Testimony of Frank Alix before the House Subcommittee on Energy and Air Quality;
Hearing on "Future Options for Generation of Electricity from Coal," June 24, 2003

Chairman Barton and distinguished members of the House Subcommittee on Energy and Air Quality, thank you for the opportunity to share Powerspan's perspective on future options for generation of electricity from coal.

My name is Frank Alix and I am the Chairman and Chief Executive Officer of Powerspan Corp.

Powerspan is a clean energy technology company headquartered in New Hampshire. Our company was founded in 1994 and has grown to employ 40 scientists, engineers and other high-tech workers. In order to fund technology development, the company has raised over $50 million to date from private, institutional, and corporate investors.

Over the past five years, we have focused our resources on developing and commercializing a patented multi-pollutant control technology for coal-fired electric generating plants called Electro-Catalytic Oxidation, or ECO^®. Our ECO technology is designed to cost-effectively reduce emissions of sulfur dioxide (SO2), nitrogen oxides (NOx), mercury (Hg), and fine particles (PM2.5) in a single, compact system. Several leading power generators are investors in the company or partners in ECO development. These include FirstEnergy, American Electric Power, Cinergy, AmerenUE, Allegheny Energy Supply, and Ontario Power Generation. In 2001 the National Energy Technology Laboratory of the U.S. Department of Energy awarded Powerspan $2.8 million under a cooperative agreement to demonstrate the mercury removal capabilities of ECO under various conditions.

Over the past 16 months, we have successfully pilot tested our ECO technology in a 2-megawatt slipstream at FirstEnergy's R. E. Burger Plant near Shadyside, Ohio.

During this testing, ECO technology reduced emissions of:

· SO2 by 98%,

· NOx by 90% based on typical inlet NOx conditions,

· Mercury by 80-90%,

· Other heavy metals by more than 96%,

· Total particulate matter by 99.9%, and

· Fine particulate matter less than three microns in diameter by more than 95%.

These pilot test results indicate that ECO is capable of providing Best Available Control Technology—or BACT—removal levels in a single, multi-pollutant control system. Furthermore, ECO produces a commercially valuable fertilizer co-product, avoiding the need for large, new landfill disposal sites to accept flue gas desulfurization waste. Finally, a commercial cost estimate for a 500-megawatt (MW) plant prepared by an outside engineering firm indicates that ECO capital and operating costs will be two-thirds of the combined costs of the separate control systems currently required to achieve comparable reductions in SO2, NOx, and Hg emissions. For a 500 MW plant, this equates to a reduction of about $60 million in capital cost and $5 million in annual operating and maintenance costs. I want to emphasize, however, that the technology is still in the development phase. There could be unforeseen hurdles in moving to commercialization. Nevertheless, based on the evidence to date, we are optimistic.

Powerspan has begun installation of a commercial ECO demonstration unit at FirstEnergy's Burger Plant. The demonstration unit will treat a 50-megawatt slipstream of flue gas, and the plant will burn Ohio coal with 2-4% sulfur content. The project is being co-funded by Powerspan, FirstEnergy, and a $4.5 million grant from the Ohio Coal Development Office within the Ohio Department of Development. Successful completion of this demonstration in 2004 will allow Powerspan to offer full-scale commercial ECO systems with standard industry guarantees.

As you consider future options for the generation of electricity from coal, I would like to focus on the importance of new technology in preserving the economic viability of the existing fleet of coal-fired generating plants. Although many had hoped that new natural gas-fired generation could replace older coal-fired plants, thereby boosting the efficiency of our electric generating fleet and significantly reducing air emissions, it is now clear that this strategy poses great risk due to the limited supplies of natural gas. Likewise, while coal-gasification technologies promise to reduce emissions and boost the efficiency of coal-fired generating plants of the future, the existing fleet of coal-fired plants cannot be economically retrofit with gasification technologies. Therefore, a significant portion of the existing fleet of coal-fired plants, that today provides over 50% of our nation's electricity, need to remain economically viable for at least the next 20-30 years.

So when considering the future of electricity generation from coal, it is important to ask what threatens the economic viability of existing coal-fired generating capacity; where is new technology needed; and what can Congress do to help? We believe that environmental regulations, and the uncertainty regarding them, pose the greatest threat to existing coal-fired plants, and may even inhibit development of the technology needed to support them.

There is consensus among coal-fired generating plant owners, employees, investors, regulators and electricity customers that more should be done to reduce emissions. The environmental and public health benefits of further reductions in SO2, NOx, and PM emissions are well documented. The power generating industry, and the investment community that supports it, have demonstrated their willingness to invest in new control systems for SO2, NOx, and PM where the regulations are clear and the cost and performance of emission control technologies are well known. But while regulating and controlling SO2, NOx, and PM emissions has proceeded without threatening the viability of coal-fired electricity generation, pending regulations for Hg emissions could be more troubling.

Today, air pollution equipment providers cannot supply Hg control systems for coal-fired power plants with guaranteed removal rates under all conditions an operating plant might experience. This is where technology development is most urgently needed. Although our industry is optimistic in our ability to provide commercial Hg control systems at some point in the future, more research and testing is required. The point at which Hg control technology would be available to support specific reduction goals for Hg emissions is not yet certain. Still, environmental technology development is driven by environmental regulations, and without some clear indication that Hg reductions will be required, Hg control technology will not be commercialized - leaving us with the classic chicken and egg dilemma.

So what can Congress do to help?

Both the electric generating industry and the environmental technology community need long-term certainty in environmental regulation. For the capital-intensive electric generating industry, long-term regulatory certainty allows financial markets to provide sufficient capital for the orderly improvement of generating assets without threat to the availability of electricity supplies. For the technology community, regulatory certainty provides the incentive and time to deploy resources to develop and commercialize new technology that will meet the regulatory goals in the most cost-effective manner possible. Therefore, regulations that set achievable emission reduction goals for SO2, NOx, PM, and Hg over a period of 10-15 years will be most effective at both providing the environmental and public health benefits we all desire, while maintaining the economic viability of the existing coal-fired fleet.

You also asked for my thoughts on the proposed FutureGen program and the Clean Coal Power Initiative. As a clean coal technology developer, we certainly support federal funding of research and development activities to enhance the generation of electricity using coal. However, we believe it is important to examine the extent to which such federal programs support the near term needs of the existing coal-fired generating fleet. FutureGen, as it's name implies, is focused on the next generation of coal-fired plants that may have to operate in a carbon-constrained environment. As such, this program is properly focused on coal-gasification and CO2 sequestration technologies. However, this provides little or no direct benefit for existing coal-fired plants.

The Clean Coal Power Initiative (CCPI) is more focused on the near term requirements of coal-fired generating plants. However, 75% of the $316 million awarded in the first round of the CCPI program was for projects involving coal-gasification and circulating fluidized bed projects. These technologies represent less than one-half of one percent of our present coal-fired generating capacity, and cannot be economically retrofit to existing coal-fired plants. So even though a great deal of federal funding has been appropriated to accelerate the commercial deployment of technologies for coal-fired generation, it is not clear that the proper balance has been struck between funding the near term needs of the existing fleet and developing the next generation of coal-fired plants.

In summary, I believe that it is possible to produce more electricity from coal and to significantly reduce or even eliminate the environmental and public health impacts of that production. Our ECO technology could make an important contribution to that objective. When evaluating future options for the generation of electricity from coal, it is important to consider the existing fleet of coal-fired generating plants and ensure that clean coal technology programs strike a proper balance between serving the needs of existing plants and providing for the next generation. Likewise, we should not allow our desire to reduce air emissions to permit us to issue regulations that threaten the viability of existing coal-fired plants. These plants are vital to our economic health and well-being. However, air emissions from coal-fired plants can and should be significantly reduced from present levels. Given time and the right regulatory framework, the technology community will find an economical way to achieve the desired environmental benefits. History has demonstrated this time and again. And there are many companies like Powerspan full of talented individuals who are dedicated to this goal.

Thank you.