The Clean Coal Technology Program: Current Prospects

Order Code RS20877

April 6, 2001

CRS Report for Congress

Received through the CRS Web

The Clean Coal Technology Program:

Current Prospects

Carl E. Behrens

Specialist in Energy Policy

Resources, Science, and Industry Division

Summary

The Clean Coal Technology (CCT) program, started in the 1980's and funded

generously in the early 1990's, has completed most of its surviving projects and has not

funded any new ones since 1994. However, President Bush’s FY2002 budget outline

proposed spending $2 billion over 10 years on a restructured CCT program. It is not

clear what kind of projects would be included in the new program.

Background and History

The Clean Coal Technology (CCT) Program was started in 1984 as a vestige of the

defunct Synthetic Fuels Corporation, a government corporation created to help develop

new fuels from domestic sources. By 1990 Congress had appropriated approximately $2.6

billion for the program, and the Department of Energy (DOE) selected and made costsharing cooperative agreements for a large number of projects of varying size and

technologies. By the mid-1990s, the potential for adoption of most CCT technologies by

industry without government subsidy began to dim, and DOE in 1994 recommended that

no further projects be funded. Since then, approximately $300 million of previously

appropriated funding has been rescinded, and other funding has been deferred – including

$67 million in FY2001. President Bush’s FY2002 budget outline, however, proposed

spending $2 billion over 10 years on a restructured CCT program, with the same industrial

cost-sharing principle as the existing program.

CCT Technologies. The CCT program currently has 40 projects on its books, of

which 24 have been completed and seven are operating. One is under construction, six are

in the design stage, and two are on hold. (For details, see the CCT web site at

[http://www.lanl.gov/projects/cctc/resources/library/bibliography/bibliography.html])

These projects fall into four general categories:

!

Environmental Control Devices. Many of the early CCT projects were

retrofits of existing powerplants to demonstrate emission control

technologies as alternatives to traditional scrubbers or to conversion to

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low-sulfur coal. The 19 projects in this category were designed to control

nitrogen oxide (NO x) emissions, sulfur dioxide (SO 2) emissions, or both.

All but two of these projects are completed; one is still operating, and one

is on hold at the design stage because the main participant is in

bankruptcy.

!

Advanced Electric Power Generation. The most expensive CCT projects

are advanced power generating facilities, of three main types: atmospheric

fluidized bed (AFB) burners, pressurized fluidized bed (PFB) plants, and

integrated gasification combined cycle (IGCC) plants. Proponents of

these technologies cited the potential of more efficient use of the energy

content of coal, as well as their ability to burn coal cleanly without

conventional scrubbers, as overcoming their higher cost than conventional

coal plants. One AFB project was completed, and another is in the design

stage. One PFB plant project was completed, and two are in design.

Three IGCC plants were built and are in the operating stage, and one is

in design.

!

Coal Processing. Five current CCT projects were aimed at converting

“run-of-the-mill” coals to high-energy, low-sulfur products. The projects

were viewed as having both a domestic and an export market for the

technology and the improved coal. Two projects were completed, two are

operating, and one is on hold.

!

Industrial Processes. Using coal to replace coke in steelmaking, enabling

cement makers to use low-sulfur coal, and converting industry burners to

coal from oil or gas, were some of the goals of the industrial CCT

program. Three industrial projects were completed, and two are in the

design stage.

Table 1

Status of CCT Projects, 2000

Environmental Control

Power Generation

Status

NO x

SO2

Comb

AFB

PFB

IGCC

Other

Coal

Process

Indus.

Appl.

Total

Completed

5

6

6

1

1

0

0

2

3

24

Operating

0

1

0

0

0

3

1

2

0

7

Construct.

0

0

0

0

0

0

1

0

0

1

Design

0

0

0

1

2

1

0

0

2

6

On Hold

0

0

1

0

0

0

0

1

0

2

Total

5

7

7

2

3

4

2

5

5

40

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Program Analysis and Prognosis

For most of the 1990's, natural gas was viewed as the fuel of choice for electric

power generation. The price of gas to utilities since 1986 was low compared to historical

levels, and was projected to remain low in light of ample supplies. New technology, in the

form of combined cycle turbine and steam generation, increased generating efficiency

greatly, reducing fuel costs even more. Many utilities were recovering from two decades

of financial disaster caused by trying to build large, capital-intensive nuclear and coal

plants in times of high interest rates and slow growth in demand for electricity. If they

needed new capacity, and many did not, they were attracted to gas plants, which could be

built quickly in small units for relatively low capital investment. Federal legislation,

especially the Energy Policy Act of 1992, also encouraged construction of powerplants by

unregulated non-utility entities, and most of these were gas-fired.

In addition to these economic advantages, natural gas was also environmentally less

objectionable than coal. The 1990 Clear Air Act Amendments imposed severe restraints

on SO 2 emissions from both existing and new coal plants, and the growing concern about

carbon dioxide (CO 2) emissions as a global climate change instigator put coal at a further

disadvantage, since CO 2 emissions from coal are significantly higher than from gas.

In the context of these factors, the Clean Coal Technology program received little

encouragement from the Clinton Administration and the Congress during the 1990's. Of

the major categories of CCT projects, the Environmental Control and Coal Preparation

technologies, even when successful, were not competitive with conventional scrubbing or

switching to low-sulfur coal, and none were directed to the problem of CO 2 emissions.

The Advanced Power Generation technologies, including fluidized bed and IGCC, could

not compete with gas-fired combined cycle with natural gas prices as low as they were.

Industrial Processes, with a small existing market for coal, also found it difficult to

compete.

New Administration, New Economics. The summer of 2000 brought an abrupt

end to the ample supplies and low prices of natural gas. The sudden and unexpected

movement in prices was typically volatile behavior of large commodity markets, but the

volatility tends to be forgotten in periods of long, steady price decline. Among other

factors, the price increase precipitated the crisis in California’s electric power sector. It

also shattered expectations that gas would be reliably available at low prices whenever

utility needs demanded it, and revived the traditional utility view that a variety of fuels and

power sources may be worth investing in even if some of them are more costly than others.

Reasoning of this sort may be behind the Bush Administration’s proposal to revive

the CCT program. In addition, de-emphasis on CO 2 emissions and the repudiation of the

Kyoto Global Climate Change Treaty have removed for the time being some the

environmental pressures on coal. However, unless new restrictions on SO 2 and NO x

emissions are imposed on coal-fired generation – and some bills have been introduced to

do that – there is not much demand for the new environmental control technologies that

the CCT program has pursued so far. Pending regulatory requirements for existing coalfired powerplants, such as the NO x State Implementation Plan (SIP) call, can be met with

currently demonstrated technologies such as selective catalytic reduction (SCR), and all

new plants are effectively required to install conventional scrubbers and SCR, which are

as effective as any of the CCT technologies in removing SO 2 and NO x.

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Similarly, the power generation technologies sponsored by the existing CCT program,

while appearing more competitive with natural gas prices so unexpectedly high, will have

to compete in a market which is likely to see gas supplies increase rapidly and prices fall

once again. Nevertheless, the memory of gas price volatility and the advisability of a

varied fuel mix for power generation may make that competition easier, especially if the

new technologies can achieve the increased efficiencies hoped for by their proponents.

Legislation

In addition to the Administration’s budget proposal to increase funding for CCT

programs, the National Electricity and Environmental Technology Act (S. 60), introduced

by Senator Byrd, is aimed at stimulating coal use. The main feature of S. 60 would allow

tax credits for investments in CCT units and commercial applications of CCT technology.

On the other side of the issue, legislation has been introduced to require further

reductions of emissions from powerplants. H.R. 25, introduced by Representative

Sweeney, is aimed at reducing acid deposition by restricting SO 2 and NO x emissions.

H.R. 1335, introduced by Representative Allen, would reduce emissions of mercury, SO

2 and NO x , and carbon dioxide from fossil-fired powerplants. As noted above, such

legislation if passed could provide a market for some of the emissions control technologies

sponsored in the CCT program.