the
compression, to either put it into a pipeline, or to sequester.
We need to evolve that integration and those systems, so
that the electricity amount produced is contained and
maintained, and not degraded.
Senator Kerry. But that's the challenge, but not the actual
capture of the carbon itself?
Mr. Rencheck. On IGCC, it is ahead of pulverized coal units
in that area. If you looked at the two technologies, PC
combustion is further advanced than IGCC, there's a lot to
learn. In the capture piece, I would put IGCC ahead than
pulverized coal, but the technology race is on for the two to
see which one will ultimately be the winner. And, we believe
that both, both have a place, and both have a role.
Senator Kerry. But the key is not to degrade the power that
you get out of it in the process?
Mr. Rencheck. That's correct.
Senator Kerry. OK.
Mr. Rencheck. You can see power prices as an example, using
today's state-of-the-art technology----
Senator Kerry. Because if you degrade it, then you've got
to replace it. And then the question is cost for what you're
providing.
Mr. Rencheck. Fifty dollars a megawatt would go to $113 a
megawatt, is an example on a pulverized coal unit----
Senator Kerry. I understand.
Mr. Rencheck.--in that range.
Senator Kerry. What about on the sequestration, if you
could all, somebody else raised their hand, but you wanted to
add something?
Dr. McRae. Just on the issue of technology, just to follow
up on the comments that were made by Senator Dorgan--coming
from MIT, I'm clearly very bullish on technology.
One of the key themes in the MIT Coal Study is a sense of
urgency, to really move very, very quickly. And, I think our
time scales are somewhat shorter, to get the information that
you need to solve this problem.
I think that the discussion about capture, sequestration
illustrates how people have thought about it in the past. We
have to think about it as a system--all the way from the
beginning of mining the coal, all the way through to the
sequestration.
If you think about how we've dealt with conventional
pollutants, like sulfur oxides, and nitrogen oxides, we took,
basically, conventional combustion processes, and then added to
them control technologies to remove those pollutants. If you,
sort of, think about the CO2 capture problem in a
slightly different way, there are some very, very interesting
technologies coming along that could potentially cut the cost
of both the capture--but without compromising the thermal
efficiency of the plant.
For example, if you burnt the coal at pressure, with
oxygen, you--it's much easier to take the carbon dioxide out of
the gas stream, and you've already got a compressed gas stream
which is partially ready for injection into the reservoir. And
so our view is that, while FutureGen is focused on IGCC, it
should not be to the exclusion of very different ways of
thinking about the problem.
I mean, I'm very optimistic about the opportunities--you
know, a lot of the technologies that we've been talking about
are 50 years old. There's not a lot of investment that has been
built into how to capture CO2 out of a gas stream. I
mean, we're still using technology that's 50 years old. The
problem is to turn it around--what molecule should you have to
design to take the CO2 out of the gas stream? You
know, pose it that way.
So, our view is that if you step back a little bit from the
problem, think of it as a systems perspective, it opens up a
whole bunch of different ways of thinking about the problem.
So, I think--two points. One, is that I think we have
technology to deal with the problem today, at cost. I think
there are lots of opportunities for dramatically lowering those
costs, costs over time.
The other issue is the issue of scale. In the United
States, there's very little activity that addresses this
problem at scale. To be able to monitor it, to make sure that
it actually stays in the ground----
Senator Kerry. That's the 10 demo projects, so to speak,
that we----
Dr. McRae. Most of the interesting work that's going on is
out of--outside of the United States. All of the big
sequestration experiments are being done in Algeria, they're
being done in the North Sea, they're being done in Canada, and
I just had a workshop over the last couple of days at MIT,
where we brought together all of the people that are doing the
sequestration experiments from around the world, and one of the
key themes that kept coming up over, and over, and over again,
was the need to do these at scale, and the need to develop a
monitoring program so that you could assure the public that the
stuff is going to stay in the ground, where you put it.
Senator Kerry. Great.
Dr. McRae. And our view is that you can do that in less
than 10 years.
Senator Kerry. Well, I'm going to come back to this,
because I want to pursue it, I just don't want to cut in on
Senator Thune, so let me go to Senator Thune, and then we'll
come back.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Mr. Chairman. I want to express
my appreciation for you holding this hearing on what is a very
important topic, clean coal technologies, and the important
role that coal can play in securing our energy independence.
And, as I know everybody on this Committee is probably aware,
that we have an abundant supply of coal, in fact, coal-fired
plants supply 22 percent of our U.S. energy demand, and over 50
percent of the energy used by the electric power sector. And,
it is projected the U.S. has a 250-year domestic supply of
coal.
As the witnesses have testified, I think we are on the
horizon of an exciting new generation of coal power, IGCC, and
other advanced clean coal technologies are very much in their
infancy stages, but considering the potential for carbon
capture and sequestration, coal could provide a clean and
reliable source of energy for generations to come.
So, I too, appreciate the testimony that we've heard this
morning, and your thoughts about where this is headed, and I am
interested in knowing, as well, what we can do to facilitate
the things that will get us to where we need to be, sooner
rather than later.
And I think the next step is to continue investing in these
technologies, so that IGCC can be implemented on a wide-scale,
and that's going to require significant investment, research
and development. So, we welcome your input and suggestions
about how to do that and what we ought to be doing here to
support the efforts that are underway.
Let me, if I could, pose a couple of quick questions.
Mr. Denis, in your testimony, you state that Sierra
Pacific's Ely Energy Center, which is a four-unit coal-powered
complex, totaling 2,500 megawatts in eastern Nevada, will pave
the way for additional renewable energy sources in eastern
Nevada. I'd be interested to know what is the relationship
between coal facilities and future development of renewable
energy projects, such as wind power? And how much of the new
transmission capacity could be available for other types of
energy, and energy generation, such as wind?
Mr. Denis. Certainly. Certainly, Senator.
The relationship between the Ely Energy Center and the
additional development of renewables is, the Center is being
built in a very sparsely populated portion of our State.
Essentially, there are no transmission facilities, there are no
wires, but yet, there's a lot of wind. So, you can put up all
the windmills you want, but there's nowhere for the electricity
to go.
This $600 million transmission line is just economically
unfeasible to build just for several hundred megawatts of wind
and resources that exist in the area. We've identified up to
about 500 megawatts of proposals from wind farms that are in
the area that could develop, and could use this transmission
line, then, to get the power to the market, primarily to the
Las Vegas region. This is 250 miles north of Las Vegas, is
where this plant is.
So, without the ability of the Ely Energy Center being
there, and economically justifying the construction of this
facility, we basically have some locked-in geotherm--wind
resources.
In addition, the northern part of the state of Nevada, as
it's closer to California, is really blessed with geothermal
resources. We're the leaders in geothermal production. Yet,
there's going to be more geothermal energy than there are
people to consume the electricity. We need to get that
electricity to the South, where the big load centers are.
So, we have now, a combination where we have a marriage
where this coal unit is a catalyst to provide for additional,
and fostering additional development of renewable energy. So,
that's the nexus that exists between the two.
Senator Thune. Well, we've got the same problem in South
Dakota, a lot of wide-open space, a lot of wind--in fact, I saw
a study the other day that South Dakota could provide 52
percent of the entire electrical demand in this country, just
from the wind we generate in our State alone. But, we have the
same problem--we're not close to population centers, and
transmission is prohibitively expensive.
And, so, I was interested in what you're doing there, in
leveraging with an investment in another facility, but being
able to use that capacity for renewables. We also have a lot of
wide-open space, and, wind turbines. Things that in some parts
of the country, people don't want to have in their back yard,
are things that my state would welcome.
South Dakota, obviously, is close to Western sub-bituminous
coal from Wyoming and Montana--you mentioned how it's more
economical to use Eastern bituminous coal--do you know of any
research that's taking place in either the public or private
sector, working to make Western sub-bituminous coal more
economical for IGCC? And in your view, would such research
warrant a Federal investment?
Mr. Denis. Well the--the issue of sub-bituminous coal, the
studies that have been performed, particularly by Electric
Power Research Institute is that when you add the carbon--the
estimated costs of the carbon capture systems, and you're
talking about IGCC with Western Powder River Basin coal, sub-
bituminous coal, that the economics are that it is less costly
to add the carbon capture to a supercritical coal unit.
The answer here, I think, the takeaway from that--in other
words, IGCC is more costly with Western coals, with carbon
capture than it is on Eastern bituminous coal without--with
carbon capture, relative to a supercritical coal.
I think the takeaway from this is that there is no silver
bullet with regards to what is the answer to the
CO2. We really must be investing in multiple
initiatives--not just in FutureGen, and not just in the
experiment that we are conducting with EPRI at Wisconsin
Energy, WE Energies, or the answer that AEP has for their Ohio
plant--we really must be looking, rather than placing the bet
on just a single technology, we must be looking across a series
of technologies at present, so that we're not disappointed in
the future that we picked the wrong technology going forward.
Senator Thune. Well----
Mr. Denis. I'm not sure if I answered your question, but--
--
Senator Thune. I think you did, I was just, specifically
homing in on Eastern sub-bituminous, versus Western.
Mr. Chaisson?
Mr. Chaisson. Senator Thune, I guess I'd like to sort of
add a slightly different perspective. The EPRI work has been
based solely on the Shell gasifier, which is the sort of, best
gasifier for low-ranked coals, of sort of the traditional
gasifiers.
There are two new gasifiers that are probably going to be
excellent for low-ranked coals, the new Siemens gasifier, and
Mitsubishi's gasifier, which simply are too new to have been
incorporated in these studies. And, I know NRG--a large
independent power developer that's very active in Texas--is
been very bullish on using the Mitsubishi gasifier on Texas
lignite coals.
So, I think the availability of gasification for low-ranked
coals is probably a more complicated picture than has been
presented by some of these earlier studies.
Senator Thune. OK.
Mr. Rencheck. I would concur. The issue with the Western
coal being less efficient is with the moisture in the coal. In
the gasifier, you're required to dry the coal before you can
partially combust it within the gasifier. That drying takes
energy, which makes it less efficient than a pulverized coal
plant.
Those processes, for example, we've signed a Memorandum of
Cooperation with Siemens to help develop that technology, but
those processes need funding for development, and with the
proper funding, would advance over time.
Senator Thune. I, yes, Mr. Denis?
Mr. Denis. Just to add to my prior statement that there's
no silver bullet, and we really must look at a menu of
technologies to prove out which one works best--in the sense
that there's no one-size-fits-all, there should not be a one-
size-fits-all attitude.
Also, the--in my opening statements, one of the issues that
we have in the West is also the altitude. Our Ely site is at
6,200 feet of altitude, and yet, there is to be proven whether
some of the technologies, in particular, IGCC, how they perform
at those higher levels where the air is less dense.
That's not to say it's not a good technology, in fact our
company was one of the few companies that participated in the
DOE Clean Coal Program of the 1990s, we built an IGCC. It never
worked. It sits idle, and it was abandoned, ultimately.
Senator Kerry. Who built it?
Mr. Denis. It was a combination, I believe, it was a Kellog
gasifier----
Senator Kerry. When was it built?
Mr. Denis. I'm sorry?
Senator Kerry. When was it built?
Mr. Denis. It was built, it was started in--the
negotiations with DOE started in 1991, it started construction
in 1995, was completed in 2001.
Senator Kerry. And why did it not work?
Mr. Denis. It was first of a kind technology. We were
experimenting--this was when DOE and their Clean Coal Program
of the 1990s was experimenting with different IGCCs to
determine which technologies worked. We eventually abandoned
the facility, it sits outside of Reno, idle. The consumers of
the State and the Federal taxpayers lost $335 million on that.
But, it taught us some important lessons in the need to
move forward----
Senator Kerry. Is it not retrofit? Is it not retrofittable
to the technology that General Electric or Siemens, or others
have developed?
Mr. Denis. No, it's not. It'd be more--it'd be less costly
to, probably, start from scratch than to try and modify what is
there.
Senator Thune. Well, I thank you--those aren't exactly the
answers I wanted to hear, Mr. Chairman, but I appreciate them,
nonetheless. So, thank you for your input.
Senator Kerry. Well, don't go away for a minute, because I
want to explore something that may be of interest to you.
The difficulty that Senator Thune mentioned with respect to
the wind power that could be produced is the transmission. And,
I know that, there's an issue always about the length, the
distance from the wind turbine to the grid, but I assume
transformers can have a profound impact on that, correct? If
you can come into--sorry, go ahead, Mr. Rencheck?
Mr. Rencheck. It's, it really is the voltage level of the
transmission lines. AEP is proposing across our system, and in
other places, to construct a 765 kV line, 765 kilovolt that
would be able to transport power more efficiently.
Part of the discussion around CO2 is also the
efficiency of energy transmission. Those high-voltage lines are
very difficult to get permitted, as we all know. In West
Virginia, we permitted an extension that took us upwards of
what, 12 years?
Mr. Kavanagh. Sixteen.
Mr. Rencheck. Sixteen years to get permitted. So, that can
have a very, very large effect on being able to move power
across the Country.
Senator Kerry. We obviously don't have 16 years to fool
around with, here. But, that's why I think we ought to consider
thinking out of the box a little bit, and thinking, as you've
said, sort of systemically, and differently.
But, with respect to that, you know, the 1930s, when
electricity first came around, Roosevelt decided that it was
important to get this out to the whole Country. And so, the
Government invested in making certain that within a certain
period of time, every home was going to be wired. Now, I don't
think this is unlike that.
If South Dakota has the ability to be able to provide 52
percent of the electricity, and we're looking at this emissions
challenge we have over these next years, what is the value of
our investing in that line, and providing an ability for them
to do it, and you joint venture this with the urgency that we
have to provide that.
Mr. Denis. Ultimately, it boils down to the cost of
electricity. If you look at the cost of that investment, plus
the cost of the electricity produced by the wind----
Senator Kerry. But, I'm not talking about this being
private sector-driven, I'm talking about the Federal Government
investing as we did in the TVA, and otherwise, in order to
provide the connection, and help make this happen at a cost
that then doesn't kill the consumer, and makes a return on
investment viable. Until you get going, until you get up and
running and you've pushed these other technologies. Is that
viable?
Mr. Wilson. Siemens provides transmission and distribution
products and services; essentially, this is one of our major
businesses, both in the U.S. and globally. And, your point is
well-taken; the U.S. is not a highly well-interconnected system
compared to Europe or other highly interconnected systems.
There's a great deal of value that could be gained by
increasing the transmission and distribution capacities of the
U.S., to basically balance the loads. This would enable us to
make use of the best most efficient plants and decrease the
emissions. It also would provide improved access for and wider
distribution of, of our renewable sources. This is another of
the key challenges that we're going to face.
Senator Kerry. Mr. Rencheck?
Mr. Rencheck. Yes, the 765 kV line is just that--it will
open up a highway for electric transmission. And you will find
private industry willing to invest in that, as well, with
Government funding, it could be expanded. The point will be in
the permitting process. If we wanted to expand those lines, we
couldn't wait 16 years to address that.
Senator Kerry. I agree. We have to have an expedited
process, we've got to put on in place. We've got to behave like
this is urgent. It is urgent, so we've got to behave that way.
And I think we've got to take a look at these kinds of options.
I'd be happy to work with you, Senator Thune, to see if
there's some way to go at that.
Dr. McRae. Senator?
Senator Kerry. Yes.
Dr. McRae. The issue about the infrastructure, which is,
you're touching on with power lines, is very, very important,
it's an often critically missing part of the debate. I mean,
we're dealing with, not just with transmission lines, for
moving electricity, we're also beginning to be looking at----
Senator Kerry. We're going to have to move carbon dioxide.
Dr. McRae.--carbon dioxide, and getting the regulatory
structures in place----
Senator Kerry. Right.
Dr. McRae.--to be able to do that, I think, is very
crucial.
Senator Kerry. I completely agree with you, I understand
that.
If that's the avenue we go down. Now, you know, if we push
the R&D, in 2004, I talked about putting $2 billion up front on
the table immediately for clean coal technology R&D. Because, I
think the minute you start to push this, who knows whether you
guys are going to come up with some other technology, or
someone at MIT, or Cal Tech, or Carnegie Mellon or somewhere,
is going to sit there and say, ``Hey, there may be a better way
to do this.'' Once the marketplace is beckoning, I'll bet you
there are 10 new Googles out there, waiting to be created----
Yes, go ahead.
Dr. McRae. Perhaps a small anecdote might illustrate this
point. I teach the Senior Design Course in Chemical Engineering
at MIT, and this semester we had 72 students who were
interested in how to burn coal in a clean way. We broke the
class up into 18 teams of four students, and each team was
assigned a different piece of the problem. And this is the
first time in my whole academic career, that after the class
finished, teams of students have come back to me and said, ``We
want to continue to working on this project, because we've got
this neat new idea for how to capture CO2,'' or a
neat new idea to think about how to build a fertilizer market.
I think--two things here. One is, that there's a group of
very talented young people who want to work on this problem,
but more importantly, by thinking out of the box, they can come
up with many different ideas about how to tackle the problem.
I mean, just one example, just following up on your
discussion about Wyoming, if you think about it as a systems
problem, you can--in addition to taking CO2 and
putting it in the ground, you can also use it as a basis for a
C1 chemical industry. And, if you have electricity, but you
can't move it, you can make hydrogen, if you had the
CO2, then you can make methanol, you've got a
transportation fuel. That's--you'd have to work through this in
a lot more detail.
But the idea here is that we need, in my view, to start to
think about this problem much more broadly than just pure
generation of power, because I think that opens up a very
different way of thinking about the technology. And it's what I
see when I look at all of these technologies, is a crucial
thing about beginning to think about them in a life cycle
sense.
You hear a lot about, for example, solid photovoltaic cells
as clean power sources. But what's often missing is the debate
that you probably have to run them for at least 3 years before
you get more power out than was used to actually produce it in
the first place, and there are all kinds of other environmental
impacts associated with the production of silicone.
So, I think, in addition to sort of thinking about
infrastructure issues, I think we need to couple that with sort
of a life cycle view of what these technologies might be,
because, on the surface, some of them look very good. But, when
you look at the co-effects of them, you often get a very
different picture.
Senator Kerry. Yes, Mr. Denis?
Mr. Denis. Mr. Chairman, I think you've touched on
something that is very important, and this is that the--if we,
as we agree in the science, there has to be a comprehensive
solution, the solution is not only the carbon capture and
sequestration. We really must focus on the development of
renewables, we must focus on the conservation of energy. I know
you have a proposal in a bill to make the Capitol carbon-
neutral, I observe that we don't have compact fluorescent
lights in this room. Things that we could be doing to reduce
our energy use in this Country, that really have the effect of
reducing the carbon dioxide.
So, it's not a simple answer, it--I think it's a portfolio
of initiatives that we need--really need to pursue to solve
this quandary, this problem that we have in front of us.
Senator Kerry. Oh, I couldn't agree more. That's why I
introduced the bill. We can't talk about this with legitimacy,
if we don't take steps here in the Capitol and elsewhere to
become carbon neutral and energy efficient.
The book that my wife and I have just written has a chapter
about energy efficiency and the three biggies, clean coal being
one of them.
I mean, there are only three ways we're going to grab this
thing fast enough. And one is clean coal technology, two is
alternative and renewables, and three is energy efficiency. You
can do your other things at the margins, but those are the big
three. And the energy efficiency piece happens to be the
cheapest, fastest, most efficient and effective way of grabbing
it fast. And a lot of companies have understood that.
You know Texas Instruments built a new plant down in Texas
that saved 88,000 jobs. It's going to provide $14 billion to
the economy over its lifetime, and they're burning 25 percent
more effective on their energy use, 35 percent less water, I
mean, these are the things we can do all over the country,
we've got to, and there's a lot of money to be made,
incidentally, in the companies that wind up doing these things,
it'll be more effective.
Let me come back, if I can, for the clean coal piece of
this for a second, I just want to make sure my own
understanding, as well as the record, is complete on it.
The IGCC, Integrated Gasification Combined Cycle, in
layman's terms, can you just tell people what that does, how it
does it?
Mr. Rencheck?
Mr. Rencheck. It partially combusts coal to produce a
syngas, synthetic gas, and that synthetic gas has sulfur,
methane in it. You clean out the sulfur, and what you
essentially do, then, is combust the gas, it's a clean gas at
that point.
Senator Kerry. And it requires no flue component at that
point?
Mr. Rencheck. You get an exhaust emission out of the HRSG
of basically the combined cycle plant, the heat regenerative,
heat exchanger. You get the combustion flue from the gas
turbines.
Senator Kerry. And how complicated is it to attach the
carbon capture to that?
Mr. Rencheck. It would require, basically, a new type of
combustion turbine that would burn hydrogen. And that is one of
the emphases of FutureGen to develop. The DOE is also working
on that, both with Siemens and General Electric, but you would,
essentially, at that point, move the gas stream from a methane-
based type gas stream to a higher, if not purer, hydrogen-based
gas stream. And its combustion profiles are a lot different
than with the syngas. And, to understand that, and be able to
get the delivered horsepower from that engine so that you could
maintain electrical output is what the quest is all about.
Senator Kerry. But, prototype-wise, the basics work, the
key now is to take it to scale.
Mr. Rencheck. For the conventional combined cycle, that's
correct. For the hydrogen turbine--it's still in the
laboratory.
Senator Kerry. What--sorry.
Mr. Wilson. Siemens is actually heavily involved, in the
DOE programs for development of hydrogen fuel combustion. And
your point is well-taken in terms of, it's a different
combustion phenomena, it's a much hotter flame, and thus a,
higher performance standard is required of the gas turbine. So,
we're working in order to make the turbine parts more robust,
to be able to maintain the turbine and maintain the cooling
technology, so they don't degrade quickly.
So, the hydrogen turbine, the next step in advancement, in
terms of gas turbine technologies. Gas turbines originally
operated very very inefficiently and at very low temperature.
They're now very efficient, very high temperature with methane-
type gasses. The next step in turbine technology is the
hydrogen capable gas turbine and Siemens is heavily involved in
the development of this technology.
Senator Kerry. And, is that the key to the carbon capture
itself?
Mr. Wilson. Yes.
Senator Kerry. Now, what kind of a threat is thermal solar?
Solar thermal?
Mr. Wilson. Threat, it's actually a very promising
technology.
Senator Kerry. But if you can do solar thermal, and drive a
steam turbine as a consequence of that and produce electricity,
what does that say to the coal industry in the long-term?
Mr. Wilson. Well,--we actually are suppliers of steam
turbines for virtually almost all of the solar-thermal plants
in the world. Siemens has a steam turbine that actually is
well-suited for solar industry application.
The challenge is, it's a fraction of a percent of the
contribution of thermal electricity to the overall electrical
demand. The scale of these projects is relatively small. These
are all multi-megawatt plants, compared to the utility-scale
project, which is 500, 1,000, 2,500 megawatts.
Senator Kerry. Yes, but isn't that, because they're new and
they are sort of coming online, can't they be taken to scale?
Mr. Denis. Mr. Chairman, if I may----
Senator Kerry. Yes.
Mr. Denis.--next month, we will put in El Dorado Valley,
just south of Las Vegas, into service, the largest solar
thermal facility built in the United States in the last 15
years. It's a 64 megawatt facility, using the sun, the strong
sun that we have in southern Nevada, to generate the 64
megawatts of electricity. The--as you come into Las Vegas, if
you land, you will look to one side----
Senator Kerry. Well, you hope you land.
Mr. Denis.--you will see half a square mile covered with
mirrors.
Senator Kerry. Yes, I've seen that.
Mr. Denis. That will generate the 64 megawatts. We're very
excited about this. There are similar facilities that exist in
California that were built in the 1980s, late 1980s, but this
one is the first one built in the last 15 years. And we're very
excited about that, and it will provide----
Senator Kerry. Who built it?
Mr. Denis. The company that started--it has changed hands
several times, it was initially Duke Solar, then they sold it
to a company called Solargenics, which is now the majority of,
the Solargenics is owned by a Spanish company called Axiona.
Senator Kerry. Very interesting.
Mr. Denis. But it is a promising technology for the deserts
of the Southwest.
Senator Kerry. What other, besides the IGCC and this
current concept, the hydrogen separation, are there other
possibilities for clean coal?
Mr. Wilson. Clearly, there are.
Dr. McRae. There's actually quite a broad spectrum of
possibilities. One, for example, is to--instead of using air,
you use oxygen to burn the fuel, and if you use oxygen to burn
the fuel, then the primary combustion products are just water
and CO2, and that separation problem is much, much
easier than it is with the conventional technologies. The
downside is, that you actually then have to supply the oxygen.
But, what's interesting is that there has been a very slow
and measurable downward trend in the price of oxygen. So, oxy-
firing is a system that I think is a very interesting
alternative to IGCC. It also is an interesting possibility for
retrofitting. So, that's one technology.
Senator Kerry. How many viable, how many different
technologies, are being seriously explored at this point?
Dr. McRae. In our Coal Study we did an initial sieving, and
we had about, I think 10 or 20 of them, and then we brought
them down to four, which are the ones----
Senator Kerry. Right.
Dr. McRae.--which we think could be brought to bear very,
very quickly.
Senator Kerry. We're going to be doing an incentive bill,
in the Finance Committee, sometime in June. As we think about
those incentives, should we be narrowing it down to the four?
Or should we frame it in a way that allows people to make their
own choice within the 20, let's say, or more.
Dr. McRae. My sense is that you need to engage the
community with lots of different ideas about how to deal with
this problem. I think the history of sort of mandating
technology has not been very good. If you open it up to the
marketplace and provide the appropriate incentives to deliver,
then I think, in fact, you'll get very different and very
innovative ways of dealing with the technology. And there's
enough out there to suggest to me that there are real
possibilities, and real alternatives to IGCC.
We can use IGCC now, there are some problems with the
hydrogen turbines, and there are also some capture issues, but
I think they're relatively small time-scale problems to solve,
compared to bringing some of these other technologies. But they
are there.
And I think just to build on a point that Mr. Denis made is
that, what we need is a portfolio of approaches, so that we're
bringing on technologies that are evolving over time. And, more
importantly, that we put in place mechanisms to learn from
these technologies.
One of the, the big problems that we had in carrying out
the Coal Study, is that it's very difficult to extract the
lessons learned from some of these demonstration projects. And,
one of the things that I would argue, that if we do open this
process up, that, in fact, we pay attention to how we can more
efficiently learn about these technologies.
Mr. Chaisson mentioned about some of these gasifiers--it's
very difficult to get your hands on what the chemistry that is
going on inside those, what really is new and different. And my
sense is that this, this kind of information----
Senator Kerry. Why is it so difficult to get your hands
on--?
Dr. McRae. I think, in part, because it's, the way it's
viewed commercially, you know, they view it as a----
Senator Kerry. You mean, because it's proprietary.
Dr. McRae.--proprietary, yes.
Senator Kerry. So, people hold it close to the vest.
Dr. McRae. But, I think there are things after the
technologies being tried, if you're going to provide large
amounts of government support to invest in these technologies,
that you should, in fact, have the ability to----
Senator Kerry. Guarantee that there is some sort of review
capacity for methodology and so forth?
Mr. Denis. Mr. Chairman, I----
Senator Kerry. Well, that makes sense, yes, Mr. Rencheck?
I'm sorry, who--?
Mr. Denis. Mr. Chairman, I hope that in that June package
of incentives that you were talking about crafting, that you
don't forget the incentives for renewables. We believe that the
investment tax credit and the production tax credit, the
extension of those for at least 8 years is important to make
sure that we have continuity in the program.
Senator Kerry. Those will be, absolutely.
Mr. Denis. Also the, there's a disallowance, utilities
cannot avail themselves of those investment tax credits
presently, and the electric utility industry can be a key
catalyst in making sure that we bring this country, and that
we, in fact, bring a lot more renewables, which may do away
with a lot of coal plants, may do away with a lot of gas
plants.
Senator Kerry. Good advice.
Mr. Denis. Thank you.
Senator Kerry. And we will do that.
Mr. Rencheck, then Mr. Chaisson.
Mr. Rencheck. We are working with Babcock & Wilcox to pilot
an oxy-coal plant in Barberton, Ohio. It will be a 10 megawatt
electric demonstration plant, or scale plant, and from that,
we'll use that to study and learn, so that we can scale it up
to a commercial-size plant.
As we talk about funding, it is, it was imperative that we
were able to fund demonstration plants. It takes a lot to get
it from the drawing board to a commercial scale that we're
talking about that can be economically applied to the grid, and
hold down electric rates.
Senator Kerry. Understood, absolutely. I can see that.
Mr. Chaisson?
Mr. Chaisson. Just two points, Senator. One is, we would
certainly support having a very broad approach to incentives,
so that any potentially viable technology gets a shot at the
incentive funding. But, I would point out that our
organization's perspective is much broader than CO2,
and while we agree that there are a lot of promising options
for, for capturing CO2 from coal to electricity, the
processes, the other environmental aspects of those processes
may vary significantly.
And, at the moment, one reason why we are primarily only
supportive of coal gasification, is because of all of the other
environmental aspects. I think our view is that, in the long
run, for coal to be sustainable, it must deal with
CO2, but it ultimately has to deal with all of the
other environmental aspects. And those should not be forgotten.
Senator Kerry. I couldn't agree more. Obviously, as we go
down the road here, the marketplace is going to decide some of
this, but probably some public policy needs to look at, the
downstream water use, land use, and overall cost impacts.
Because, if you look at liquefied coal, for instance, I don't
know if anybody here is advocating it but, there's more and
more evidence that that is just a huge mistake. I know there's
some momentum here, by some, to sort of move in that direction,
but it's more energy exploitative in the end, more costly, and
threatens an even greater degree of CO2.
I think we have to think in the, again, the larger piece
here, of the consequences.
Is there anything with respect to the clean coal piece that
we should know, that you haven't had a chance to share with us
as we think about this? Yes.
Mr. Chaisson. I'd just make one final comment. I think we
see underground coal gasification as an extremely promising
technology, Lawrence Livermore lab is doing a lot of work in
that area, it's really not on the radar, except, perhaps the
Governor of Wyoming, who you might want to have come in and
talk about that--but that technology, if it proves out anything
like its promise appears, it may be a very cost-effective way
to use coal, with full capture of carbon, and at the same time,
to really minimize most of the adverse impacts of using coal.
And it's, it's just not in the studies, it's not kind of, on
the radar, but there's actually a surprising amount of
commercial activity moving forward in North America.
Senator Kerry. Well, that's terrific, thank you for calling
that to our attention, and we will dig into it, get a handle on
it, take a look at it, and understand it better.
Yes, Mr. Wilson?
Mr. Wilson. I just wanted to make one last point in terms
of, we're looking at a lot of promising technologies for the
next generation. We want to make sure that we address the fact
that we have a very large fleet out there now. Whatever options
you put in place need to also address the existing fleet, and
essentially incentivize industry to address that existing fleet
at the same time you invest in new projects. You've got to
level the playing field, and not necessarily grandfather
everything out there.
Senator Kerry. I couldn't agree more. I'm very opposed,
personally, to a lot of grandfathering, which is why I got
involved in TXU, and I think we have a serious issue there, and
obviously we've got a fight here on the new source performance
standards issued over the last few years which I think was just
a terrible mistake, and will be one of those big contributions
to the problem we have.
Yes, Dr. McRae?
Dr. McRae. Just one comment I would make, this morning was
spoken mostly about what's going on in the United States, but
we shouldn't lose sight of the fact that there's an enormous
amount of activity going on in Europe, and in China and I think
there's a crucial need to figure out how to----
Senator Kerry. Are we sharing any of that?
Mr. Wilson. I work in a global organization, and everything
we do is basically on a global basis.
Dr. McRae. But, my general sense is, that there is sharing,
individually, amongst companies, but there is an opportunity to
learn a lot from some of the technology demonstrations that
other--that are being done in other parts of the world. This
meeting that we had on Monday about sequestration, I think,
just getting all of these countries together to talk about how
to do it----
Senator Kerry. Who brought them together?
Dr. McRae. This was MIT and Chamboucher, excuse me.
Senator Kerry. That's a very good thought. We need to think
about how to augment the global effort. Previously, if I may
say, when Senator Worth was serving as the Policy Director at
the State Department, that position was essentially created to
empower us to be engaged in these kind of talks. Obviously, for
the last few years, given the Administration's attitude about
Kyoto, there has been zero exchange in that regard. I think
there's a very, you know, there's a huge pent-up demand for us
to get involved in that kind of a dialogue, and I think we
will, very shortly. Yes?
Mr. Rencheck. We sponsored an Asian-Pacific partnership
meeting, where we had members from India and China attend in
very large numbers. It went over quite well, in discussions of
energy efficiency, and also new generations of combustion and
IGCC plants. So that, that sharing of technology is starting to
occur.
There was recently a sponsored meeting in Japan that also
went along those lines.
Senator Kerry. I can't thank you enough. I think it's been
a very helpful, very interesting exchange, and we're all
learning up here, trying to get up to speed.
I don't think there's any disagreement about the urgency,
and it's interesting to hear you all accept that, readily
accept the challenge, and understand that if you had greater
resources, you believe you could move this thing an awful lot
faster. I have complete confidence in that, incidentally.
Again, referencing back to the Clean Air Act experience,
and the Clean Water Act experience of the 1970s, there is no
doubt in my mind that once we get a standard in place, create a
market, get this moving, American ingenuity--global ingenuity--
but American ingenuity will contribute significantly, and we
can get this done. But, we've got to treat it as the emergency
and urgent effort that it is.
Thank you for contributing to that dialogue and we will
certainly follow up with you.
I'm going to leave the record open for 2 weeks in the event
that any colleagues want to submit any questions in writing,
and the full text of all of your testimonies will be placed in
the record.
Thank you very much, we stand adjourned.
[Whereupon, at 11:54 a.m., the hearing was adjourned.]