 GE Energy Ups Ante in Coal Gasification - By Ken Silverstein Daily IssueAlert 5/14/2004 Free Copyright 2004. All rights reserved. ChevronTexaco has agreed to sell its gasification technology business to GE Energy for an undisclosed price. While the move provides GE Energy with additional opportunities to provide coal-powered generation technologies that produce fewer pollutants, it also signals that well-heeled enterprises will be spending increasing dollars on developing innovative clean coal technologies. The announcement comes at the same time the results of a study by three analyst groups, including Lehman Brothers, concludes that quarterly natural gas production is off by as much as 5.3 percent from a year ago. That's surprising, given that drilling levels have been at near record highs. The dilemma means that lawmakers and regulators are going to have to give producers more access to federal lands that are now off-limits to drilling or it means that there will be a greater reliance on other fuel sources. Producers are unlikely to get more drilling rights—a fact that will help keep gas prices high. At the same time, coal is cheap and abundant. Coal gasification works by converting coal into synthetic gas. The coal is subjected to heat and pressure. It then breaks down into gases, specifically hydrogen and carbon monoxide. The resulting “syngas” is then cleaned before it is piped to the turbines, burned, and subsequently used to make electricity. It is doubly efficient because the waste heat is used to boil water and make steam, which produces more electricity. That's the “combined cycle” process. Raw coal has too many contaminants in it and so it cannot be used directly to fire turbines in the combined cycle process. At present, gasification technologies are affected by some cost inhibitors that might deter risk-taking among power generators. But GE Energy and Shell Global Solutions are two conglomerates that are willing to place their bets on the idea. The drivers: emission reduction, energy reliability and high natural gas prices. This also ties into GE's strategy of developing high efficiency turbines that are compatible with gasified coal. In the case of ChevronTexaco's gasification business, it has 65 facilities currently in operation and it produces 5 billion standard cubic feet a day of syngas. It has 27 such plants in Asia, 22 in Europe and 16 in the Americas. The company has been involved in private power generation since the early 1980s. Some of the company's existing refineries are a logical host for power projects, says Jim Houck, one-time president of Texaco Power and Gasification in New York, in a prior interview with this writer. That's because certain refinery products such as petroleum coke can be used as feedstock for a gasification plant that will generate electricity. ChevronTexaco has been licensing its gasification to other refineries, as well as chemical plants. With more than 70 countries having restructured their energy markets, Houck says that there are opportunities out there to develop further gasification projects. Positive Light According to EPRI, the utility industry's research and development arm located in Palo Alto, Calif., integrated gasification combined cycle plants—the formal name for such power plants—is the cleanest coal technology available today. Four such power plants are operating now: two in the United States and two in Europe. They are successful, EPRI says, because the technology controls most of the pollutants as part of the conversion process, rather than at the backend with clean-up devices such as those that are added to today's plants. Coal gasification is a chemical and heat process. As such, it is possible to remove the sources of sulfur dioxide, mercury and carbon dioxide from the “syngas” before it is combusted, experts say. And because the “syngas” is cleaner than raw coal, lower quantities of nitrogen oxide and particulate matter are produced during the combustion or burning process, he says. The carbon dioxide is more concentrated, which makes it easier to capture and seize. Despite the fact that GE is purchasing the gasification business of another giant, its entrance into the business is viewed in a positive light. That is, the move brings attention to a valid idea and should help usher the technology into the mainstream more quickly. GE Energy already supplies turbines for more than 60 percent of the world's integrated gasification combined cycle plants and it currently works with ChevronTexaco on a number of projects. But, big oil will not forsake the gasification idea altogether. Besides, Shell, ExxonMobil and BP, as well as oil services companies Halliburton and Schlumberger, have the ability to make similar investments in gasification technologies or other clean energy alternatives. They are continually looking to find good assets at reasonable prices that come with the right personnel. “If there is an opportunity and the asset would fit with their business plan, then the oil firms would explore those options,” says Bill Harmon, an energy lawyer with Jones Day in Chicago. While the market players jockey for position, coal gasification projects are working. The Wabash River clean coal project in Indiana is one such plant. It receives federal support and has shown that it can remove 97 percent of the sulfur and 82 percent of the nitrogen oxide from smoke stacks. The 262 megawatt plant, which has been in commercial operation since 2001, also releases 50 percent less mercury and 20 percent less carbon dioxide than a conventional coal-fired plant without the need for scrubbers because of the inherent efficiency of the gasification process. TECO's Polk Power 250 MW Station has been in operation since 2001 in Polk County, Fla. Shell, meanwhile, has several syngas plants either currently on line or in the developmental process. Three of them are designed to produce hydrogen, steam and power. The reliability rate, generally, of gasification plants is said to be in the 90 percent range while the annual maintenance costs have decreased by 40 percent over the last six years. Gasification has promise. GE Energy would not increase its stakes if it thought differently. Indeed, high natural gas prices coupled with continuous environmental pressures mean that enterprises are seeking newer and cleaner ways of doing business. But, the capital costs are high and risk takers are understandably apprehensive about plunging in head first. If GE's foray proves successful, then other blue chip companies may ante up too. UtiliPoint's IssueAlerts are compiled based on the independent analysis of UtiliPoint consultants. The opinions expressed in UtiliPoint's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. UtiliPoint's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues. Copyright 2004. UtiliPoint International, Inc. All rights reserved. |
