Syngas a Savior: Consumers Could Save Money and Jobs Could Stay Home if Gasification Bill is Enacted

America is now facing the highest energy prices since the gas lines of the 1970s. In addition to soaring prices at the pump, the last few years have seen natural gas prices more than double, costing American consumers and homeowners an extra $75 billion every year, and costing American workers their jobs as industry moves offshore in search of lower energy costs. Faced with the prospect of prices growing even higher, Congress has begun considering an innovative proposal to radically expand the deployment of advanced gasification technology, which can make clean-burning gas from abundant domestic coal, renewable biomass and waste petroleum products.

This could be a giant first step toward taming our spiraling energy costs in an environmentally responsible way and would stimulate economic development in Pennsylvania and other industrial and coal producing states.

For most of U.S. history, much of our industry and utilities have been fueled by coal: the United States is the Saudi Arabia of coal, home to fully a quarter of the world's known coal reserves. But while coal still supplies 51 percent of our electricity today, over the last 15 years almost all new power plants have been built to run on cleaner-burning natural gas. The problem is, in just the last few years, it has become clear that the United States has fewer natural gas reserves than we thought, and now we face the prospect of importing expensive liquefied natural gas to cover the shortfall.

Gasification technology offers the possibility to create a new domestic supply of gas. It works by converting the hydrocarbons in coal, biomass and waste petroleum products into a gas called "syngas" that can be used in place of natural gas to generate power, or used in manufacturing as fuel or feedstock. Because the syngas is cleaned prior to combustion, it produces very little air pollution. It is also easier to capture greenhouse gas emissions from gasification power plants than from traditional coal plants, raising the possibility that, with additional technology development, gasification plants could generate power from coal with less contribution to global warming.

Gasification is already a reality: commercial-scale gasification power plants built with Department of Energy support are operating right now in Indiana and Florida. Commercial gasification technologies are available from General Electric, ConocoPhillips and Shell. China currently is building nine gasification plants, and two major U.S. electric power companies, American Electric Power and Cinergy Corp., have announced their intention to build coal-gasification power plants by the end of this decade.

But though the technology is proven and ready, it is still more expensive to build gasifiers than conventional coal plants because the technology is new, and construction and operating uncertainties raise financing costs. That means that if Congress does not act, only a handful of public utility commissions will be willing to sign on and pass these extra costs to their ratepayers.

The federal government could stimulate a broad-based National Gasification Strategy very efficiently using loan guarantees to finance the construction of new gasifiers. Financing 80 percent of construction with federally guaranteed loans, similar to the Alaskan Gas Pipeline plan, would minimize the impact on our overstretched federal budget and substantially lower the cost of power and synthesis gas output. The loans would be backed by contracts to purchase each plant's output negotiated with creditworthy industrial companies or utilities with approval of state public utility commissions.

Together with other flexible finance options, such a plan could make clean gasification technology broadly available across the country, producing affordable syngas at $4 in a $7 mmbtu natural gas market and power at combustion technology prices. Allocating $3 billion of credit enhancement to a deployment program could stimulate 50 gasification projects over 10 years and leave room to fund greenhouse gas (carbon dioxide) capture and storage demonstrations and other advanced technology development. With these initial plants built, construction costs would drop over time, and they would provide the energy equivalent of the 1.5 trillion cubic feet of natural gas — equal to natural gas deliveries from the proposed Alaskan Gas Pipeline.

CEOs from the chemical, pulp and paper, fertilizer and glass industries recently wrote to Senate Energy and Natural Resources Committee Chairman Pete Domenici calling for just such an aggressive national gasification initiative: "U.S. industry would be able to shift from over-reliance on an increasingly expensive energy and feedstock resource — natural gas — to less expensive, more widely available resources: vast domestic reserves of coal, petroleum refining residues and biomass."

Sen. Lamar Alexander, R-Tenn., introduced a bill, co-sponsored by Sen. Tim Johnson, D-S.D., to pursue a National Gasification Strategy that would be a real bargain compared with the alternative: importing ever more expensive natural gas, costing consumers tens of billions every year and driving U.S. industries overseas. Sen. Ken Salazar, D-Colo., introduced another version of a National Gasification Strategy. Let's hope Congress will seize this opportunity to use American technology and resources to cut our increasing dependence on expensive foreign energy.

William G. Rosenberg is a professor in the department of engineering and public policy, Carnegie Mellon University, and a senior fellow at Harvard's Kennedy School of Government. He previously served as assistant administrator for air and radiation at the U.S. Environmental Protection Agency.