AEP halts carbon capture plan due climate inaction

NEW YORK Thu Jul 14, 2011 3:18pm EDT

Michael Morris, Chairman, President and CEO, American Electric Power Co. Inc., speaks during the Revisiting Nuclear Energy panel at the 2008 Milken Institute Global Conference in Beverly Hills, California April 28, 2008. REUTERS/Phil McCarten

Michael Morris, Chairman, President and CEO, American Electric Power Co. Inc., speaks during the Revisiting Nuclear Energy panel at the 2008 Milken Institute Global Conference in Beverly Hills, California April 28, 2008.

Credit: Reuters/Phil McCarten

NEW YORK (Reuters) - American Electric Power Co Inc on Thursday shelved plans to capture heat-trapping carbon dioxide emissions from a coal-burning power plant in West Virginia, citing a lack of action by the U.S. Congress.

The move by Ohio-based AEP is a blow to U.S. efforts to rein in carbon dioxide emissions from coal plants using carbon capture and storage, or CCS, which experts see as the most viable way of limiting emissions from existing plants.

The company, one of the biggest U.S. CO2 emitters, cited congressional inaction on climate rules and a weak economy in its decision to table the $668 million project to build an industrial-scale carbon capture facility at its 31-year-old Mountaineer coal plant in West Virginia.

"We are placing the project on hold until economic and policy conditions create a viable path forward," Michael Morris, AEP chairman and chief executive, said in a statement.

AEP's move illustrates the quandary of big investor-owned utilities, which are reluctant to proceed with massive pollution-reduction investments without clear rules of the road to ensure that they will be able to recoup their costs.

Power plants contribute about 40 percent of the carbon dioxide in the United States with coal-burning plants contributing most of that.

"It is unlikely that large-scale implementation of CCS will take place in the absence of some sort of regulatory structure that requires it and allows companies that put projects in place to recover the costs," said Franklin Orr, director of Precourt Institute for Energy at Stanford University.

AEP and partner French multinational Alstom embarked on the CCS project at Mountaineer with a pledge from the U.S. Department of Energy in 2009 to cover half the cost. AEP proceeded on the assumption that the U.S. Congress would soon enact first-ever limits on CO2 emissions, AEP spokesman Pat Hemlepp said.

Action on climate change, which was among President Barack Obama's top priorities, stalled in Congress after Republicans took control of the House of Representatives.

AEP has a large stake in the future shape and timing of U.S. CO2 policy -- about 65 percent of its 39,000 megawatts of generation comes from coal plants.

Atlanta-based Southern, another top U.S. coal-burning utility, is building a 582-megawatt gasified coal plant in Kemper County, Mississippi, which will capture 65 percent of CO2 emissions.

DOE PICKS UP THE TAB

The DOE picked AEP to receive funding of up to $334 million to help pay for the installation of a commercial-scale carbon capture and storage system at Mountaineer in West Virginia.

The system was designed to capture at least 90 percent of the carbon dioxide from 235 megawatts of the 1,300-MW plant.

The CO2, about 1.5 million tonnes per year, would be treated and compressed, then injected into rock formations for permanent storage about 1.5 miles below the surface.

Plans were for the project -- with funds coming from the government's Clean Coal Power Initiative -- to be completed in four phases, with commercial operation starting in 2015.

"The commercialization of this technology is vital if owners of coal-fueled generation are to comply with potential future climate regulations without prematurely retiring efficient, cost-effective generating capacity," Morris said.

AEP stock eased 21 cents or about 0.6 percent at Thursday afternoon, while the S&P Utilities index remained unchanged.

(Reporting by Scott DiSavino in New York and Timothy Gardner and Ayesha Rascoe in Washington; Editing by Dale Hudson, Chris Baltimore and Lisa Shumaker)

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