POWER March 2014 - 40

The fuTure of coal-fired generaTion
Laura Miller, Summit Power's director of
projects, told POWER that TCEP had hoped
to close financing in December, but its engineering,
procurement, and construction
contractors (Siemens, Linde, and Sinopec Engineering
Group) are having difficulty staffing
the project because of the oil and gas boom in
Texas, which has made skilled labor extremely
expensive and hard to find. Its plan is to break
ground as soon as possible in 2014.
TCEP suffered a setback on Jan. 6, when
CPS Energy, which supplies power to the San
Antonio area, allowed its power purchase
agreement (PPA) with Summit to expire. It
blamed repeated delays in getting TCEP built
and the changing power market as a result of
falling natural gas prices. Still, CPS said it
would " consider the possibility of an updated
PPA with the Texas Clean Energy Project in
the future " and that it " remain[s] hopeful this
project can proceed. "
Only one other polygeneration project is
abt. power feb 14:Layout 1 1/8/14 4:31 PM Page 3
under development, but it's one with some
structural advantages not enjoyed by TCEP
or HECA. India-based Reliance Industries
is planning to add what may be the world's
largest gasification complex to what is already
the largest oil refinery in the world,
Jamnagar in Gujarat. Reliance has thus far
run Jamnagar's 1.5-GW cogeneration power
plant on imported liquefied natural gas, but
transitioning to syngas from the refinery's
excess petcoke (as well as coal) will allow it
to reduce its fuel costs. With the refinery already
in place, the polygeneration plant will
have a captive customer for it output. The
project, to be built by Fluor using CB&I's
E-Gas technology and Linde air separation
units, is planned in two phases of eight gasifiers
each with initial start-up in mid-2015.
The Way Forward
The companies working on polygeneration
are frank about the need for better policy
support if the sector is to take off. Speaking
to a 2012 meeting of the Interstate Oil and
Gas Compact Commission, Summit Power
Vice President Jeff Brown openly conceded
that the market does not currently support the
extra costs of carbon capture, even with additional
revenues from selling CO2
, fertilizer,
and other products. But the current system for
carbon sequestration tax credits under Section
45Q actually makes the situation worse.
" As the tax credit is currently structured,
no individual facility can predict the number
of years it will be able to receive sequestration
tax credits, " Miller said. " As there is no
assurance that a facility will be able to receive
sequestration tax credits for a set number of
years, lenders are unwilling to assume the
risk that the tax credits will be available. "
Summit and other groups working in CCS
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have been pushing for an amendment that
would allow a CCS project to reserve credits
once construction begins. Right now, the credit
is capped at 75 million tons on a first-come basis,
and those credits are being used up by oil
and gas companies conducting conventional
EOR rather than true CCS. " We can't put the
$10/ton we ought to be getting for doing EOR
with 2.5 million tons per year of captured CO2
because there is no protocol for reserving
credits for individual projects, we don't know
how much has been claimed already-and,
worse, the IRS won't tell anybody how much
has been claimed or who is actually eligible to
make claims, " Miller said.
Jeff Phillips, manager of advanced fossil
generation and CCS R&D for the Electric
Power Research Institute, said the advantage
in polygeneration is likely to go to early
entrants with existing infrastructure and expertise
in chemical processing, such as Reliance.
One challenge is financing projects that
are unfamiliar to the investment community
because they operate in both the power and
chemical markets. " It's difficult to find investors
who want to be involved in all of that, "
he said, given how it can take many of them
out of their comfort zone.
Another challenge that will need to be adDuraSquirter
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is selling polygeneration to public utility
commissions in regulated markets, because
it's difficult to separate out the power costs
from the chemical costs in calculating the ratebase.
Here, the integrated nature of the plant is
actually a problem because of the amount of
equipment used for both power and chemical
production and how operators will shift back
and forth depending on market fluctuations.
" You can get complicated in a hurry, " he said.
" There's a bigger regulatory hurdle " in building
polygeneration plants in those markets.
Croyle agreed, noting that polygeneration
is a learning process for regulators as well as
developers. " This is something that a myriad
of local, state, and federal agencies are dealing
with for the first time, and it's easy to understand
their challenge, " he told POWER.
Phillips expects it to be the mid-2020s at
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POWER | March 2014
the earliest before polygeneration in the U.S.
progresses beyond the TCEP and HECA
projects. But as with everything in the power
sector, things could easily change if the
economics shift. " If gas prices surprise the
prognosticators and go up, that might spark
earlier interest, " he said. ■
-Thomas W. Overton, JD is a POWER
associate editor.
http://www.appliedbolting.com http://www.powermag.com

POWER March 2014

Table of Contents for the Digital Edition of POWER March 2014

Contents
POWER March 2014 - Cover1
POWER March 2014 - Cover2
POWER March 2014 - Contents
POWER March 2014 - 2
POWER March 2014 - 3
POWER March 2014 - 4
POWER March 2014 - 5
POWER March 2014 - 6
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POWER March 2014 - Cover3
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