Monday 15 September 2008

Why the Gasoline Engine Isn't Going Away Any Time Soon

Blame it on technology, cost -- and the American way of life
By JOSEPH B. WHITESeptember 15, 2008;

An automotive revolution is coming -- but it's traveling in the slow lane.
High oil prices have accomplished what years of pleas from environmentalists and energy-security hawks could not: forcing the world's major auto makers to refocus their engineers and their capital on devising mass-market alternatives to century-old petroleum-fueled engine technology.
With all the glitzy ads, media chatter and Internet buzz about plug-in hybrids that draw power from the electric grid or cars fueled with hydrogen, it's easy to get lulled into thinking that gasoline stations soon will be as rare as drive-in theaters. The idea that auto makers can quickly execute a revolutionary transition from oil to electricity is now a touchstone for both major presidential candidates.
That's the dream. Now the reality: This revolution will take years to pull off -- and that's assuming it isn't derailed by a return to cheap oil. Anyone who goes to sleep today and wakes up in five years will find that most cars for sale in the U.S. will still run on regular gas -- with a few more than today taking diesel fuel. That will likely be the case even if the latter-day Rip Van Winkle sleeps until 2020.
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Free to Drive
Cars aren't iPods or washing machines. They are both highly complex machines and the enablers of a way of life that for many is synonymous with freedom and opportunity -- not just in the U.S., but increasingly in rising nations such as China, India and Russia.
Engineering and tooling to produce a new vehicle takes three to five years -- and that's without adding the challenge of major new technology. Most car buyers won't accept "beta" technology in the vehicles they and their families depend on every day. Many senior industry executives -- including those at Japanese companies -- have vivid memories of the backlash against the quality problems that resulted when Detroit rushed smaller cars and new engines into the market after the gas-price shocks of the 1970s. The lesson learned: Technological change is best done incrementally.
Integral to Modern Life
Technological inertia isn't the only issue. Cars powerful enough and large enough to serve multiple functions are integral to modern life, particularly in suburban and rural areas not well served by mass transit.
Ditching the internal-combustion engine could mean ditching the way of life that goes with it, and returning to an era in which more travel revolves around train and bus schedules, and more people live in smaller homes in dense urban neighborhoods.
Economic and cultural forces -- high gas prices and empty-nest baby boomers bored with the suburbs -- are encouraging some Americans to return to city life, but by no means all. In rising economies such as China, meanwhile, consumers are ravenous for the mobility and freedom that owning a car provides.
CAR MAKERS AND ALTERNATIVE FUEL


Corbis
A Peek at GM's New Battery-Powered Volt
Mitsubishi's President on Electric-Car Plans
A Tiny Solution to High Gas Prices
Honda CEO on Hydrogen-Car Plans
Test Driving the iMiEV Electric Microcar
Mazda's Hydrogen Hybrid Unites Green Technology
Japanese Car Runs on Water
Desire Isn't Enough
That doesn't mean auto makers and their technology suppliers aren't serious about rethinking the status quo. But displacing internal-combustion engines fueled by petroleum won't be easy and it won't be cheap.
It also may not make sense. Over the past two decades, car makers have at times declared the dawn of the age of ethanol power, hydrogen power and electric power -- only to wind up back where they started: confronting the internal-combustion engine's remarkable combination of low cost, durability and power. One effect of higher oil prices is that car makers now have strong incentives to significantly improve the technology they already know.
"There are a lot of improvements coming to the internal-combustion engine," says John German, manager for environmental and energy analysis at Honda Motor Co.'s U.S. unit.
Refinements to current gasoline motors, driven by advances in electronic controls, could result in motors that are a third to half the size and weight of current engines, allowing for lighter, more-efficient vehicles with comparable power. That, Mr. German says, "will make it harder for alternative technologies to succeed."
THE ROAD AHEAD

Gasoline has powered the vast majority of the world's automobiles for the past century. But now amid rising oil prices and increasing concern about tailpipe emissions and global warming, new types of propulsion technologies are starting to emerge. Here's an overview of what's here now, and what's ahead. (Adobe Acrobat is required)
By 2020, many mainstream cars could be labeled "hybrids." But most of these hybrids will run virtually all the time on conventional fuels. The "hybrid" technology will be a relatively low-cost "micro hybrid" system that shuts the car off automatically at a stop light, and then restarts it and gives it a mild boost to accelerate.
Cheaper Than Water
Gasoline and diesel are the world's dominant motor-vehicle fuels for good reasons. They are easily transported and easily stored. They deliver more power per gallon than ethanol or other biofuels. And until recently petroleum fuels were a bargain, particularly for consumers in the U.S. Even now, gasoline in the U.S. is cheaper by the gallon than many brands of bottled water.
Car makers have made significant advances in technology to use hydrogen as a fuel, either for a fuel cell that generates electricity or as a replacement for gasoline in an internal-combustion engine. But storing and delivering hydrogen remains a costly obstacle to mass marketing of such vehicles.
Natural gas has enjoyed a resurgence of interest in the wake of big new gas finds in the U.S., and Honda markets a natural-gas version of its Civic compact car.
But there are only about 1,100 natural-gas fueling stations around the country, of which just half are open to the public, according to the Web site for Natural Gas Vehicles for America, a group that represents various natural-gas utilities and technology providers.
Among auto-industry executives, the bet now is that the leading alternative to gasoline will be electricity. Electric cars are a concept as old as the industry itself. The big question is whether battery technology can evolve to the point where a manufacturer can build a vehicle that does what consumers want at a cost they can afford.
"The No. 1 obstacle is cost," says Alex Molinaroli, head of battery maker Johnson Controls Inc.'s Power Solutions unit. Johnson Controls is a leading maker of lead-acid batteries -- standard in most cars today -- and is working to develop advanced lithium-ion automotive batteries in a joint venture with French battery maker Saft Groupe SA.
Harry Campbell
The Costs Add Up
Cost is a problem not just with the advanced batteries required to power a car for a day's driving. There's also the cost of redesigning cars to be lighter and more aerodynamic so batteries to power them don't have to be huge.
There's the cost of scrapping old factories and the workers that go with them -- a particular challenge for Detroit's Big Three auto makers, which have union agreements that make dismissing workers difficult and costly.
A world full of electricity-driven cars would require different refueling infrastructure but the good news is that it's already largely in place, reflecting a century of investment in the electric grid.
The refueling station is any electric outlet. The key will be to control recharging so it primarily happens when the grid isn't already stressed, but controllers should be able to steer recharging to off-peak hours, likely backed by discount rates for electricity.
Big utilities in the two most populous states, California and Texas, are adding millions of smart meters capable of verifying that recharging happens primarily in periods when other electricity use is slack. Studies show the U.S. could easily accommodate tens of millions of plug-in cars with no additional power plants. Three big utilities in California are planning to install smart meters capable of managing off-peak recharging. The estimated cost: $5 billion over the next five years.
Remembering the Past
Americans often reach for two analogies when confronted with a technological challenge: The Manhattan Project, which produced the first atomic bomb during World War II, and the race to put a man on the moon during the 1960s. The success of these two efforts has convinced three generations of Americans that all-out, spare-no-expense efforts will yield a solution to any challenge.
This idea lives today in General Motors Corp.'s crash program to bring out the Chevrolet Volt plug-in hybrid by 2010 -- even though the company acknowledges the battery technology required to power the car isn't ready.
Even if GM succeeds in meeting its deadline for launching the Volt, the Volt won't be a big seller for years, especially if estimates that the car will be priced at $40,000 or more prove true.
Moon-shot efforts like the Volt get attention, but the most effective ways to use less energy may have less to do with changing technology than with changing habits.
A 20-mile commute in an electric car may not burn gasoline, but it could well burn coal -- the fuel used to fire electric power plants in much of the U.S. The greener alternative would be to not make the drive at all, and fire up a laptop and a broadband connection instead.
--Mr. White is a senior editor for The Wall Street Journal in Washington.
Write to Joseph B. White at joseph.white@wsj.com

Consumers ditch bottled water and tap into free drink

By Jenny Wiggins in London
Published: September 14 2008 23:29

The ubiquitous plastic water bottle, long the bane of environmental campaigners, is being ditched by consumers in the US and Europe as incomes slump and people return to the tap for a free drink.
Sales of the world’s best known brands, including Aquafina and Volvic, have been tumbling in some countries as weakening economies take a toll on household incomes and consumers become more concerned about the environmental impact of throwing away the plastic packaging of a liquid that can be drunk for free.
In the US, where people drink more bottled water than any other country, supermarket sales are running at their slowest rate since bottled water started becoming popular a decade ago.
Total sales volumes are up only 1 per cent this year (including recently popular water brands such as Glaceau, which are “enhanced” with vitamins and fruit infusions), according to US soft drinks newsletter, Beverage Digest.
This compares with growth of 11 per cent over the same period last year, and more than 21 per cent in 2006.
“The bottled water industry has slowed dramatically this year,” said John Sicher, editor of Beverage Digest. “With the challenging economy for many consumers there’s been some increase in tap water and some trading down to less expensive beverages [such as supermarket own-label water brands].”
PepsiCo’s Aquafina brand has had a particularly bad year in the US, with supermarket sales volumes down 12.7 per cent year to date.
In the UK, sales volumes have slid 4.7 per cent and sales revenues have fallen 5.1 per cent in the 12 months to mid-August, according to research group Nielsen. This includes a 2.5 per cent drop in sales volumes of Evian, and a 7.4 per cent drop in sales volumes of Volvic.
The slump in bottled water sales, which are worth some €70bn ($99.5bn) annually, is hurting revenues at owners of the world’s biggest brands.,
At Danone, where brands such as Evian, Volvic, and Aqua contribute one-third of total group sales, revenues from bottled water dropped 0.8 per cent in the second quarter to €1.1m.
At Nestlé, where brands including Vittel, Perrier and Poland Spring contribute 10 per cent or SFr4.9m ($4.4m) to group sales, revenues dropped 1.1 per cent in the first half of the year.
Copyright The Financial Times Limited 2008

The politics of wind power

By Mark Svenvold
Published: September 14, 2008

"The moment I read that paper," the wind entrepreneur Peter Mandelstam recalled, "I knew in my gut where my next wind project would be."
I was having lunch with Mandelstam last fall to discuss offshore wind in general and how he and his tiny company, Bluewater Wind, came to focus on Delaware as a likely place for a nascent and beleaguered offshore wind industry to establish itself. Mandelstam had been running late all morning. I knew this because I received a half-dozen messages on my cellphone from members of his staff, who relayed his oncoming approach like air-traffic controllers guiding a wayward trans-Atlantic flight into Kennedy International Airport. This was the Bluewater touch — crisp, informative, ever-helpful, a supercharged, Eagle Scout attentiveness that was part corporate style, part calculated public-relations approach. It would pay off tremendously in his company's barnstorming campaign of Delaware town meetings and radio appearances to capture what he had reason to believe would be the first offshore-wind project in U.S. history.
These features were, unsurprisingly, manifestations of Mandelstam himself, who arrived in a suit and tie, a wry smile, his wiry hair parted in the middle and tamped down like someone who had made a smooth transition from a Don Martin cartoon. Mandelstam, a 47-year-old native New Yorker who is capable of quoting Central European poets and oddball meteorological factoids with ease, had long committed himself — and the tiny company he formed in 1999 — to building utility-scale wind-power plants offshore, a decision that, to many wind-industry observers, seemed to fly in the face of common sense. Offshore marine construction was wildly, painfully expensive — like standing in a cold shower and ripping up stacks of thousand-dollar bills. The very laws for permitting and siting such projects had yet to be enacted. Indeed, the recent past was littered with failed offshore wind projects. Never mind that there were so many more opportunities in the continental United States to build land-based wind farms, which cost half as much as offshore projects. While wind-energy companies in Europe were moving offshore at great speed, neither Mandelstam nor anyone else had ever successfully built an offshore wind farm in the United States. Failed, stalled or delayed projects sounded like a catalogue of coastal shipwrecks: Long Island, Padre Island, Cape Wind. Entrepreneurs, of course, need to anticipate the next market, but when it came to offshore wind, Mandelstam seemed too far ahead of the curve to ever succeed.
Then in 2005 Willett Kempton, a University of Delaware professor in the school's College of Marine Studies, began teaching a course on offshore wind power. "In our department," Kempton recalls, "most of my colleagues were working on some aspect of the global-warming problem." Coal-fired power plants, a major contributor of carbon in the atmosphere, had recently been linked in Delaware to clusters of cancer outbreaks and to high levels of mercury in the state's fishery. One of the first things Kempton and his class did was go down the list of clean-energy options for Delaware — "It was a pretty short list," he said. Solar power was still far too expensive to be economically sustainable. And the state had no land-based wind resource to speak of. But a team of students, led by Amardeep Dhanju, became curious about measuring the winds off the coast to determine whether they might serve as a source of power. What he found was that Delaware's coastal winds were capable of producing a year-round average output of over 5,200 megawatts, or four times the average electrical consumption of the entire state. "On the wholesale electricity markets," Dhanju wrote, "this would produce just over $2 billion" in annual revenue.
It so happened that the day Dhanju's semesterlong research project was discussed, Kempton had invited several wind entrepreneurs to class. Mandelstam was the only invitee to show up in person. It was then that Mandelstam had his eureka moment. The amount of power Dhanju was describing, Mandelstam knew from Kempton, was but a small fraction of an even larger resource along what's known as the Mid-Atlantic Bight. This coastal region running from Massachusetts to North Carolina contained up to 330,000 megawatts of average electrical capacity. This was, in other words, an amount of guaranteed, bankable power that was larger, in terms of energy equivalence, than the entire mid-Atlantic coast's total energy demand — not just for electricity but for heating, for gasoline, for diesel and for natural gas. Indeed the wind off the mid-Atlantic represented a full third of the Department of Energy's estimate of the total American offshore resource of 900,000 megawatts.

ScottishPower sees North Sea as carbon solution


Longannet power station could become a centre of excellence for new technology, according to ScottishPower

Robin Pagnamenta, Energy and Environment Editor

A plan to liquefy carbon dioxide emissions and transport the waste gas for permanent burial in rocks beneath the North Sea has been drawn up by ScottishPower.
The energy company is pitching its plans to the Government, hoping that it will win a competition to build a pilot power plant that will capture CO2 and store it safely. The utility, which is owned by Iberdrola, of Spain, hopes that the ambitious project will lay the ground for a vast new business opportunity if future European legislation to tackle climate change forces polluters to trap and store their carbon emissions.
Nick Horler, chief executive of ScottishPower, told The Times that the company believed that it had identified a rock formation in the North Sea that could store all of Europe's emissions of CO2 for the next 600 years.
Its plan to install carbon capture and storage (CCS) technology at the Longannet coal-fired power station in Fife is one of four entries that have been submitted in a Government competition to develop the world's first CCS power station of a commercial scale by 2014.

ScottishPower has proposed converting one of the four burner units at Longannet — Scotland's largest power station, with generating capacity of up to 2,600 megawatts — to use CCS technology built by Aker, a Norwegian engineering group. It would strip out the carbon dioxide emitted by the burning of coal using chemical solvents. The gas would be pressurised and liquefied, allowing it to be piped using existing oil and gas pipelines for secure storage beneath the seabed.
ScottishPower is working on the scheme with Marathon Oil. The Texas-based oil and gas explorer would handle the transportation of the surplus liquid via existing North Sea pipes.
Scientists and geologists at Edinburgh University are also working on identifying safe long-term storage in sub-sea rocks.
About £100 million of government funding will be available for the project if it wins the competition to build a 300-megawatt CCS unit — which would be about ten times bigger than the largest CCS unit yet built anywhere in the world. A winner will be announced next summer.
Mr Horler said that the use of an existing coal-fired power station such as Longannet, which has been operating on the upper Firth of Forth since 1972, would avoid the controversy associated with the construction of new coal-fired stations, such as E.ON's proposed plant at Kingsnorth, on the Medway Esturay, in Kent, which is one of the three other entries. He said that it would form part of a larger investment programme for Longannet.
The remaining two submissions would also involve the construction of new coal-fired plants.
ScottishPower burns between four million and six million tonnes of coal a year at Longannet and at Cockenzie power station, in East Lothian.
“Longannet could become the centre of excellence for this technology,” Mr Horler said. “Ultimately, this could be a massive opportunity. It could become a hub, handling carbon emissions from all over Scotland and the North of England.”

Carbon capture stations must not be delayed

By Martin Rees and Nick Butler
Published: September 14 2008 19:29

Despite the economic downturn and rising prices, global energy demand continues to rise; so do carbon emissions.
In 2008 the world will use 50 per cent more oil, gas and coal than in 1980. Emissions from fossil fuels will be 30 per cent higher than in 1990 – the baseline for the Kyoto targets. The atmospheric concentration of carbon is now 387 parts per million – against 280ppm before the industrial revolution. On current trends the figure will pass 400ppm within a decade and will be more than 450ppm by 2050.
Climate change can seem so complex and global that action by any one country or individual can seem futile. In reality, however, much can be done using known and proven technology. Energy use could be cut by at least 20 per cent by matching Japanese standards of efficiency. Deforestation could be limited or reversed. Proven technologies such as wind, solar and systems to convert waste into power could be deployed. Beyond the proven, we could invest to make those alternatives cheaper and explore ambitious longer-term options: for example, large-scale solar generation in the Sahara, combined with a pan-European direct current (DC) transmission grid.
None of these possibilities, however, will provide sufficient energy in time to forestall the increasing use of hydrocarbons. Today, oil, coal and natural gas provide more than 80 per cent of world demand. On business-as-usual projections that percentage will be un­changed in 2030. That means volumes will increase by about 50 per cent with a comparable growth in emissions. Today, renewables supply just 1 per cent of global demand. Even a tenfold increase would leave carbon emissions growing.
In reality our dependence on fossil fuels is likely to persist until 2050. There seems no way to curtail the serious risk of long-term global warming unless – well before 2050 – we capture much of the carbon emitted when fossil fuels are burnt. The technology is available. Carbon capture and storage (CCS) extracts and buries the carbon from any hydrocarbon source rather than allowing emissions to enter the atmosphere.
Small-scale projects have shown that the technology works but we now need between 10 and 20 full-scale demonstration plants to identify the most effective techniques and the most secure storage options. The Group of Eight leading industrialised nations and the European Union have endorsed this approach but very little is happening – certainly nothing with the urgency that the challenge demands.
Each plant will cost an estimated €1bn ($1.4bn) – not a trivial sum, but a fraction of the €40bn spent each year by the EU on agricultural support and the €200bn spent by European governments on defence.
It is time for Europe’s leading economies to initiate the demonstration process as part of their commitment to serious action on climate change. For the UK the opportunity and the challenge are immediate. The decision to proceed with a new coal-fired power station at Kingsnorth should be accompanied by a decision to begin work immediately on a CCS demonstration plant in Britain. Kingsnorth’s licence to operate should be limited to 10 years and extended only if CCS technology is deployed.
Climate change is no longer a remote long-term possibility but a present reality – all too visibly demonstrated by the melting of Arctic sea ice. If emissions rise unchecked, temperatures may rise by significantly more than the 2°C that is now almost universally viewed as inevitable.
There is substantial uncertainty about the sensitivity of temperature to the level of carbon concentration. Climate models can, however, assess the likely range. We should be most worried by the high-end tail of the probability distribution – the risk of a really drastic climate shift. A 2- or even 3-degree increase might seem manage­able but we should remember that the shift in temperature from the depths of the last ice age to the present day has been just 5 degrees. Any increase that comes will also be far from uniform. The land warms more than the sea; higher latitudes more than the low. In areas such as the Arctic, any change can have untold, self-reinforcing effects. The average numbers tend to gloss over these truths.
The risks are great and probably greater than we realise. Most importantly, they are risks we need not take.
Lord Rees is president of the Royal Soc­iety. Nick Butler chairs the Centre for Energy Studies at the Cambridge Judge Business School
Copyright The Financial Times Limited 2008

Cleaning Up Coal's Act


New projects offer the chance to tap inaccessible reserves, as well as limit the release of harmful gases
By DAVID WINNINGSeptember 15, 2008;

BEIJING -- India and China are at the forefront of a new wave in clean-coal technology that has the potential to tap enormous and otherwise inaccessible coal reserves -- and to slow the speed of climate change.
The Asian giants are investigating large-scale commercial projects that would produce energy by burning the coal where it lies, deep below the Earth's surface. Building on pilot projects in the U.S. and elsewhere, the two countries are also looking at the possibility of capturing and permanently storing underground the gases produced, like carbon dioxide, which scientists believe cause global warming.
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The underlying technology is one pioneered by the Soviets during the 1930s, called underground coal gasification -- a way to tap energy from coal that was impossible or too costly to bring to the surface. A borehole is drilled down to the coal seam, which is then ignited. Oxygen is forced down through the borehole to feed the combustion. Gases produced by the combustion are then forced out a second borehole to the surface, where they are harnessed to turn turbines or for the production of chemicals. A power plant in Uzbekistan has been using the process for nearly 50 years. But elsewhere the practice was largely abandoned as increasing reserves of oil and natural gas were discovered, providing a cheaper alternative.
New Life
Now, thanks to higher oil and gas prices, underground coal gasification has again become cost-competitive. Advances in the technology also make the practice more attractive. Tests in Europe in the late 1990s demonstrated it was possible to have greater control of deep drilling, to create larger cavities in the coal seam for the gases and to provide more efficient combustion. Also, while the process once was criticized for generating large quantities of hydrogen as a useless byproduct, hydrogen is now in demand as a feedstock for the chemical industry and shows potential as an alternative fuel for vehicles.
Experts say underground gasification could triple or quadruple recoverable coal reserves globally, offsetting declines in other energy reserves such as crude oil. China and India have the world's third- and fourth-largest coal reserves, respectively. The U.S. has the most, and Russia is No. 2, according to industry estimates. China is believed to have conducted more trials of the process than any other country over the past 10 years; one estimate counts at least 17 since 1991. A Chinese-built chemical plant in Inner Mongolia now uses the process to produce a diesel-fuel substitute, and the Chinese company that built the plant has plans for a much larger sister plant in China itself. India, meanwhile, plans to use underground gasification both to generate more power and to produce pesticides and chemicals.
Heavy use of coal already in rapidly developing countries like China and India has come at a price of worsening pollution, particularly from traditional coal-fired plants that aren't fitted with equipment to strip out sulfur and capture emissions. Thus, underground gasification also presents an attractive alternative because it produces no sulfur oxide or nitrogen oxide, there are lower levels of mercury and particulates, and the ash stays underground. Experts say the technology is especially suitable for low-rank coals like lignites and sub-bituminous coal, which produce less heat when burned due to their high ash content, and are highly polluting.
"This has driven a lot of recent investigation in India where that is a major technological limitation to their coal development because their coal is 35% to 50% ash," says Julio Friedmann, leader of the carbon-management program at the Lawrence Livermore National Laboratory in Livermore, Calif.
Other countries such as the U.S., U.K., South Africa and Australia have all shown renewed interest in the process over the past decade. Eskom Holdings Ltd., the biggest power generator in South Africa, performed a trial at the Majuba coal field north of Johannesburg, which has reserves of 1.2 billion tons. U.S. and British energy companies are studying the possibility of using it in the Powder River Basin along the Wyoming-Montana border, the largest source of mined coal in the U.S. In Britain, officials hope the process will provide access to vast coal reserves under the North Sea.
FIRE DOWN BELOW

• Coal Wave: China and India are moving toward large-scale adoptions of a clean-coal technology -- underground coal gasification -- that burns hard-to-reach deposits deep underground, and holds promise for capturing and storing the resulting greenhouse gases.
• Some Concerns: More testing is necessary to investigate the possibilities of underground water contamination and large cave-ins.
• Moving Ahead: China is already using the technology at one plant and has plans for more. India is still forming its plans.
Concerns Linger
Experts are still cautious about rolling out the process on a massive scale. There's some concern that it will contaminate underground water supplies, or cause serious incidents of subsidence, which involves land sinking into the cavities created when the coal seams are drilled and burned out.
Mr. Friedmann says the risk of subsidence is small if a good site is chosen and the surrounding rock strata is sufficiently strong. Water contamination is avoidable, he says, if operators manage the pressure in the cavity properly. The risks of subsidence and contamination also generally decrease with depth, he says.
Underground coal gasification isn't the only "clean-coal" technology in the works. One of the most popular is a technique known as integrated gasification combined cycle system, or IGCC. IGCC plants bring the coal to the surface, where it is heated and turned into synthetic gas, which then turns a turbine to generate electricity. Duke Energy Corp. has won approval from state regulators for a $2 billion IGCC plant in Indiana. American Electric Power Co. is pursuing IGCC projects in West Virginia and Ohio, and NRG Energy Inc. has proposed building a $1.5 billion IGCC plant in upstate New York.
But because the above-ground process requires expensive gasification equipment -- and extraction of the coal -- it's considerably more expensive than the underground gasification process. GasTech Inc., a Casper, Wyo.-based gas-exploration company, says its studies show that capital costs of building an underground-gasification facility are 25% lower and its operating costs 50% lower than a comparable IGCC plant.
Carbon Capture
A large-scale project that includes carbon capture and sequestration, meanwhile, is still years away. The big hope is that carbon dioxide produced in the process can be pumped back into the void left by the combustion of the coal underground, and permanently sequestered from the atmosphere, helping to reduce the emission of greenhouse gases. But experts say more tests are needed before it can be proved that carbon dioxide can be permanently stored in the cavities created, and at an affordable cost. Indeed, carbon capture would likely make underground gasification more expensive.
China has about 30 projects in different phases of preparation that use underground coal gasification, says Ming Sung, a former vice-president of XinAo Holdings Ltd., a unit of the Chinese energy company ENN Group. Mr. Sung is now chief representative, Asia-Pacific, at the Clean Air Task Force, a Boston-based nonprofit advocacy group. So far, there is only one plant operating, a methanol plant in Inner Mongolia operated by ENN Group. But the company is drawing up plans for a similar plant in Liaoning province that will be 15 times larger, says Mr. Sung. The new plant will produce 300,000 metric tons of methanol a year, which will be converted into dimethyl ether, a substitute for diesel. A spokeswoman for ENN's XinAo unit says the plant is still in the preparation stage.
India, meanwhile, wants to use underground gasification to access an estimated 350 billion tons of coal discovered by state-run Oil & Natural Gas Corp. in the states of Gujarat and West Bengal. Some of the carbon dioxide produced could be pumped into underground oil reservoirs to boost recovery of heavy oil discovered in Gujarat. This is being done in an Energy Department-funded project straddling the U.S. and Canadian border. Dakota Gasification Co. is piping carbon dioxide from a coal-gasification plant in Beulah, N.D., to an oil field in Saskatchewan where it has helped increase the field's production, according to the Energy Department.
Last year, India compiled a 93-page status report on underground coal gasification that highlighted plans from many of the country's biggest companies, including Oil & Natural Gas, the conglomerate Reliance Industries Ltd. and state-run natural-gas distributor GAIL India Ltd. According to the report, GAIL envisages three commercial UCG-powered plants in operation by 2015. The company declined to comment.
Many companies say they want governments to provide incentives before they get involved. In its submission to the Indian government, for example, Reliance Industries said it wanted a similar fiscal regime to that provided to producers of coalbed methane because UCG "remains untested in India and has many inherent uncertainties." These incentives include a tax holiday for seven years and the freedom to use, sell and price any gas that is produced. A company spokesman declined to comment further.
--Mr. Winning is a news editor for Dow Jones Newswires in Beijing.
Write to David Winning at david.winning@dowjones.com