1

BARRIERS & OPPORTUNITIES FOR

CLEAN COAL TECHNOLOGIES IN

INDIANAF.T. Sparrow

CCTR Director

INDIEC, Indiana Industrial Energy Consumers, Inc.Indianapolis

November 11, 2004

CCTR, Center for Coal Technology Research

PURDUE UNIVERSITYPotter Engineering Center, 500 Central Drive, Room

270West Lafayette, Indiana 47907

2

Q. Why The Rush to Clean Coal Technologies (CCT) in Indiana?

A. #1. National Reasons: Combination of high gas prices, expectation of tighter environmental rules regarding power plants are national drivers.

A. #2. Four Midwest Regional Drivers:(a) Regional need for new base load capacity (Indiana will need 2500MW in 8 years, 6000MW in 17 years).

(b) Two of three states in the Illinois Basin are still regulated, in their power to help reduce uncertainty by rate-basing investment, offer rate of return adders for CCT (SB 29).

3

(c) Illinois Basin Coals have several advantages over Powder River Basin Coals when used in gasifiers

Illinois Basin Coals: • Have higher heat content than Powder River Basin

coals (PRB) – delivered cost per ton similar but Illinois coals have lower cost per Btu.

• Provide significantly reduced transportation costs.• Possess higher chlorine content making it easier for zero

mercury emissions.

Illinois Basin coals have a high sulfur content – but this disadvantage is negated with IGCC technology

because of ease of sulfur removal in the gasification process.

Q. Why the Rush to CCT in Indiana? - continued

4

(d) Finally Indiana’s aging boilers and generators

offer an opportunity for repowering projects

– retrofit with gasifiers, or fluegas/oxygen

combustion (Edwardsport).

Q. Why the Rush to CCT in Indiana? - continued

5

CCTR Indiana Center for Coal Technology

Research• July 2002: The CCTR is established, Indiana Senate

Enrolled Act No. 29, July 2002.

• July 2003: House Enrolled Act No. 1166, creates CCTR Advisory Panel and provision for public education.

• June 2004: CCTR Advisory Panel appointed.

• August 18, 2004: First CCTR Workshop.

• Fall 2004/Spring 2005: Four Consultation Workshops are being planned.

6

What are the Surrounding States Doing?

Illinois• Coal Research Program – granted over $60 million in last

two decades, through Illinois Clean Coal Institute at SIU.• Coal Demonstration Program – state’s $120 million has

attracted over $200 million in federal funds, over $450 million in private and public cost-sharing.

Ohio• Coal Research Grant Program – through Ohio Coal

Development Office – almost $4 million to fund 19 projects in 2000.

• Ohio Coal Research Consortium – over $1 million/year at six universities.

7

What are the Surrounding States Doing?

Kentucky• Center for Applied Energy Research at University of

Kentucky – started in 1972 as Kentucky Coal Utilization Research Program.

• Total funding authorization was $50 million.• Governor’s current budget provides $4 million for coal-bed

methane production, $3 million for clean coal combustion.

8

COAL RESERVES IN THE U.S. AND INDIANA

• Current U.S. recoverable reserves are 498 billion tons, enough to last for over 450 years.

• Indiana recoverable reserves are 9.6 billion tons, enough to last for over 250 years (producing 35 million tons per year).

• Indiana has more energy underground in the form of coal reserves than the U.S. does in the form of oil and gas reserves.

9

• Indiana mines are part of the Interior Coal-Producing Region, Illinois Coal Basin.

• Economic impact: $675 million.

• Employment impact: >14 thousand people.

• Strong link: coal with low cost electricity.

• Coal is a significant contributor to the economy of the state.

INDIANA COAL FACTS - 2002

10

APPLIED R&D PROGRAMS FOR COAL

Helping to strengthen the economy of Indiana:

BY: Assisting in the development of strategic long-term coal related proposals

THROUGH: Appropriate policies, most cost effective new technology investments, reduced transportation costs, regional cooperation

WITH: Increases in Indiana’s coal production

WHILE: Having concern for health and environment

11

INDIANA COAL PRODUCTION

Production of 35 million tons of coal in 2002

Indiana coal has high heat content and high sulfur

content0

5

10

15

20

25

30

35

40

1985 1990 1995 2000 2005

Year

Mill

ion

Sh

ort

To

ns

78% of production is from surface mining. Is there a gradual return to underground mining? At present Indiana has highest percentage of surface mining in the Midwest (next highest is Ohio with 49%)

12

INDIANA COAL TRADING

Indiana is a major importer of coal

• Consumption 66 million tons in 2002• Imports 34 million tons• Exports 3 million tons

Where do coal imports come from and where do coal exports go to?

This network of trade flows needs to be understood for future planning.

13

INDIANA COAL TRADE FACTS AND RESPONSE

• Complex flow of coal supplies

• Indiana imports ½ of its total coal needs

• Wyoming is biggest supplier of out-of-state coal

• Majority of coal imports are for electricity generation

Strategy for import substitution?

Strategy for increase in exports?

Investment strategy for increased mineproduction?

Coal directly

Coal by wire

14

INDIANA COAL IMPORTS - 2002

Alabama: 540 Total540 Coke Rail

In state: 32,146 Total23,370 Electricity GenerationRail 9,311 River 502Conveyer 577 Truck 12,980

8,455 Industrial Plants Truck

321 Residential/Commercial Truck

Illinois: 5,935 Total5,839 Electricity GenerationRail 3,445 River 930 Truck 1,46496 Industrial PlantsRiver

Import

Import

Import

Import

Import

Colorado: 227 Total227 Industrial PlantsRail

Kentucky: 994 Total314 Electricity GenerationRail 178 Truck 13686 Coke PlantsRail 75 Truck 11594 Industrial PlantsRail 507 River 49 Truck 38

Import

Montana: 1,441 Total1,441 Electricity GenerationRail

Ohio: 124 Total105 Electricity GenerationRail 36 River 6 Truck 6320 Industrial Plants Truck

Pennsylvania: 429 Total419 Electricity GenerationRiver 350 Truck 68 (Bituminous)9 Residential/Commercial1 Industrial PlantsTruck (Anthracite) Both Res. & Ind.

Wyoming: 13,606 Total13,606 Electricity GenerationRail 7,189 River 6,417

State Totals: 48,643 Electricity Generation6,014 Coke Plants, 11,281 Industrial Plants, 331 Resid/Com

Source: http://www.eia.doe.gov/cneaf/coal/page/coaldistrib/d_in.html

Utah: 281 Total281 Industrial PlantsRail

West Virginia: 7,942 Total2,111 Electricity GenerationRail 1,114 River 968 Truck 284,634 Coke PlantsRail 4,163 River 420, Truck 511,197 Industrial PlantsRail 949 River 246 Truck 2

Virginia: 2,602 Total1,157 Electricity GenerationRail 481 River 677754 Coke PlantsRail 754691 Industrial PlantsRail 676 River 15

State Consumption Total of 66,269 Thousand short tons & methods of transportation

15

LOW SULFUR IMPORTS TO INDIANA

Indiana Production Profile Wyoming Production Profile

Wyoming consumes < 1/12 of all it produces

Wyoming produces 1/3 of nation’s coal

73% consumed forIndiana electricity

Major imports of Wyoming’s low sulfur coal have dramatically affected Indiana’s coal trade situation as result of more stringent environmental standards.

16

INDIANA COAL EXPORTS - 2002

State Production Total of 35,391 Thousand short tons & methods of transportation

Florida: 162 Total162 Electricity GenerationRiver

In state: 32,146 Total23,370 Electricity GenerationRail 9,311 River 502Conveyer 577 Truck 12,980

8,455 Industrial PlantsTruck

321 Residential/CommercialTruck

Illinois: 468 Total466 Electricity GenerationRiver 140 Truck 3262 Industrial PlantsRailroad 2

Export

Export

Export

Exp

ort

ExportIowa: 146 Total9 Electricity GenerationRiver137 Industrial PlantsRail 105 River 32

Kentucky: 1,499 Total1,461 Electricity GenerationRail 808 River 481 Truck 171

39 Industrial PlantsTruck

Export

Minnesota: 8 Total8 Electricity GenerationRail

Missouri: 19 Total19 Industrial PlantsRiver Ohio: 178 Total

178 Electricity GenerationRiver

Tennessee: 6 Total6 Residential/CommercialRiver

Wisconsin: 757 Total385 Electricity GenerationRail372 Industrial PlantsRail 68 River 304

State Totals: 26,038 Electricity Generation9,023 Industrial Plants, 327 Residential/Commercial

Source: http://www.eia.doe.gov/cneaf/coal/page/coaldistrib/o_in.html

17

INDIANA COAL EXPORTS

0

5

10

15

20

25

30

35

40

1988 1990 1992 1994 1996 1998 2000 2002 2004

Years

Mil

lio

n T

on

s

Coal Produced in Indiana

Indiana Coal Consumption in-state

0

5

10

15

20

25

30

35

1988 1990 1992 1994 1996 1998 2000 2002 2004

Years

Exp

ort

s as

Per

cen

tag

e o

f P

rod

uct

ion

Indiana Coal Productionand Consumption

Decline in IndianaCoal Exports

What has caused the decline in Indiana’s coal trade and what response is to be made to this?

18

COOPERATION WITH NEIGHBORS

• The Midwest states are all very dependent on coal imports from the Western Region and Indiana exports suffer

• Similarly to the electricity network of the region and the creation of MISO can there be a similar regional level of cooperation with coal technology development?

• A regional approach could have important consequences for the location of the FutureGen project?

19

EXPANDING INDIANA COAL USEBY THE IRON AND STEEL INDUSTRY

• Currently, very little Indiana coals utilized by the industry.

• Two opportunities – in coke blends and blast furnace injection.

• Two studies – IGS Report 64, DOE Clean Coal Technology Report.

• Coke blends: Indiana coals limited by strength, moisture problems – nonetheless, “Indiana coal could be successfully incorporated in amounts up to 45% of the blend” – potential between 2 to 3-½ million tons/year.

20

EXPANDING INDIANA COAL USEBY THE IRON AND STEEL INDUSTRY

• Blast furnace injection: could replace up to 40% of coke charge; in competition with gas. Coals with high combustibility, high coke/coal replacement ratios, low sulfur preferred.

• Total potential: 4 ½ to 5 ½ million tons/year.

• Problem: best Indiana coals for both uses are Brazil formation, with limited reserves.

21

COAL BY WIRE

• Indiana electric utilities currently export about 850 MW under firm capacity agreements.

• Additional 1,200 MW exported from Clifty Creek plant.

• Depending upon load patterns and availability of generation units, Indiana may be net electricity importer or exporter.

• EIA and SUFG project substantial need for base load electric generation resources over next 15 to 20 years.

22

FUTURE COMPETING TECHNOLOGIES FOR POWER

GENERATION• Power generation from coal becomes more competitive as the capacity factor increases

• It appears likely that future base load needs in Indiana (6000 MW by 2021) will come from coal based plants while the peaking and cycling demands will be met by gas fired turbines and combined cycle plants

23

FUTURE COAL-BASED POWER GENERATION TECHNOLOGIES

How extensive a role is IGCC technologyto have in Indiana and the Midwest?

24

FUTURE COAL-BASED POWER GENERATION

TECHNOLOGIES • Requirements for future coal-based power plants include

– High Efficiency– Low Emissions (including CO2)– Versatility

• Competing technologies include– Pulverized Coal Steam Turbine– Integrated Coal Gasification Combined Cycle (IGCC)– Flue Gas Recycle

• The IGCC process best fits the criteria for future plants, exhibiting a high efficiency, low emissions with the possibility of economical CO2 capture, and versatility to produce power, syngas, or hydrogen. The sulfur is captured in a form that provides an additional economic advantage.

25

REGULATORY UNCERTAINTY

Cost/Unit

Tighter Regulation

“Ostrich”Technology

“Bite the Bullet”Technology

“Bite the Bullet”: Invest now, pay the price, and protect against possible legislation.

“Ostrich”: Ignore the possibility of tighter regulation, and hope it doesn’t come.

26

GENERATING TECHNOLOGY OPTIONS

Integrated Gasification Combined Cycle (IGCC) Plants

Take away: EPRI studies are indicating that IGCC Plant costs are approaching those of conventional technologies; this is yet to be tested in the marketplace with real contracts.

Source: EPRI estimates

CFB NGCC IGCC

1,250 1,300 1,300 440 1,300Ave. Heat Rate,

Btu/kWh 9,300 8,700 9,800 7,200 8,650Cost of Electricity

$/MWh 53 53 54 52 55

PC Subcritical

PC Supercritical

EPC Cost, $/kW

162110 - GJS/CE-01/1-23-02

Coal

Syngas

Quench Gasifier

Slag/Fines

Steam

Sulfur Removal

Cryogenic Oxygen

Particulate Removal

MercuryRemoval Steam

7FA Combustion Turbine

Steam Turbine

HRSGAir

Electricity

StackWater

Solids

Pure Sulfur

Source US Department of Energy

27

IGCC – SUPERIOR ENVIRONMENTAL

PERFORMANCE

Source Eastman Chemical Company

Take away: IGCC’s emissions are the lowest of any coal-based technology.

28

IMPACT OF COAL TYPE ON TECHNOLOGY SELECTION

Choices regarding coal type strongly

influence technology selection

Take away: IGCC plants become less competitive with low-BTU coals. IGCC is not a silver bullet; having other technology options available is strategically important.

Source: EPRI

Capital Cost vs. Coal Type

0200400600800

1,0001,2001,4001,6001,8002,000

Eastern Coal PRB Coal Lignite

PC Plants IGCC Plants

Heat Rate vs Coal Type

0

2,000

4,000

6,000

8,000

10,000

12,000

Eastern Coal PRB Coal Lignite

PC Plants IGCC Plants