Tamar Hallerman
GHG Monitor
05/11/12
AT TAYLORVILLE: TENASKA FLOATS PLAN TO TEMPORARILY FORGO COAL GASIFICATION COMPONENT
Tenaska Energy may temporarily forgo plans for a coal gasification plant at its proposed Taylorville Energy Center in the hopes of gaining eleventh-hour approval for the project from the Illinois state legislature, the company confirmed this week. In a ‘Hail Mary’ move of sorts, the Omaha, Neb.-based independent power producer said that it is pursuing a “compromise approach” to its controversial new-build Taylorville Energy Center (TEC) by proposing a new natural gas-fired facility.
Tenaska said it is in talks with members of the Illinois state legislature about possibly including an amendment to legislation greenlighting the plant that would allow for the construction of a natural gas combined cycle power plant at the central Illinois site. However, the amendment would also allow Tenaska to postpone plans for an Integrated Gasification Combined Cycle coal gasification unit with carbon capture and storage that was initially proposed as part of TEC along with the gas-fired power block. “We have not made a final decision to switch to this approach,” Tenaska Vice President of Development Bart Ford told GHG Monitor. “But we are committed to working with legislative leaders on this plan as a compromise,” he added.
A company fact sheet provided to GHG Monitor said that plans for the gasification portion of the plant would be delayed “until more favorable market conditions, sequestration permits are obtained and the legislature approves.” Instead, Tenaska said that if the compromise moves forward the company could commence plans to build the natural gas plant as gasification-ready and later integrate the gasification island fairly easily into Phase II of the project if circumstances allow.
The plan represents a stark departure from initial plans for TEC, which was billed as a 602 MW facility that would incorporate both gas and CCS with at least a 65 percent capture rate. Ford indicated that without the gasification unit built, the company would not aim to capture emissions from the gas facility. It is unclear whether TEC would lose its $417 million tax credit and $2.6 billion loan guarantee from the Department of Energy as a result of the proposed changes.
Tenaska Officials Met with Legislators
Local news outlets reported earlier this week that Tenaska met with legislators in a closed-door meeting on May 8 to float the idea of altering the controversial project, which has been debated and stalled in the state legislature on-and-off for the last four years. “We have had discussions regarding possible changes to [the bill] with supporters and opponents of the bill,” Ford said in a company statement. However, he later told GHG Monitor that no amendment has been formally agreed to yet. Local reports said the amendment text is being currently drafted so that it can be considered before the legislature adjourns on May 31, and that language could be introduced within days.
If approved, the amendment would alter legislation to allow Tenaska to move forward on the plant, the most recent version of which has been stalled in the Illinois House of Representatives for the last several months. A similar measure squeaked through the state Senate late last year after a handful of failed attempts. The gridlock over the legislation was the result of an intense lobbying effort from the group Stop Tenaska’s Overpriced Power (STOP Coalition). Led by Tenaska competitor Exelon Corp. and several business, energy and trade groups, the STOP Coalition has moved to halt the project by primarily focusing on the high project pricetag and its effect on area ratepayers, as well as the environmental disadvantage of coal compared to cleaner-burning sources like gas.
Smaller Impact on Area Customers
With that in mind, Tenaska is banking heavily on cost as the way to shift the political tides in its favor. The company said the revised plan would cut capital costs by about two-thirds compared to TEC’s initial IGCC incarnation, from $3.5 billion to slightly more than $1 billion. That change could garner much more political support given that a major sticking point of the initial project was the potential cost on area residents and businesses. Under the state’s clean portfolio standard, TEC was entitled to a 30-year power purchase agreement as Illinois’ first facility with CCS. Utilities in the state would have been required to purchase electricity from the facility even if it was more expensive than power produced from conventional sources, costs that would eventually be passed on to consumers.
Under the compromise deal, Tenaska said the reduced project costs would lead to a rate impact of less than 60 cents per month for residential customers and one-tenth of a cent per kilowatt for businesses. The company said it would also absorb all cost overruns that may occur with the project. But because of the project format lacking CCS, the project would not be eligible for the automatic 30-year power purchase agreement. Instead, local press reports stated that if the new project design moves forward, Tenaska would seek a similar agreement with the state. The company emphasized that the electricity produced at TEC is needed in Illinois, which in recent years has lost a significant amount of generating capacity.
Whether the new project design has legs may depend, to some degree, on the reaction of the STOP Coalition and its allies in the state legislature. The group told GHG Monitor that it would hold back on its response until a formal compromise on TEC is released. “We are pleased that Tenaska has recognized that their original proposal was too costly for Illinois families and businesses, didn’t make sense environmentally, and had little support in the Assembly. When details of the proposal emerge, we will look at it with the goal of ensuring customers aren’t subject to unnecessary rate increases,” a group statement said.
