Clean Coal Technologies

1

• Clean Coal Technologies
• -Keeping Coal in the Money-
• Gary Spitznogle
• Manager
• New Generation Development
• November 8, 2006

2
AGENDA

• Integrated Resource Plan (IRP)
• Strategy
• Generation options
• Technology options
• Generation costs
• Power Plant siting
• New Generation status update
• Conclusions
• Questions

3
AEP An introduction

• AEP Facts at a Glance
• Largest U.S. Electricity Generator and coal user
• 11 States (7-East 4-West)
• 36,000 MW Generation
• 75-80 MM tons of coal per year
• 39,000 Miles Transmission
• 210,000 Miles Distribution
• 5 Million Customers
• 20,000 Employees
• US 11.9 Billion Revenue
• US 36.2 Billion in Assets

Coal NG Nuclear Hydro Wind
73 26,280MW 16 5,760MW 8 2,880MW 2 720MW 1 360MW
4
What is AEPs need for new base load generation?

• AEP has not added base load capacity since the
  Zimmer Conversion (nuclear to coal) in 1991

• AEP Integrated Resource Plan (IRP) shows that by
  2015 baseload generation needs are

• East - at least 1200 MW (2 x 600MW)

• West at least 1800 MW (3 x 600 MW)

5
What is AEPs need for new peaking and
intermediate generation?

• AEP Integrated Resource Plan (IRP) shows that by
  2015
• peaking and intermediate generation needs are

• East - at least 300 MW (Peakers)
• - at least 1,000 MW (Intermediate)

• West - at least 650 MW (Peakers)
• - at least 500 MW (Intermediate)

6
AEPs air emissions control strategy

• Asset diversification and optimization
• Multiple fuels (coal, gas, renewables)

• Substantial air emissions compliance program

• 3.6 billion in retrofits from 2004 through
  2010
• FGD - SO2
• 3 billion (5,000 MW done 8,000 MW to do)
• 95 to 98 removal
• SCR - NOx
• 500 million (10,000 MW done 2,000 MW to do)
• 85 to 93 removal
• Hg (Mercury)
• SCRFGD co-benefit - 80 removal
• Undetermined number of activated carbon systems
  (likely 5,000 MW)

7
What base load options are available? -Looked at
natural gas-
8
What base load options are available? -Looked at
nuclear-
9
What base load options are available? -Looked at
coal-
10
And the answer for base load is
COAL AEPs commitment to coal has been a basic
element of our generation strategy

• We know coal
• Its abundant and available
• Its important to the states we serve
• Its important to our nation

11
U.S. coal capacity additions
12
What technology should we use for the different
generation needs?
?
?
?
?
?
?
?
13
Looked at technology for peaking and intermediate
load - Natural gas -
14
Looked at CFB technology for base load - Coal -
15
Looked at IGCC technology for base load - Coal -
16
Looked at PC technology for base load - Coal -
17
What about fuel choice? - Technology selection
IGCC plants become less competitive with low-BTU
coals having other technology options available
is strategically important.
18
Generating Technology Options Ultra
Supercritical PC Units

• An ultra-supercritical (USC) steam generation
  unit operates above the supercritical pressure
  point of water, typically 3500 psi or higher, and
  at steam temperatures above 1100 oF (593 oC).
• The critical point of water is 3208 psi and is
  the point at which the vapor and liquid are
  indistinguishable
• For comparison
• A conventional supercritical unit operates at
  steam pressures of 3500 psig or higher and steam
  temperatures of 1000-1050 oF (538-566 oC).
• A subcritical unit operates below the critical
  pressure, typically 2400 psig.
• Modern chrome and nickel-based super alloys in
  the steam generator, steam turbine, and piping
  systems can withstand prolonged exposure to this
  high temperature steam.
• By operating at elevated steam temperatures, the
  turbine cycle is more efficient. This reduces
  fuel (coal) consumption, and thereby reduces
  emissions.
• Higher efficiency Less emissions

19
Generating Technology Options Ultra
Supercritical PC Units

• USC technology has been specified for capacity
  additions to AEP West
• USC technology is most efficient cycle available
  for PRB fuels
• Main Steam 1115 F
• Reheat Steam 1130 F
• Pressure 3725 psi
• IGCC is limited for PRB Applications
• Dry feed IGCC technology such as Shell not
  available with full EPC wrap
• The GE Slurry feed gasifier technology we are
  using for our new AEP East IGCC units not suited
  to low rank fuels
• In addition to improved environmental performance
  due to reduced fuel, USC technology will include
  state-of-the-art emission control technologies
• SCR system for NOx reduction
• Wet or Dry FGD system for SO2 reduction
• Baghouse for particulate removal.

20
Generating Technology Options IGCC Units

• AEP Board Report (August 2004)
• Committed AEP to being an industry leader in
  development of coal-fueled IGCC technology

• AEP East - building 2 x 600 MW IGCC plants (OH
  WV)

21
IGCC Advantages

• Relatively low fuel cost from domestic coal

• Multiple product versatility
• Electricity
• Chemicals
• Liquids

22
IGCC Advantages

• Reduce incremental cost of CO2 capture
• And also make Hydrogen

CO H2O gt CO2 H2
23
Whats the Catch?

• IGCC technology is developing
• The I is missing in IGCC
• Capital cost premium
• Cultural Changes
• IGCC cost advantage longer horizon

24
IGCC a leadership decision

• Choosing IGCC for AEP East was not just a
  technology decision it was a leadership decision
• If not AEP, then who
• If not one of our states, then where
• If not coal, then what

• Being leaders has its perils and risks
• Partnerships and cooperation are necessary for
  success

• Federal Government has a role
• Provide incentives and remove roadblocks, but do
  not attach unacceptable strings

25
Current economics of new AEP East baseload
generation

• Source Results of AEP analysis based on EPRI
  studies.
• Total Plant Cost (2005s) includes the cost to
  Engineer, Procure and Construct plant and owners
  direct costs does not include
  interconnections, transmission lines,
  transmission upgrades, contingency or AFUDC.
• Assumes Northern Appalachian Coal price of 1.60
  /mmBtu for PC and IGCC, and natural gas price of
  7.00/mmBtu for NGCC.
• Assumes 85 capacity factor for PC and IGCC, 25
  for NGCC.
• Production Cost includes Fuel Cost and Variable
  Operations Maintenance (VOM) cost.
• Cost of Electricity based on EPC cost, does not
  include the cost of Emission Credits.

26
But current economics ignore possible future
GHG requirements

• Investment evaluation should consider possible
  future option value of IGCC vs. PC on carbon
  capture

• Possible scenarios
• No CO2 legislation
• CO2 legislation 2015 Low carbon prices
• CO2 legislation 2015 High carbon prices
• Stringent CO2 legislation Forcing carbon
  capture on coal by 2020

27
CO2 Emissions

28
How do the generation options compare?
29
Where to build AEPs first commercial IGCC unit?
30
Great Bend-Ohio IGCC Plant
31
Mountaineer-WV IGCC Plant
32
AEPs investment in IGCC

• Engineering Studies
• FEED with GE/Bechtel for Great Bend, Ohio with
  completion targeted for mid-November
• FEED for Mountaineer, WV with completion targeted
  for mid-December
• PJM Facilities Study Report firm up scope and
  cost of the system improvements.

• Regulatory cost recovery
• 2005 March, Filed cost recovery plan with PUCO
• 2006 April, Received approval to recover
  27million development cost
• Ohio Supreme Court appeal of PUCO order
• 2006 January, Provided notice of intent to file
  with WV PSC

• RD Activities
• 2002 November, Mountaineer Storage Study
  Demonstration
• 2005 September, FutureGen Alliance created

33
AEPs Western units

• AEP West (PSO SWEPCO) Regulatory Process
• Required for Utilities to solicit proposals for
  new electric generating facilities
• Request for Proposals (RFP) issued September 2005

• Baseload Awards
• SWEPCO Self-build 600 MW USC PC unit at
  Hempstead County, AR
• Joint Ownership with OGE at Red Rock for a 950
  MW USC PC unit

34
AEPs Western units

• Peaker Awards
• PSO Self-build at Riverside (160 MW) and
  Southwestern (160 MW)
• SWEPCO - Self-build at Tontitown, AR (320 MW)

• Intermediate Awards
• SWEPCO Self-build at Arsenal Hill, LA 500 MW
  Natural Gas Combined Cycle (NGCC)

35
Conclusions

• AEP recognizes the strategic importance of IGCC
• Important to the future of coal
• Produces synthetic gas for poly-generation
• Potential to displace the use of natural gas (NG)
  in the electricity generation market
• Helps to stabilize the price of natural gas
• Frees NG for use in the chemicals, fuels and
  fertilizer industries
• Saves domestic jobs
• Accelerates progress towards the hydrogen economy
  initiative

36
Conclusions

• AEP recognizes the importance of other clean
  coal-based technologies
• AEP supports RD to futher advance Ultra
  supercritical PC and CFB
• Especially in the areas of carbon capture and
  disposal, and ultra-supercritical designs and
  other efficiency improvements
• Investors in coal-based power plants need a
  portfolio of attractive technologies to choose
  from

37
Conclusions

• AEP supports necessary RD to advance clean
  coal-based technology
• FutureGen (near zero-emission coal-fueled plant)
• 275 MW Unit
• 1 million tons/year CO2 captured and sequestered
• Co-production of H2 and electricity
• Public-private partnership
• 750M from DOE
• 250M from alliance members
• Mountaineer Carbon Sequestration project