The March 6, 2008 Order of the West Virginia Public Service Commission approving the 629 megawatt IGCC unit of Appalachian Power Company (APCo) offers significant insight into the future of coal as the fuel of choice for electric power generation in West Virginia. In addition to granting the certificate of convenience and necessity for the IGCC unit, the Commission also granted a special rate recovery for APCo conditioned upon APCo’s commitment to use coal produced in West Virginia for no less than 75% of the plant’s fuel requirements. Among the more significant findings and conclusions of the Order are the following:
1. As compared with other types of generation facilities, APCo’s preference for IGCC base load technology is reasonable because natural gas-fired facilities meet mostly “peak” or “intermediate” needs; IGCC technology better meets existing environmental requirements than coal-fired plants; the plant will run more efficiently and at a cost on par with or below that of natural gas-fired facilities; and when the impacts of the environmental compliance are considered, the overall estimated cost of electricity from an IGCC plant is the least-cost option over the life of a base load plant. Therefore, the Commission concludes that the IGCC technology has advantages, both environmental and economic, especially under CO2 control scenarios, making it the logical choice for new base load generation for the project.
2. In 1990, the West Virginia Legislature adopted W. Va. Code §24-2-1g, generally referred to as the Clean Coal Statute which grants the Commission the authority to make rate-making allowances for investment in clean coal and clean air technologies following a determination that to do so was in the public interest. Although there have been references to the Clean Coal Statute and other Commission proceedings, the request to establish incentive rate-making allowances for this project under the Clean Coal Statute is a matter of first impression.
3. Because IGCC technology has the proven capability to capture CO2 and because IGCC technology will result in lower emissions that conventional coal plants, it is appropriate to consider the plant as a clean coal facility within the meaning of W. Va. Code §24-2-1g. Furthermore, APCo must use West Virginia coal for at least 75% of the plants fuel requirement.
4. There are significant public concerns regarding climate change and consideration legislative activity in Congress. Accordingly, the Commission concludes that federal climate change laws are likely to be forthcoming to require CO2 emission reductions in the electric generating sector, although the exact timing and extent of those reductions are not known.
5. Because modifications to carbon capture technology are being developed that may improve the technology and reduce its price, and because national environmental requirements have not yet been enacted, it is reasonable for APCo to wait to choose how to achieve compliance with forthcoming environmental requirements regarding carbon emissions.
6. Because bituminous coal has efficiency and cost advantages, particularly when considering potential CO2 capture and control possibilities related to IGCC technology, and because the state’s coal and transportation resources are so abundant, it is reasonable for APCo to consider adding generation capacity that is fueled with coal.
This article was authored by David M. Flannery, Jackson Kelly PLLC. For more information on the author see here.