By Chris Holly
IHS The Energy Daily
Tapping a China-seasoned clean energy technology expert to lead its effort to complete a gasified coal power plant project in Texas that has been buffeted by delays and cost increases, Summit Power Group LLC has announced it has named former General Electric executive Jason Crew as the new chief executive officer for the Seattle-based power plant developer.
The October 1 appointment of Crew, who toiled for GE nearly five years in China—including three years in Shanghai managing GE’s burgeoning coal gasification business in that country—comes as Summit is reaching a critical point in the development of its flagship venture, the 400 megawatt Texas Clean Energy Project (TCEP), an integrated gasification combined cycle (IGCC) plant to be located near Odessa.
While in China, Crew was the architect of a 2010 joint venture between GE and Shenhua Group, China’s largest coal company, to develop projects in China’s $10 billion gasification market.
At Summit, Crew’s primary task will be to shepherd the TCEP, which like Mississippi Power’s IGCC project in Mississippi’s Kemper County has struggled with delays and cost hikes. The Summit plant is designed to capture 90 percent of its CO2 emissions, and Summit plans to sell the captured green-house gas into the West Texas enhanced oil recovery market.
Unveiled six years ago, TCEP—then estimated to cost $1.75 billion to complete—since has seen its cost estimate climb steadily, rising to $2.5 billion according to a front-end engineering and design (FEED) study completed in July 2011 that led Summit Power to ink engineering, procurement and construction (EPC) contracts with Siemens, Linde and SK.
In September 2012, China’s Sinopec Engineering Group joined the EPC team and requested a second FEED to update the project’s cost estimates. The second FEED was completed in July 2013 and indicated costs of more than $3 billion due to sky-high labor costs in West Texas that prevented the EPC contractors from obtaining fixed-price, turn-key labor contracts.
Summit spokesman Ray Vincenzo said October 6 this led to all three contractors inserting high labor contingencies in their cost estimates, which prevented Summit from financially closing on the project in December 2013, as it had planned.
Summit received a welcome pledge of financial backing earlier this year from China Huanqiu Contracting and Engineering Corp. (HQC), which is now the lead contractor on a third FEED study, which Vincenzo said again indicates a final cost of $2.5 billion. The reduced cost estimate reflects “a streamlined EPC arrangement; equipment improvements from Siemens that will optimize the project’s configuration; and value engineering that will be performed by HQC and Siemens to find additional areas of savings,” he said.
In addition, Summit this year got a boost via an agreement with China Huaneng Group Corp., one of China’s five largest electric utilities and builder of the China Greengen—a three-phase effort to build China’s first IGCC plant with carbon capture and storage—to collaborate on the TCEP.
The Huaneng and HQC agreements arose from a memorandum of understanding inked between China and the United States this summer to share information on technology to reduce the carbon footprint of coal-fired generation in response to global warming.
Summit in 2012 received a $450 million Energy Department grant for the TCEP issued under DOE’s Clean Coal Power Initiative (CCPI), with $211 million of that amount coming from CCPI funds provided by the American Recovery and Reinvestment Act (ARRA), the Obama administration’s economic stimulus initiative in 2009.
In a brief interview September 30, Crew told IHS The Energy Daily that the underlying technologies that comprise IGCC power plants have been around “for a very long time,” noting that Tampa Electric Co.’s 260 MW Polk IGCC plant, built as a pilot project with generous DOE assistance in 1996, remains the lowest-cost power on TECO’s system.
“What is challenging is the complexity and scale, and our overall focus has to be on configuring the project so it has the most chance of success,” Crew said of the TCEP endeavor. “We are continuing to focus on developing the best TCEP we can manage, and we’re optimistic that we will have great news in due course.”
Crew got some welcome news October 6, his first day in his new post, in an announcement by San Antonio municipal utility CPS Energy that it has signed a new power purchase agreement with Summit to take 200 MW of the plant’s output for 25 years.
CPS last year allowed a similar agreement, signed in 2011, to expire. The utility at that time said it decided to let that PPA lapse due to continued low natural gas prices and be¬cause “the economics of energy produced from coal generation with carbon capture have changed.”
CPS said Monday that the new contract is more favorable to CPS Energy customers, as power prices in the Texas grid managed by the Electric Reliability Council of Texas have dropped while the TCEP has been in development.
“We remained hopeful this project would be built and that CPS Energy customers could take advantage of this low-carbon source of power,” CPS Energy CEO Doyle Beneby said in a statement. “Adding clean coal to our portfolio dovetails with our strategies to diversify and reduce the carbon intensity of the power we supply to our customers.”
Summit officials said they now expect to close on the project financially in the second quarter of 2015, with groundbreaking occurring in the summer of that year and construction starting up shortly thereafter.
Crew said the key to broad deployment of IGCC in China, the United States and elsewhere lies in bringing down the technology’s cost, which he said will happen as companies gain experience in building IGCC plants.
“One of the critical things at these large scales is bringing particular configurations down the cost curve,” Crew said. “There is a dynamic where this technology has to come down the cost curve. You can do that by studying it more, but you really do it by building projects.”
In addition to specializing in gasification projects with carbon capture and EOR, Summit also focuses on high-efficiency natural gas-fired projects, utility-scale photovoltaic and large wind projects.
Summit also works jointly with several technology companies pursuing financing and commercial development of new clean energy technologies, such as direct air carbon capture and ultra-clean underground coal gasification with carbon capture.
In all, Summit has led or had significant involvement in the successful development of more than 9,250 MW of projects either operating, in construction or in late stage development and representing more than $9 billion in investment. In addition, the company has more than 1,100 MW of early-stage development projects in process which, when completed, will result in $2 to $3 billion in additional investment.