Increasing Costs Hinder IGCC Plant Construction

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Research by Industrial Info Resources (Sugar Land, Texas)--When integrated gasification combined-cycle (IGCC) plants were "the plants to build," it seemed as though all power generators had plans to build one. However, because of the astronomical costs of the plants, the majority of the projects were abandoned.

IGCC is a technology that provides the best way to reduce the emissions associated with using coal to produce electricity. Rather than generating electricity from the heat produced from burning coal, IGCC plants use a coal gasification system to convert coal into synthetic gas, which provides a relatively clean burn.

Developers often run into financial issues and are often unable to obtain financing or power purchase agreements. Given the current state of the energy market, low natural gas prices and a still sluggish economy, it is hard to predict if any of the many planned IGCC projects will actually be built.

Most IGCC projects are required to have carbon capture and sequestration (CCS) technology installed, and any carbon capture technology for coal-fired power plants will increase the cost of electricity generation because of efficiency losses, decreasing profits to the generator.

The most challenging part of carbon capture and sequestration is transportation and storage of the carbon, as there is limited storage space, although costs for the capture technology to be installed could be five to 10 times the cost of storage. Capital costs for IGCC plants are estimated to be 20-47% higher than a traditional coal-fired plant.

Carbon capture technology is estimated to significantly increase the cost of electric generation from coal-fired plants. The parasitic power consumption caused by the CCS technology decreases efficiency. Plants with CCS generally produce about 10% less power from an equivalent amount fuel than plants without the technology. With low natural gas prices and increasing emissions regulations, coal-fired construction in any form is becoming an increasingly less viable option for utility generators.

Summit Power Group (Penwell, Texas) is in the final financing stage on its $2.2 billion IGCC plant in Ector County, Texas. Engineering and construction firms are lined up and ready to begin construction early this fall if Summit Power gets the financing in order. The Penwell project has been under development since 2008, waiting for funding from the Department of Energy, and finally received an air permit from the Texas Commission on Environmental Quality in early 2011. The project has a 25-year, 200-megawatt power purchase agreement with CPS Energy (San Antonio, Texas).

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