8
Technology Demonstration and Commercialization

EPACT specifically directs DOE to conduct demonstration and commercialization programs on coal-based technologies (Title XIII, Section 1301; see Appendix B, this volume). DOE's CCT program constitutes the major effort in this area, although relevant activities are also being conducted under the Office of FE's R&D program for coal. The CCT program constitutes a major government-funded effort and provides some useful insights into the role of DOE in facilitating the transition of advanced coal-based technologies from demonstration into the commercial sector. Under the Clinton administration, there is a strong emphasis on accelerating the commercial deployment of new technologies and on developing markets for U.S. technologies both domestically and overseas. In this context the committee has been asked to make recommendations pertaining to EPACT Section 1301 (c), subparagraphs c(3), c(4), and c(5) (see Appendix B, this volume). As discussed in Chapter 1, these subparagraphs relate to the requirement for current FE RDD&C programs and the CCT program to deliver commercial technologies by 2010. Recommendations made by the Clean Coal Technology Coalition (CCTC) and the National Coal Council (NCC) for the future of the CCT program are reviewed below. The committee's conclusions and recommendations are given in Chapter 10.

COMMERCIALIZATION ISSUES

The steps required to commercialize any new technology differ greatly, but the fact that coal is a solid substance introduces a significant technical risk into the technology scale-up process. The difficulty of extrapolating the processing of solids from laboratory through pilot scale to commercial scale is widely recog-



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--> 8 Technology Demonstration and Commercialization EPACT specifically directs DOE to conduct demonstration and commercialization programs on coal-based technologies (Title XIII, Section 1301; see Appendix B, this volume). DOE's CCT program constitutes the major effort in this area, although relevant activities are also being conducted under the Office of FE's R&D program for coal. The CCT program constitutes a major government-funded effort and provides some useful insights into the role of DOE in facilitating the transition of advanced coal-based technologies from demonstration into the commercial sector. Under the Clinton administration, there is a strong emphasis on accelerating the commercial deployment of new technologies and on developing markets for U.S. technologies both domestically and overseas. In this context the committee has been asked to make recommendations pertaining to EPACT Section 1301 (c), subparagraphs c(3), c(4), and c(5) (see Appendix B, this volume). As discussed in Chapter 1, these subparagraphs relate to the requirement for current FE RDD&C programs and the CCT program to deliver commercial technologies by 2010. Recommendations made by the Clean Coal Technology Coalition (CCTC) and the National Coal Council (NCC) for the future of the CCT program are reviewed below. The committee's conclusions and recommendations are given in Chapter 10. COMMERCIALIZATION ISSUES The steps required to commercialize any new technology differ greatly, but the fact that coal is a solid substance introduces a significant technical risk into the technology scale-up process. The difficulty of extrapolating the processing of solids from laboratory through pilot scale to commercial scale is widely recog-

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--> nized. Piloting even at a 1,000 ton/day scale cannot completely ensure the same results at 10,000 ton/day. This differs from processing gases or liquids, where extrapolation from laboratory to full commercial scale in a single step is now commonly practiced, based on an in-depth understanding of the chemical engineering parameters governing such operations. For example, a 14,000 bbl/day commercial Mobil fixed-bed methanol-to-gasoline plant was designed and built based on a 4 bbl/day laboratory unit (Bibby et al., 1988). The difficulty of scale-up when processing solids, such as coal, increases with increasing complexity of the process. Systems that require multiple sequential or tightly integrated solids reactors are at a distinct disadvantage; simplicity is at a premium for solids processing, and this extends to the many auxiliary steps required for the demonstration of a complete coal-fired power generation system. Thus, in scaling-up coal technologies, notably for power generation, there is a need for prudent stepwise increases in capacity from laboratory to pilot plant to demonstration scale. The complexity of power generation systems implies that commercialization is particularly expensive. The objective of the DOE demonstration and commercialization effort is to enhance the process whereby a developing technology is demonstrated at the commercial scale such that it is regarded as commercially available by the ultimate user. In most instances this requires the mitigation or elimination of the additional technological and economic risks that the user associates with the adoption of a new as compared to a proven technology. In the power generation area, the investor-owned utility cannot generally assume the risk of a new technology, faced with a possible loss of return on investment from the rate-making authority if the technology does not perform as expected and requires modification. It is an accepted principle for advancing new technology to commercial maturity that the first-of-a-kind commercial plant is significantly higher in cost to build than subsequent plants and does not provide adequate information on all operating, maintenance, and cost issues. A new technology is not considered mature and commercially demonstrated until two to five applications of the technology have been installed, as illustrated by the generic capital cost learning curve shown in Figure 8-1. The issue for DOE is how to enhance the installation of additional applications of early demonstrations. CLEAN COAL TECHNOLOGY PROGRAM The CCT program is a technology development effort jointly funded by government and industry in which advanced coal-based technologies are being demonstrated at a scale large enough for the marketplace to judge their commercial potential. A unique feature of the program is that industry plays a major role in defining the demonstration project and in ensuring eventual commercialization. It is intended that once the program is complete the private sector should be able to make use of the technologies developed in the commercial arena without

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--> FIGURE 8-1 Capital cost learning curve. further government support. The industrial partner in each CCT project is required to contribute at least 50 percent of the total cost, indicating the extent of their commitment to develop a technology with a real commercial potential. The patent rights for inventions developed during the demonstration program are normally granted to the industrial participant, thereby preserving the incentives for subsequent commercialization. Five competitive solicitation cycles (CCT Rounds I through V) have been conducted, resulting in 45 active demonstration projects encompassing total public and private investments of $6.9 billion, of which DOE is providing $2.4 billion (34 percent) and private and other sources are providing $4.5 billion (66 percent). Currently authorized funding by solicitation round for the CCT program is given in Chapter 1. From CCT Round III onward, industrial program participants have been required to commercialize technologies in the United States on a best-effort, nondiscriminatory basis, although they cannot be forced to license technologies to their competitors. A summary of CCT activities is provided in Table 8-1. Additional information on demonstration projects in the CCT program is provided in Appendix E. ADVANCED POWER SYSTEMS DEMONSTRATION PROJECTS DOE's technology goals for the Advanced Power System demonstration projects were given earlier in Chapter 7 (Tables 7-1, 7-2, and 7-4). Many of the technologies being demonstrated in the CCT program are the same as those being targeted in the FE R&D program. As a result, a number of the CCT demonstrations are also being considered demonstrations under the FE R&D program, notably, first- and second-generation PFBC, first- and second-generation IGCC, IGFC, and mild gasification technology demonstrations. Of the 45 active CCT demonstration projects, 18 are scheduled for completion, 11 will be in operation, and the remaining 16 were in design and construction by the end of FY 1994.

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--> TABLE 8-1 Summary of CCT Activities Round Principal Goals Number of Proposals Submitted Number of Projects Selected; Current Status I Demonstrate feasibility of clean coal technologies for future commercial applications 51a 9 plus 14 alternates; 1 complete, 8 ongoing, including 3 alternates II Demonstrate technologies: 55 16; 4 withdrawn, 12 ongoing     Capable of being commercialized in 1990s         More cost-effective than current technologies         Capable of achieving significant reduction of SO2 and NOx emissions from existing facilities     III Demonstrate technologies capable of: 48 13; all ongoing     Being commercialized in 1990s         Achieving significant reductions in emissions of SO2 and/or NOx from existing facilities         Providing for future energy needs in environmentally acceptable manner     IV Demonstrate technologies capable of: 33 9; 2 withdrawn, 7 ongoing     Retrofitting, repowering, or replacing existing facilities while achieving significant reductions in SO2 and/or NOx emissions         Providing for future energy needs in environmentally acceptable manner     V Advance efficiency and environmental performance of coal-using technologies applicable to new or existing facilities 24 5; pending final approval a The majority of the proposals were for four technologies: coal preparation (10), coal gasification (10), atmospheric fluidized-bed combustion (9), and flue gas cleanup (7). Source: DOE (1994a). Advanced Emission Control Systems Of the 45 active CCT demonstration projects, 19 involve advanced emission control systems technologies aimed at the cleanup of SO2, NO, and particulates (see Chapter 7, Table 7-8). The 19 projects require an obligation of $672 million (approximately 15 percent of the program funding), of which the private sector has contributed approximately 58 percent. The demonstrations apply to 3,250

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--> MW of generating capacity (units from 5 to 605 MW in size). These activities are expected to have a relatively short-term payoff and result in commercially available technologies for compliance with the acid rain precursor provisions of the Clean Air Act. The technologies being developed also offer significant export potential. Integrated Gasification combined-cycle A key component for new power generation systems in the near- to mid-term periods (through 2020) will likely be the gas turbine. The fundamental thermodynamic advantage of a heat engine with a 1260 °C (2300 °F) (and rising) inlet temperature over the typical steam turbine with a 540 °C (1000 °F) inlet is very great and the main reason thermal efficiencies in excess of 50 percent are possible. In the foreseeable future, gas turbine capacity is anticipated to be in the range of 100 to 300 MW, including a combined steam generation cycle. This will require gasification systems that use between 1,000 and 3,000 tons/day of coal. The series of new gasification systems being demonstrated under the CCT program can be expected to achieve these levels, although most still fall in the lower end of the range. IGCC units being demonstrated under the CCT program (see Appendix E) have capacities of 65 to 480 MW (total capacity of 1,343 MW), and all are scheduled for completion between 1995 and 2000. Thermal efficiencies are predicted to reach 45 percent, with SO2, NOx, and particulate emissions well below New Source Performance Standards (NSPS) levels. A discussion of the gasification technologies being demonstrated under the CCT program is given in Chapter 6. Pressurized Fluidized-Bed Combustion Another new technology being demonstrated is PFBC. Two first-generation PFBC demonstrations, sized at 70 and 80 MW, are part of the CCT program, as is a 95-MW second-generation PFBC demonstration unit. PFBC technology has the potential to achieve 50 percent thermal efficiencies but only if hot gas cleanup systems can be improved and used in conjunction with advanced turbines (see Chapter 7). PFBC has a very compact footprint that makes it a viable technology for repowering existing generating units. Direct-Fired Systems The technology for direct firing of coal in a gas turbine or diesel engine has been developed through the proof-of-concept phase under the FE R&D program. In addition, a dual stationary coal-fired diesel engine with a combined rating of 14 MW will be demonstrated in Round V of the program. This activity is not scheduled to receive any further funding under the FE R&D program.

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--> Indirectly-Fired Systems The FE R&D program has supported this technology through two programs: EFCC (externally fired combined-cycle) and HIPPS (high-performance power system). A demonstration of EFCC technology at the 47-MW level is planned for Round V of the CCT program. Continuation of development work on HIPPS is proposed for FY 1995, with a goal of achieving 47 percent thermal efficiency (DOE, 1994b). If the HIPPS technology is to advance to the demonstration phase, the components that will be demonstrated in the CCT EFCC project must prove to be commercially viable. Thus, demonstration of HIPPS technology must await the outcome and economic evaluations of the EFCC demonstration. Advanced Pulverized Coal Systems As noted in Chapter 7, the FE R&D program is supporting the development of the low-emission boiler system with the goal of demonstrating a 42 percent efficient system with emissions one-half to one-third of the NSPS by the year 2000. For FY 1995, the FE R&D program has requested $7.6 million to continue engineering development and subsystem testing of this technology. Fuel Cells Development and demonstration of fuel cell technology have been transferred from the coal component of the FE R&D program to the gas component, on the basis that technology demonstration and commercialization will likely be accelerated using gas rather than coal. An IGCC demonstration selected in CCT Round V will utilize a portion of the clean coal gas to fuel a 2.5-MW molten carbonate fuel cell. FUTURE DIRECTIONS Additional CCT Solicitations Section 1321 of EPACT requires DOE to conduct additional solicitations for the development of cost-effective, higher-efficiency, low-emission coal utilization technologies for commercialization by 2010. Recommendations for the future of the CCT program have been made by two groups, the CCTC and the NCC. The CCTC, representing the coal, utility, manufacturing, design, and construction industries and states, advocates the demonstration of clean coal technologies and has made recommendations to DOE regarding the future of the CCT program (CCTC, 1993). The CCTC seeks to ensure that technologies demonstrated in whole or in part through the existing CCT program are also commercially deployed and thereby made ready for ''commercial application" as required

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--> by Section 1301 of EPACT. The CCTC's specific position regarding Sections 1301 c(3) and c(4) is as follows: While continuing to support the completion of the projects already selected in the current CCT program, the program would be modified to address commercial deployment by reducing the financial risks associated with the use of the technologies. The program would operate basically as it does now but would cost share only certain cost differentials when compared to a conventional technology. The DOE's cost share of the "risk gap" would be significantly less than the current 50 percent. Specifically, DOE support for commercial demonstration plants would be determined using a risk-based formula to make a given CCT cost competitive with conventional technologies. With regard to Section 1301 c(5), the CCTC would keep the same program elements and management structure in place, with a revised focus on cost sharing the financial risk. The proposed risk-based formula for determining cost sharing would address both capital cost risk and operating cost risk. As these risks decrease in subsequent demonstrations, so would the cost-shared DOE support, resulting in eventual commercial acceptance with no cost sharing. Timing of this future program must build on the first-of-a-kind projects and result in commercial acceptance to meet repowering and new capacity requirements from 2005 onward. The NCC, a federal advisory committee to the Secretary of Energy, has, at the request of the Secretary, made recommendations regarding the future direction of the CCT program (NCC, 1994). The NCC has recommended that no more solicitations be issued under the current CCT program. The NCC further recommends that the Secretary foster the establishment of a new federal-level CCT incentive program to stimulate initial and sustainable commercial deployment of CCT. The recommended CCT incentive program would provide approximately $1.1 billion of capital incentives and $0.3 billion in operating incentives over the 15-year period from 1995 to 2010. The incentives would offset 10 to 15 percent of the capital risk and help offset operating risks associated with first-of-a-kind and early commercial units. The incentive would be based on a percentage of the capital and operating cost risk differential between the CCT and conventional technology. For example, if the risk differential between a 400-MW IGCC project and conventional pulverized coal with FGD plant is $360 million, the federal incentive for the project would be $54 million or 15 percent of the differential. International CCT Initiative Section 1332 of EPACT (Innovative Clean Coal Technology Transfer program) proposes the development of a joint DOE/Agency for International Development clean coal technology program to encourage exports of U.S. technologies that allow more efficient, cost-effective, and environmentally acceptable use of

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--> coal resources. FY 1995 funding has been requested to implement an international initiative for "showcase" demonstration projects in clean coal technologies in China and Eastern Europe. Specifically, DOE has proposed that China receive approximately $50 million for an IGCC demonstration plant, and $25 million in support is proposed for power plant refurbishment in Eastern Europe. DOE expects these funds to be available from projects that were selected in the first five rounds of the CCT program but have dropped out of the program or may do so in the future. The first priority for the existing CCT program, mandated by Congress in Section 1301 of EPACT, is to conduct a research, development, and demonstration program that will result in CCT technologies that are ready for commercial use by 2010. Thus, in the view of the committee, the impact on the existing CCT program of using CCT program funds to support technology demonstrations in a foreign country requires careful examination. Funding of CCT technology in foreign countries in lieu of domestic demonstrations runs a risk of delivering little if any technology advancement, export opportunities, or lasting U.S. jobs. It is entirely possible that the demonstrations will provide a basis for a foreign country to copy the technology and provide subsequent installations itself. A further question raised by the committee concerns the suitability of IGCC technology to meet China's major increases in demand for electricity and significant environmental problems. Commercially available pulverized coal plants with modern flue gas cleanup technology may be more cost-effective and beneficial (see Chapter 3). Supporting funding for commercially available technology, including retrofit technologies for environmental control, could come from the traditional sources of overseas aid, without impacting the existing CCT program or the FE R&D program budget. ADVANCED FUEL SYSTEMS DEMONSTRATION PROJECTS As noted in Chapter 2, the objective of the Advanced Fuel Systems program is to develop systems that can produce coal-derived transportation fuels, chemicals, and other products at costs competitive with oil-derived products. At the present time, the prices of coal-derived liquid fuels are significantly greater than of those derived from petroleum or natural gas. Oil prices are not expected to rise sufficiently in the near future to change this situation. As a result, there is currently minimal private sector support for developing and demonstrating technologies for the conversion of coal to fuels at a commercial scale. One exception is in mild gasification technology. The FE R&D program has sponsored a process development unit for mild gasification (the Illinois Mild Gasification Facility) that is supported by 20 percent private sector investment. In addition, the CCT ENCOAL Mild Coal Gasification project aims to demonstrate the production of both a solid and a liquid fuel from coal. This approach has been attempted many times in the past and has not been successful (Probstein and Hicks, 1982), princi-

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--> pally because 50 to 70 percent of the feed coal remains as a low-volatile-content char that must be used as a fuel or feedstock. Pyrolysis as a source of liquid fuels has been commercially practiced only under wartime conditions in Germany between 1935 and 1945 based on the Lurgi sweep gas carbonization process. Current efforts have focused on using the char as a boiler fuel or in the production of form coke. The characteristics of the char and the resulting price paid for it have prevented this approach from being economical. DOE has no further plans to use the Illinois Mild Gasification Facility following completion of ongoing development activities. No additional funding for the facility has been requested for FY 1995. A stand-alone facility for producing finished liquid fuels from coal must necessarily be large to achieve economies of scale and will thus be very expensive. As discussed in Chapter 6, recent systems studies have projected equivalent crude prices of $30 to $35/bbl for stand-alone production of high-quality gasoline and distillate fuels. This cost, combined with the uncertainty in crude oil prices over the operating life of the liquefaction plant, are strong disincentives for demonstration and commercialization projects. However, coproduct systems combining F-T (Fischer-Tropsch) synthesis of coal liquids and electric power generation have the potential to reduce the equivalent crude cost of coal liquids by approximately $5 to $7/bbl (see Chapter 6, Gray, 1994; Tam et al., 1993).1 The above results, together with oil price projections for 2010 (EIA, 1994), indicate that demonstration and early deployment of liquefaction technology in coproduct systems may become economically attractive within the mid-term (2006-2020), that is, in approximately the same timeframe as installation of advanced IGCC power generation facilities. Nevertheless, the price projections from the studies assume "nth plant" costs. As for advanced power generation technologies, first-of-a-kind or pioneer plant demonstrations are likely to be significantly more expensive than fully commercial systems. Thus, the committee anticipates that some federal cost sharing of early demonstration plants, similar to that in the CCT program, will be necessary to stimulate industry participation, and ultimate adoption, of coproduct systems to produce coal liquids and electric power. FINDINGS Demonstration of advanced coal-based technologies at a commercial scale, as in the FE R&D and CCT programs, is an important step in the development of commercially available technologies. The demonstrations being supported by the FE R&D and CCT programs appear, for the most part, to be well directed toward advancing power generation technologies that have the potential 1   In the studies cited the economic return on electric power production was assumed to be constant, with the savings applied to the liquid products.

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--> to meet relevant goals for thermal efficiency, environmental control, and reduced costs. The program components and management of the current CCT program have demonstrated the ability to conduct a successful demonstration program, as evidenced by the involvement and financial support of the private sector. The commercial acceptance of new power generation technologies will be impeded by the remaining financial risk associated with secondand third-of-a-kind demonstration projects. REFERENCES Bibby, D.N., C.D. Chang, R.F. Howe, and S. Yurchak. 1988. Methane conversion. P. 251 in Proceedings of the Symposium on Production of Fuels and Chemicals from Natural Gas, April 2730, 1987, Auckland, New Zealand. Amsterdam: Elsevier Science Publishers. CCTC. 1993. Recommendations made by the Clean Coal Technology Coalition to the Department of Energy on the Future of the CCT Program, Oct. 6. DOE. 1994a. Clean Coal Technology Demonstration Program, Program Update 1993. U.S. Department of Energy, DOE/FE-0299P. Washington, D.C.: DOE. DOE. 1994b. FY 1995 Congressional Budget Request. U.S. Department of Energy, DOE/CR-0023, Vol. 4. Washington, D.C.: DOE. EIA. 1994. Annual Energy Outlook 1994. Energy Information Administration, U.S. Department of Energy, DOE/EIA-0383(94). Washington, D.C.: DOE. Gray, D. 1994. Coal Refineries: An Update. Prepared for Sandia National Laboratories by the Mitre Corporation under contract no. AF-7166. McLean, Virginia: The Mitre Corporation. NCC. 1994. Clean Coal Technology for Sustainable Development. Washington, D.C.: National Coal Council. Probstein, R.F., and R.E. Hicks. 1982. Synthetic Fuels. New York: McGraw-Hill. Tam, S.S., D.C. Pollock, and J.M. Fox. 1993. The combustion of once-through Fischer-Tropsch with baseload IGCC technology. P. 306 in Alternate Energy '93 held April 28-30, in Colorado Springs, Colorado. Arlington, Virginia: Council on Alternate Fuels.