Recession chills zeal for highly touted CO2-capture technology

Second of seven parts.

FREIBERG, Germany -- Climate regulations pushed electricity generators and chemical manufacturers into each other's arms.

As oil and carbon prices soared in Europe a few years ago, these two behemoths found themselves in a flush of mutual discovery. Coal-dependent utilities knew they would have to capture their carbon dioxide emissions to survive. And their only technical fix involved a chemical system called gasification that would turn coal into easily separable gases.

Utilities saw a savior, chemical engineers a customer. Gasification fever was on.


Then the economy crashed. The recession deflated oil and carbon prices, just as engineers began discovering that the always-on demands of the electricity business would cause exorbitant plant costs. The courtship cooled.

"What you're doing is linking two industries together that have hardly had a dialogue before," said Andreas Northemann, the head of gas treatment at BASF SE, the world's largest chemical company and a leader in carbon-capture research. "You had two different industries that didn't necessarily understand each other right from the start."

Meanwhile, gasification -- which has been at the heart of nearly every full-scale carbon capture and sequestration (CCS) power plant proposed in recent years -- has had a long-delayed arrival.

Gasifier reactors promise to power FutureGen, the coal-burning power plant planned by a U.S. government-industry alliance in Illinois that, with its fits and starts, has been the Hamlet of the power industry. German utility RWE AG -- the largest carbon dioxide emitter in Europe -- has planned a plant nearly identical to FutureGen and seen similar delays.

Gasification plants -- also known as integrated gasification combined cycle (IGCC) plants -- put finely pulverized coal under high pressure in gas chambers. Reactors then press and cook the coal at high temperatures to create a hydrogen-rich synthetic gas and, eventually, CO2. Thanks to the system's high pressure, the CO2 can easily be captured. The synthetic gas then fuels turbines similar to those used in natural gas plants.

It seems simple in theory, but it gets complicated quickly.

Costs ran rampant on proposed IGCC plants simply because, as engineers discovered, the loops and processes of the chemical industry are not so easily adapted.

Chemical companies have long used gasification in set production runs that, most importantly, end. The demand for electricity, however, never ends, which requires additional redundant systems to be added into power plant designs. And so the estimated cost of a plant like FutureGen rapidly soared from $950 million to $1.8 billion.

But increasing costs is not the only reason utilities have held off investing in gasification plants. Many see the plants as viable only if coal-derived gas can compete with oil as a feedstock to the chemical industry.

When oil prices were pushing $150 a barrel two years ago, companies like RWE dreamed of coal-fired power plants that would produce not only electricity, but also diesel, hydrogen, fertilizer and plastics.

Indeed, the potential of becoming a major player in the chemical industry was why RWE pursued a gasification design, said Johannes Heithoff, the company's research chief.

"It's not the cheapest option," Heithoff said. But the plans "were in a good situation" when crude costs were soaring.

For the plant to be feasible, oil would have to average $150 a barrel, far from current prices hovering around $85 a barrel, RWE estimates. The company has little idea how it could operate the plant at anywhere close to a profit in the foreseeable future, Heithoff added.

This will be a common problem throughout Europe, Northemann said. The disappearance of gasification hype in the past three years has been remarkable and more IGCC construction should not be expected soon, he said. Only two small-scale plants exist in Europe.

"I can't see a third one being built in the near future," Northemann said.

Gas hurdles

Even in Freiberg, a former mining town and home to the coal gasification unit of the German engineering firm Siemens AG, there is acceptance that IGCC plants won't gain a foothold unless steep cost savings are found. Siemens is one of several industrial giants -- along with General Electric Co. and Royal Dutch Shell PLC -- that make competing next-generation gasifiers.

Siemens operates its test gasifier here. The 20-foot-tall gasifier, which resembles a massive iron lung tipped on its vertical, is used to tweak operating conditions for a variety of fuels. Coal is far from the homogeneous rock it is often portrayed as and varies much with regional geology. For instance, European coal tends to have a far lower mercury content than U.S. coal.

The firm has begun selling 500- and 850-megawatt reactors and has had some recent success in the United States, if not Europe, inking deals last fall with companies in Texas and Illinois.

In Texas, Summit Power Group Inc., bolstered by $350 million in funding from the Energy Department, plans to build an IGCC plant that will produce electricity and ammonia; its captured CO2 will be used for enhanced oil recovery. In Illinois, Tenaska Energy Inc. plans to build a massive $3.5 billion gasification plant that will focus on turning coal into natural gas.

Tenaska's goal, in particular, highlights how much natural gas looms as a competitor for gasification.

The recent plunge in gas prices thanks to expanded use of shale gas has dealt a serious blow to IGCC proponents. Siemens believes coal gasifiers can compete with natural gas at prices around $9 per million British thermal unit, the common measuring unit; currently, gas sits at about $4.

In effect, Siemens is betting that natural gas and oil will, after the world recovers from the recession, again begin spiraling up in cost as coal remains plentiful and cheap -- an uncertainty at best.

With additional economies of scale, IGCC could compete with gas at $6, but for those savings to be realized, more commitment is needed, said Frank Hannemann, the engineering chief at Siemens' gasification works.

"I'm sure we can expect investment costs to go down," Hannemann said. "But it's necessary to build plants. If plants are built, then the cost will come down. If nobody decides to build the plants, it will remain expensive."

Hannemann, for one, is placing his hopes on the Chinese.

"The Chinese are putting a lot of pressure on us to build gasification plants more competitively," he said. "And they're making it a reality. In Europe and the United States, there are a lot of discussions going on. A lot of studies going on. But not so many real plants."

China plans gasification projects

The Chinese have already ordered five gasifiers from Siemens. These reactors are not used for electricity; they are turning coal into plastics.

But after gaining experience with the gasifiers, China -- long wary of its dependence on Russian natural gas -- is now planning up to 20 gasification projects that would focus on transmuting coal into natural gas, said Anton Haberzettl, who works with Hannemann at the test works.

"This is a very important market for China, because they do not have natural gas resources," Haberzettl said. "They have to import it from Russia. The dependency is huge."

A lack of energy security has often prompted innovations in coal gasification in the past from a rogue's gallery of countries.

During World War II, cut off from oil, Germany pioneered the technology, using coal to fuel its vehicles. And decades later, South Africa, rich in coal but oil poor, pushed forward with gasification during apartheid, when few countries would trade with it. Even after apartheid, South Africa remains the largest practitioner of gasification.

The gasifiers used by these countries were dirty and often caused unmitigated environmental disasters. For evidence, Haberzettl points at the rolling hills and glacial lakes in his own region, Saxony, located in the former East Germany, near the Czech border.

Siemens' gasifier works in Freiberg, which it purchased only in 2006, began life in the 1970s as a research center tasked by the desire of East Germany's communist government to use its vast reserves of low-quality coal. The crude gasifiers produced then had large amounts of waste: carcinogens, like benzene, and also tar oil. Lots of tar oil.

"And they didn't know what to do with the tar oil," Haberzettl said. "So they filled the lakes with it."

The lakes have since been cleaned, the tar pumped out and transformed by modern gasifiers into methanol for use in the chemical industry.

"Today," he said, "it's a beautiful landscape."



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