WHAT'S HAPPENING: Companies want to use gasification technology at two new power plants in Illinois.

WHY: New technology reduces pollution emissions, making coal- fired plants more environmentally acceptable.

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The energy industry has grappled for decades with a question: How does the nation use its vast coal resources to satisfy a growing appetite for electricity -- and in a way that doesn't foul the environment?

Near the central Illinois town of Taylorville, a company from Louisville, Ky., is proposing a solution: a new breed of power plant that chemically converts sooty, black coal into a synthetic gas, stripping out most pollutants before the fuel is burned.

Erora Group LLC expects its 770-megawatt plant to be completed by 2010. It is one of two power plants proposed in Illinois and about two dozen across the United States that will rely on integrated gasification combined cycle technology, or IGCC.

In Missouri, Illinois and nationwide, environmentalists are challenging projects that rely on traditional technology, where powdered coal fuels boilers, creating steam that drives turbines. They're asking state and federal regulators to require power plant developers to consider generating electricity with gasified coal, as a means of cutting emissions.

"There's a lot at stake," said John Thompson of the Clean Air Task Force in Carbondale, Ill. "This generation can transform coal used for burning -- one of the dirtiest industrial activities on the planet -- to, ironically, being one of the cleanest fuels from an air pollution standpoint."

Even skeptics acknowledge the advantages. Plants that run on gasified coal emit a small fraction of the mercury, sulfur dioxide and other small pollutants of plants using older "pulverized coal" technology. They also use significantly less water.

The new plants also pave the way to capture emissions of carbon dioxide, a greenhouse gas linked to global warming.

Some utilities and plant developers have embraced IGCC. Others say the technology isn't ready for wide-scale use, regardless of the environmental benefits.

Only four IGCC plants

"Technologists believe it's ready for commercial deployment, but investors haven't seen any built and see it as a risky investment," said Jenny Tennant of the Department of Energy's National Energy Technology Laboratory.

There are just four IGCC plants worldwide. Two are in the United States, including one on the Wabash River in western Indiana.

By contrast, 5,000 plants worldwide use pulverized coal technology, and the track record makes regulators, lenders and utilities more confident that traditional coal-fired plants can be built and operated profitably.

IGCC plants also are more expensive, and those built so far have been heavily subsidized. Cost projections are murky, because no one has built an IGCC plant in a decade, but a 2005 Standard & Poor's report estimates the figure is about 15 percent to 25 percent higher than for a new pulverized coal plant.

"A lot of it is economic, but there's a cultural question as well," said Sasha Mackler, a senior analyst with the National Commission on Energy Policy, a privately funded group of energy experts based in Washington.

"Power companies know the combustion technology," Mackler said, "and the financial community understands the technology."

The same isn't true for IGCC. Last summer, Missouri regulators said the technology

wasn't mature enough when they approved plans by Kansas City Power & Light to build a traditional coal-fired power plant in western Missouri, said Warren Wood of the Missouri Public Service Commission staff.

St. Louis-based Ameren Corp. isn't actively looking to build a coal-fired plant, but it agrees that IGCC isn't ready for prime time.

"We think that the technology has great potential, but it's a ways off yet," said Rick Smith, Ameren's manager of new generation and environmental projects.

Peabody Energy Corp., which is building the 1,500-megawatt Prairie State Energy Campus an hour's drive south of Erora's Taylorville project, thoroughly studied IGCC. But Peabody ultimately chose to build a pulverized coal plant, said spokesman Vic Svec. The company says it will be cleaner than any existing coal-fired plant in the state.

"Our view then is our view now," Svec said. "IGCC is very promising, and we believe it will be deployed commercially. But the technology still needs to ripen."

The pendulum swings

David Schwartz, a former executive at Louisville Gas & Electric and one of the co-founders of Erora, acknowledges the higher construction, operating and maintenance costs associated with IGCC plants.

But he doesn't see the technology as risky or difficult to finance, and he said the company's central Illinois project will be able to produce electricity at a competitive cost.

Erora initially sought to build a pulverized coal plant near Taylorville, but water and transmission constraints limited the project's size. Without the economies of scale of a plant larger than 1,000 megawatts, and considering the reduced emissions from using gasified coal, the choice was clear, Schwartz said.

"At the end of the day, the technology choice was premised on the fact that (IGCC) was going to be at a cost similar to or cheaper than pulverized coal," he said.

Erora signed an agreement with General Electric Co. and Kansas City-based Burns & McDonnell to design the plant. Construction is to begin next spring.

The air permit for the Taylorville project and the other IGCC plant near Marion are under review, said Maggie Carson, a spokeswoman for the Illinois Environmental Protection Agency.

Analysts, utilities and regulators say one thing could radically alter the economics of building a coal-fired power plant in America: limits on carbon emissions.

"That's the kicker in this whole debate that swings the pendulum," Tennant said. "Then the economics start to favor IGCC."

In Ohio and West Virginia, American Electric Power Co., one of the nation's largest electric utilities, has asked regulators to guarantee the costs associated with building two 600-megawatt IGCC plants. The company believes the plants make economic sense, even without carbon regulation.

"We recognize the upfront costs are more," spokesman Pat Hemlepp said. "But when you look at what is likely to happen during the life of the plant, IGCC will be a better investment. With carbon mandates, this becomes a no-brainer."