Energy companies drive IGCC commercialization

Integrated gasification and combined cycle technology (IGCC) is gaining considerable attention from both industry and government in the US for its potential to capture and sequester a significant percentage of its carbon dioxide emissions while providing baseload power from abundant, low-cost coal resources.

Around the world, over 50 IGCC projects have been announced or have entered planning in the past few years. Several new IGCC plants using liquid refinery wastes became operational from 2000-2006. In this boom of project activity, the US is clearly leading the way with 30 projects in 17 states at some stage of development with a combined capacity of more than 15,000MW.

IGCC is not a new concept. It has been demonstrated at a commercially significant scale and has operated to a fairly reliable standard, though inconsistently, with various fuel sources. However, historically IGCC has remained commercially unattractive as a more technologically risky, less bankable and more expensive alternative to conventional coal combustion, offering only modest efficiency and emissions benefits. However, as climate change regulations appear inevitable in the US, IGCC’s potential for lower cost recovery of carbon dioxide than conventional combustion is driving substantial interest; and for the first time, the power industry is paying attention on a broad scale.

Gas turbine vendors provide added credibility

A particularly encouraging sign for the power industry over the last few years has been the entry of significant gas turbine manufacturers into the IGCC market on a turnkey basis. These manufacturers are looking to protect gas turbine market share as CCGT project activity wanes, while integrating vertically to capitalize on new growth opportunities.

In particular, major gas turbine players GE, Mitsubishi and Siemens have all entered the IGCC market and they are investing substantial resources to address the technology and cost challenges facing IGCC with new commercially driven solutions. The goal is to incorporate the technological lessons learned from the previous generation of projects, while standardizing plant designs and partnering with EPC firms for turnkey plant delivery, both to drive down costs and to transfer risk from the customer to the supplier. For the first time in the history of IGCC, potential customers now have the opportunity to choose from a handful of turnkey IGCC designs eliminating the responsibility for integrating the various process components of IGCC themselves, which has in the past made the technology too complex and risky to consider for most companies.

Coal-dominant utilities pursue IGCC demonstration

Clearly the entry of these credible technology suppliers has already boosted confidence in IGCC for many significant power-producing customers. Roughly half of the projects under consideration in the US are being pursued by traditional utilities, spurred by impending carbon constraints and increased regulatory support. The three largest coal-consuming utilities in North America – AEP, Southern Company and Duke—have all initiated coal IGCC projects. IPPs are also pursuing IGCC projects seeking a competitive advantage in a new emerging generation trend, and to hedge the risk to their coal-dominant business operations as carbon constraints appear inevitable in the next few years. US project activity has been further encouraged through the allocation of substantial federal tax credits, loan guarantees, and other regional incentives helping to bridge the commercial and economic gap between IGCC and conventional coal combustion for a few initial projects.

IGCC poised to replace conventional coal combustion

The US installed more than 190GW of coal capacity between 1970 and 1985, which is approaching the end of its economic lifetime over the next 20 years. Given the emerging pressure not to build conventional coal combustion plants, uncertainty over natural gas prices, and the planning and waste disposal limitations of nuclear, in the US IGCC is poised to grow more than any other technology option available to displace this capacity.

However, the next round of IGCC projects will be crucial to the industry's future. A dearth of operational experience and information continues to constrain widespread customer confidence in IGCC, while keeping risk premiums and costs high. If the next round of projects fails to demonstrate commercial competitiveness and reliability, other carbon capture-ready technologies could emerge as more practical alternatives for the power industry. However, if the first few IGCC projects can be demonstrated successfully, the industry could scale quickly, enabling cost convergence with conventional coal combustion and increased flexibility for the industry to manage carbon emissions on a significant scale.