Want Cleaner Coal? Duke Energy Says It's Gonna Cost Ya

Last Updated Apr 19, 2010 5:54 PM EDT

The coal industry has struggled unsuccessfully to spruce up its bad rep for years. Burning coal for energy is dirty and getting it out of the ground can be dangerous -- the Massey Energy (MEE) mine explosion was a stark reminder of just how risky it can be.

If the fuel source wasn't so cheap and abundant, coal would have faded from our collective memory decades ago. But what if we could make one piece of the coal-mining equation cleaner? Would people pay for it? What if your utility bill rose 19 percent?

Duke Energy (DUK) is building a massive 618-megawatt coal power plant in Indiana that aims to be a whole lot cleaner than its counterparts, including the 160-megawatt coal plant it will replace. It's also expensive and getting more so by the day. And the power plant isn't expected to be done until 2012, which leaves two more years for costs to rise.

How much more, you dare ask? If history is at all a guide, consider this: When regulators first approved Duke's power plant in 2007, it was bigger -- at 630 megawatts -- and was expected to cost about $2 billion. Just a few days ago, Duke upped the project cost -- something it did just five months before -- to nearly $2.9 billion. If approved by the Indiana Utility Regulatory Commission, rates will increase about 19 percent, on average, for customers. The increase will be phased into rates by 2013.

Turns out, building a cleaner coal power plant is a lot more complex than Duke had anticipated. Instead of burning coal for electricity, this plant will convert coal into a synthetic gas. Pollutants like mercury are stripped out of the gas before it's burned to produce electricity. The new plant, slated to open in 2012, uses one-tenth of the amount of water per day compared to Duke's existing Indiana coal plant. And it manages to produce 10 times the power and still reduce its rate of emissions. Duke will test the capture and underground storage of carbon dioxide emissions at the plant, a technology the coal industry is counting on to lower emissions.

Until carbon capture and storage technology improves, the costs will continue to soar. Energy Secretary Steven Chu says carbon capture and storage as it exists today would increase the cost of coal-generated energy by about 80 percent. And it's already going to cost Indiana customers. Duke already received an approval to charge ratepayers $17 million to study capturing carbon dioxide and has asked to pass on another $121 million to customers to pay for a geological study for underground carbon storage.

Customers may accept a 19-percent rate increase phased in over several years. But it's only going to get tougher for Duke to get approval if the company doesn't rein in costs soon. It also highlights just how complicated -- and costly -- it's going to be for the coal industry to adapt to a government-led push to go green.

Photo of a coal-fired power plant in Virginia from Wikimedia CC 2.5