Globe and Mail: Shawn Mccarthy - July 15, 2007

Saskatchewan's provincially owned utility is set to deliver a reality check for the notion that the world can increasingly rely on coal-fired electricity, while aggressively battling climate change.

At a board meeting later this month, SaskPower directors will decide whether to proceed with a $2-billion clean-coal plant, one of the world's first commercial-scale, coal-fired power plants that would produce virtually no greenhouse gas emissions.

Instead, the carbon dioxide emissions would be captured and piped to the nearby oil fields in southeastern Saskatchewan, where companies would inject the gas to enhance oil recovery and, in the process, leave it permanently stored underground.

The proposed project would be the first coal-fired power plant in North America to utilize carbon-capture and storage technology. But it is just one of several competing projects the utility is considering as it looks to add 300 megawatts to its power supply by 2012.

"It certainly is a real test" for clean-coal technology, Bob Page, a University of Calgary professor and former vice-president of Calgary-based TransAlta Corp. [TA-T] , said in an interview.

"It's about the credibility of the technology - you need to test it out in Canadian weather conditions to make sure it can operate efficiently. And secondly, we're all going to be very interested in terms of what the costs are for capture and storage. These are all things that are germane to the whole field."

Coal is the fuel of choice for many utilities around the world - especially in the United States, China and India.

It is cheap and plentiful, but it is also the worst offender among fossil fuels in terms of release of carbon dioxide, a key greenhouse gas.

The Ontario Liberal government, for example, has promised to phase out the use of coal in its electricity mix as part of its effort to reduce such emissions. Its Nanticoke coal-fired plant is the largest single emitter of greenhouse gases in the country.

But Saskatchewan - along with Alberta and Nova Scotia - relies heavily on coal for electricity and all three provinces are involved in research to develop commercially viable, clean-coal technology. Similar developments are occurring in the United States and Europe, though to date no utility has proceeded with a commercial plant that includes capture and storage of carbon.

But the SaskPower board won't support the current project if it is too costly. Among other alternatives, the board will consider building a high-efficiency coal-fired plant, which would reduce CO{-2} emissions by roughly 25 per cent compared to the current technology. It is also looking at natural gas-fired projects that could be combined with wind or biomass generators, and is considering imports from hydroelectric sources in Manitoba.

SaskPower officials would not comment on the impending decision. But industry officials said the Saskatchewan project could mark a watershed in the effort to commercialize carbon-capture and storage technology and persuade a skeptical public that coal has a robust future in a carbon-constrained world.

On the face of it, SaskPower could not be better positioned to take a leadership role on the technology:

--The province has coal deposits that should last some 300 years;

--It has oil fields where CO{-2} injection has been used to improve oil recovery, providing a market for emissions from the proposed coal plant and an additional revenue stream from the sale of the carbon dioxide;

--It is a Crown corporation, with a far greater ability to flow through additional costs to ratepayers than the privately owned utilities in neighbouring Alberta, which are also examining the feasibility of clean coal.

Still, the provincial utility has a responsibility to deliver the lowest-cost electricity to its customers, and observers say it wants to ensure it does not get saddled with a white elephant that would unnecessarily drive up power costs.

"The hurdle they've got, of course, is cost," said Malcolm Wilson, director of the energy and environment program at the University of Regina.

SaskPower has indicated that it could get the same output of electricity from a high-efficiency coal plant for half the capital cost, not including revenues from the oil companies. It must decide whether the potential revenue stream and the possible cost of reducing emissions in the future justify the additional cost now.

Mr. Wilson said it is not clear that the oil fields of southeastern Saskatchewan can handle the 8,000 tonnes per day of CO{-2} that a coal-fired power plant would produce.

Even with enhanced recovery methods, those fields are expected to decline rapidly in a few years, and the region's major operator, Calgary-based EnCana Corp. [ECA-T] , is already purchasing a supply of CO{-2} from a heavily subsidized coal gasification plant in North Dakota.

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