Duke Energy Indiana Edwardsport IGCC Project - Status Report - Dennis M. Zupan Senior Project Director Duke Energy
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Duke Energy Indiana Edwardsport IGCC Project – Status Report Dennis M. Zupan Senior Project Director Duke Energy
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation
Act of 1995
This document contains forward looking information which is
subject to risks and uncertainties that could cause actual results
to be different than those contemplated, including, but not limited
to, changes in state, federal or international regulatory
environments; project costs; operational performance;
commercial, industrial and residential growth in the Company’s
service territory; natural phenomena; the timing and extent of
changes in commodity prices, interest rates, and foreign currency
exchange rates; general economic conditions; changes in
environmental and other laws and regulations to which Duke
Energy and its subsidiaries are subject or other external factors
over which Duke Energy has no control; the results of financing
efforts; the effect of accounting pronouncements; growth in
opportunities for Duke Energy’s business units, and other risks
described in the Company’s filings with the Securities and
Exchange Commission on Form 8-K and other Securities and
Exchange Commission filings.
Edwardsport IGCC Project – Status Report 2
The New Duke Energy Corporation
Created by the merger of Duke Energy and Cinergy
• Fortune 500
• Assets over $70 billion
• More than 3.8 million electric customers
• Top-tier electric utility
• Top 10 for US generation
• 100+ years of service
• Gas and Electric separation in progress
Edwardsport IGCC Project – Status Report 3U.S. Franchised Electric & Gas
• 5 states: North
Carolina, South
Carolina, Indiana, Ohio
and Kentucky
• 47,000 square miles of
service area
• ~28,000 MW
• 3.8 million retail electric
customers
• 500,000 retail gas
customers
Edwardsport IGCC Project – Status Report 4Duke Energy Indiana and IGCC
Duke Energy has
over 14 years of
experience and
involvement with
IGCC technology
Edwardsport IGCC Project – Status Report 5WRCGRP
PSI Energy, in a joint venture with Destec Energy,
delivered the Wabash River Coal Gasification Repowering
Project in 1995
PSI Energy was responsible for:
• Providing a ready-to-build site for the gasification island
• Power block and
refurbishment of the
existing steam turbine
• Water treatment systems
• All site utilities
• Coal handling
• Integration of the power
block with the gasification
island
Edwardsport IGCC Project – Status Report 6IGCC Experience
• 1996 to present – Operating experience with
WRCGRP power block
• Members of Gasification Technology Council
• Members of the EPRI Gasification User’s Association
• Members of EPRI’s “CoalFleet for Tomorrow” serving
on the Advisory Panel for IGCC
Edwardsport IGCC Project – Status Report 7Need for Baseload Capacity
• The Indiana State Utility Forecasting Group estimates
that by 2011, 1400MW of additional base load
capacity will be required to meet Indiana’s increasing
demand
• Duke Energy Indiana (DEI) also sees a need for
additional capacity in 2011 to maintain a 15–17%
reserve margin
Edwardsport IGCC Project – Status Report 8Initial Project Background
• 2003/2004 DEI recognized that the need was coming
• Site studies were performed in 2004
• MISO system impact study requests submitted for 600
MW
• October 2004 we signed a letter of intent with GE and
Bechtel to perform an IGCC feasibility study
• Invited other Indiana electric utilities to participate
• Vectren Energy Delivery and Duke Energy signed an
MOU for their participation in the feasibility study
Edwardsport IGCC Project – Status Report 9The 2005 Feasibility Study –
And Supporting Activities
• In January 2005, we signed a Technical Services
Agreement with the GE/Bechtel Alliance to provide:
indicative cost
performance estimates
Schedule
• Edwardsport was chosen as the study site
Not on a navigable waterway
Presence of underground mining activity
Brownfield site
Availability of high sulfur coal
Edwardsport IGCC Project – Status Report 10The 2005 Feasibility Study –
And Supporting Activities (cont.)
• Began work with Indiana Legislature to develop a
state investment tax credit for IGCC
• Initiated Tax abatement and the TIF process in Knox
County
• August 2005 – received the cost, schedule and
performance estimates from the Alliance
• No fatal flaws with the site or the proposed technology
Edwardsport IGCC Project – Status Report 11Carbon Sequestration Potential
• The Indiana Geological Survey, in conjunction with the
Midwest Geological Sequestration Consortium, performed
a CO2 Sequestration feasibility study as part of our overall
feasibility study, focusing on the Edwardsport site
• Conclusions:
“There appears to be significant geological
sequestration potential underlying the site.”
“The most promising zones to evaluate further are the
St. Peter and Mt. Simon Sandstones.”
Edwardsport IGCC Project – Status Report 12The 2006 FEED Study
• September 2005 – Phase 1 FEED study authorized,
and we began negotiation with GE and Bechtel
• Internally initiated several studies for site-specific
components of the project outside the Alliance scope
of work
• Completed work to confirm the fuel specification
• February 2006 – signed TSA Agreement with GE
and Bechtel
• Vectren continues to participate in the FEED
Edwardsport IGCC Project – Status Report 13Technical Services by GE and Bechtel
• Facilities objectives defined by
GE – refined by DEI
• Currently we are through
Process Flow Diagram and P&ID
review and comment stage -
ready to begin estimating the
baseline cost
• We will use a value engineering
process as one means to control
cost and scope of the project
• We receive regular updates on
NPI programs required to meet
our facility objectives and CTQ
measures for GE
Edwardsport IGCC Project – Status Report 14DEI Integrated Resource Plan
• IRP submitted to IURC on June 15, 2006
• Developed based on the feasibility and FEED study
results to date
• From the executive summary:
“The least cost plan in each of the sensitivities and
scenarios contained either the 80% or 50% share of
the IGCC unit at Edwardsport during the 2011 to
2014 timeframe…”
Edwardsport IGCC Project – Status Report 15Status of Regulatory Submittals and Approval
• In July 2006, we reached agreement with the Office of
Utility Consumer Counselor on a request for cost
recovery of the FEED study. The IURC issued a
favorable order
• In September 2006, DEI and Vectren Filed a joint
petition for a Certificate of Public Convenience and
Necessity (CPCN) to construct the Edwardsport IGCC
Plant
• We are working a schedule that anticipates an order
from the Commission in mid 2007
Edwardsport IGCC Project – Status Report 16State of Indiana Support for IGCC
Gov. Daniels Plan – Economic Growth from Hoosier
Homegrown Energy:
• Reduces dependency upon outside sources for
basic energy needs
• Allows Indiana to fully utilize in-state coal resources
• Builds and modernizes energy
generation capacity for use both
internally and for potential export
• Develops high tech, high paying jobs
• Shows significant decreases in
emissions of SO2, NOx, and can
more easily accommodate new
CO2 emission controls, if required
Edwardsport IGCC Project – Status Report 17Response to our CPCN Filing
Governor Daniels said he is enthusiastic about the action
taken by the companies that could lead to construction of
Indiana's first new baseload power plant in 20 years. The
state's new Hoosier Homegrown Energy Plan calls for such
new facilities to produce needed energy supplies from
Indiana coal and biomass using state-of-the-art technology.
"I can't pretend I'm neutral on their idea. Our state needs
the power, our coal miners and construction workers
need the jobs, and southwest Indiana needs the overall
economic boost. Obviously, the Commission must see
that the legal requirements are met, but this is exactly
the kind of progress our energy strategy calls for,"
said Daniels.
Edwardsport IGCC Project – Status Report 18Indiana State and Local Incentives
• IN SB 29 provides for timely recovery of IGCC
construction & operating costs
• IN SB 378 – investment tax credit of 10% of project
cost for the first $500 million and 5% of the remaining
cost paid over a 10-year period with some restrictions
• Property tax abatement and a tax incremental finance
district are already approved in Knox County Indiana
Edwardsport IGCC Project – Status Report 19Energy Policy Act of 2005
• DEI has submitted an
application under the
bituminous coal category
• The Federal Tax Credit is
very important to the
financial viability of the
early deployment projects
• Yes – we need the
money…
Edwardsport IGCC Project – Status Report 20Status of Air Permitting
• Air Permit filed with Indiana Department of
Environmental Management on August 18, 2006
• There are net reductions of SO2 and NOx from the
site, therefore no PSD evaluation or BACT analysis is
required for these pollutants
• Malcolm Pirnie, Inc. and Duke EH&S developed the
application based on worst-case coal data and
no SCR
• SCR is not required, but DEI plans to install SCRs as
long as the reference design continues to support their
use
• Additional modeling and finalization of emission rates
is ongoing as the plant design continues
Edwardsport IGCC Project – Status Report 21General Environmental Performance Comparison
New Source Performance Standards (NSPS) vs. IGCC
0.20
Emission Rate, Lbs/MMBtu
0.16
0.16
0.12
0.12
0.08
0.08
0.06
0.04
0.014 0.02 0.015 0.01
0.007
0.00
Sulfur Dioxide (SO2) Nitrogen Oxide (NOx) Particulate Matter
(PM-10)
NSPS (Limit) Typical IGCC Edwardsport IGCC
For Discussion Purposes Only – Approximate conversion of NSPS lb/MWh (gross) to lb/MMBtu for SO2 and NOx.
Rates for Edwardsport IGCC reflect preliminary expected performance with SCR in service. Air Permit emission limits
may be greater than depicted to provide adequate operating margin.
Edwardsport IGCC Project – Status Report 22Project Timeline
• 1st Quarter 2007 – FEED Study complete
IGCC feasibility • 3rd Quarter 2007– Air and IURC approvals secured
study completed • 4th Quarter 2007 – Begin construction
September 2005
2005 2006 2007 2008 2009 2010 2011
• June 2006 – Filed integrated resource plan 2nd Quarter 2011
in Indiana commercial
• July 2006 – IURC settlement agreement operation
approved FEED study cost recovery
• August 2006 – Filed air permit application
• September 2006 – Filed Certificate of Public
Convenience and Necessity (CPCN) in Indiana
Edwardsport IGCC Project – Status Report 23Summary
What we have:
• A proven track record of delivering on IGCC
• Strong CEO support
• A need for base load capacity in 2011
• Site under option
• Strong state and local incentives already in place
• CPCN process in motion
• Air permit process in motion
• A very clean proposed technology
Edwardsport IGCC Project – Status Report 24Summary
What we need:
• Federal tax incentives
• A robust design that meets our facilities objectives
• Timely completion of the FEED to support approvals of
the CPCN and air permit
Cost
Performance
Emissions
Schedule
Edwardsport IGCC Project – Status Report 25Edwardsport IGCC Project – Status Report 26
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