Economic Analysis of Proposed IGCC Coal Power Plant and Alternatives
Synapse was hired by a coalition of public interest organizations to review the proposal by Duke Energy Indiana and Vectren to invest approximately $2 billion in a new integrated gasification combined cycle (IGCC) coal power plant at Edwardsport. The project included analysis and testimony by Bruce Biewald on computer modeling and resource planning, levelized cost comparisons, and ratemaking issues; by Phil Mosenthal of Optimal Energy on demand-side management potential and costs; Robert Fagan on renewable resource potential and costs; and David Schlissel on carbon dioxide regulations and power plant construction costs. The project team found that the Companies' planning for Edwardsport was inadequate, that the IGCC plant would increase dependence upon coal for electricity generation and would subject the Companies’ shareholders and customers to unnecessary costs and increased risks. Synapse witnesses recommended that the Commission reject the Companies’ request for approval of the proposal to construct and own the Edwardsport IGCC project, and instead require the Companies to do complete and proper planning which should include: (1) up-to-date construction cost estimates for IGCC and other resources; (2) analysis of the cost impacts on customers that reflect the ratemaking treatment that the Companies’ request be used for the resources; (3) use of a realistic range of low, mid, and high case projections for future carbon dioxide prices; (4) full consideration of cost-effective demand-side management, combined heat and power, and renewable resources, and (5) a proper risk analysis that recognizes a range of risks including but not limited to construction cost overruns and project delays as well as fuel prices and environmental compliance requirements.