In the absence of mandates  people don’t build capital intensive power plants that produce electricity at costs that are higher than current market prices. That’s the biggest reason why utilities aren’t rushing towards solar and most other renewables. High cost is also a big part of why we don’t have a real clean coal plant operating or even under construction – yet.

So if you don’t have a mandate, go get one.

One example took place recently in Delaware where NRG Energy supported state legislation that expressly favored gasification – a clear nod towards clean coal. The law mandated that the local utility solicit proposals and purchase the winning bidder’s power under a long-term contract.  Even though the solicitation indirectly favored clean coal, and NRG did indeed bid a total clean coal package including carbon capture and sequestration,  everything changed when another developer proposed a massive offshore wind project along Delaware’s pristine southern shoreline. In a liberal and largely agrarian coastal state like Delaware, the green giant ended up slaying the clean coal dragon – legislation favoring dragons notwithstanding. But when it came time for Delaware authorities to approve the final deal on the offshore wind project, the state’s decision was to make no decision. In short, they punted.  Why? Because that big,  green and windy offshore giant was just  too damn expensive.

The boys at Tenaska took a different tack and got their mandate from the State of Illinois instead. Smart move if you ask me. If you want to get clean coal done, go to the state with the most coal in the Eastern US. In fact, the energy content of Illinois coal is greater than that of all the oil in Saudi Arabia and Kuwait combined. Unfortunately, Illinois coal is high sulfur coal and the downstate Illinois economy has taken a beating ever since the Clean Air Act of 1990 put the squeeze on sulfur emissions. But clean coal technology can handle high sulfur and virtually eliminate it from its emissions profile. So when Tenaska rode into Springfield with a plan for a clean coal plant in downstate Illinois, the legislators were all ears.

On January 16th, 2009 the now notorious and recently impeached Illinois Governor Blago signed Senate Bill 1987 ushering in the first ever Clean Coal Portfolio Standard (“CPS”).  lllinois took a page out the renewable energy playbook and rewrote it for clean coal. The CPS mandates that 5% of all electricity in Illinois must come from clean coal sources by 2015, increasing to 25% by 2025; values comparable to current renewable energy portfolio mandates in many states including California – although the timing is 10-15 years further out for clean coal. To qualify as a Clean Coal plant under the CPS, a plant must capture and permanently store (sequester deep undeground) at least 50% of its CO2 emissions and also have an emissions profile at least as good as any modern plant burning natural gas.

As soon as this legislation was passed by the Senate, Tenaska (a highly experienced power project development company based in Omaha) announced that its clean coal project in Taylorville, Illinois had secured its air permit (authority to construct) from the Illinois EPA and that it intended its Taylorville IGCC (Integrated Gasification Combined Cycle) plant to be the first project to qualify under the new CPS.  Taylorville is dubbed a hybrid IGCC project meaning it can produce both electricity and synthetic natural gas (“SNG”).

A key feature of the Illinois CPS is that the state’s electric utilities (Ameren and Exelon) are obligated to purchase power from qualifying clean coal projects under long term power purchase agreements. But only if each resulting contract doesn’t increase the price of power to Illinois rate payers too much. With the Taylorville project already reportedly costing north of $3 billion for a 500 MW project – a capital cost per MW that actually exceeds that of most large solar projects today – it’s far from a done deal. Perhaps thats why Tenaska is building in the optionality of producing natural gas at its Taylorville plant instead of  only electricity; just in case the State balks at the price tag for clean coal power.

Portfolio standards (clean coal or renewables) are enacted to achieve public policy goals. The idea of a Clean Coal Portfolio Standard is a good one just as its counterpart has been for renewables like wind and solar. Without these mandates utilities will default to the lowest cost solutions and the unavoidable fact is clean coal and most renewables are not the cheapest sources of electricity. At least not today. As in Delaware, when the capital cost of a mandate exceeds the political cost, mandates with safety valves have a habit of losing their teeth.

Yet we live in a time when the issues of climate change, environment, national security and clean energy have become forever joined at the hip and are eclipsing the conventional metric of getting the most BTUs per buck. When this has happened in the past, the issue at hand takes on a moral imperative.  A good example is the federal worker safety laws enacated early in the last century when morality finally trumped the argument that worker safety would cost  too much – we finally just did it because it was the right thing to do.  Such moves requires federal action.

For real change to happen on energy policy, we need federally mandated energy portfolio standards, including one for clean coal, with big teeth and no safety valves. It will cost what it needs to cost in order get clean energy and we’ll all adjust to this new reality accordingly. Our newly minted President Obama has arrived in Washington at a time in our history when the country is open to changes, even big changes.

Time will tell if the man from Yes-We-Can can turn his mandate into a Yes-You-Will for the energy industry.

Tags: clean coal, climate change, leadership, renewable energy