Jun 2 - Knight Ridder/Tribune Business News - Thomas Content Milwaukee Journal Sentinel

Wisconsin should explore the potential of an emerging technology for making electricity from coal, particularly as the United States considers whether to impose taxes or other limits on emissions of carbon dioxide, members of the state Public Service Commission said Thursday.

The new technology, known as coal gasification, is more expensive than other forms of burning coal to make electricity but could be less expensive if utilities install systems to prevent carbon dioxide from being released into the atmosphere, a 74-page report by the PSC and state Department of Natural Resources says.

The report highlights questions about cost and reliability but says those concerns could be addressed as major utilities across the country take the lead in building new gasification plants.

The report was released as Wisconsin energy policy-makers, utilities and environmental groups assess how Wisconsin should plan for possible federal legislation that would tax emissions of carbon dioxide as a way to combat global warming. Wisconsin relied on coal-fired power plants for 63% of its electricity in 2005, the report says.

"Action in Washington suggests that limits will likely be placed on carbon dioxide emissions in the near future, such that I think that critical question is not if there will be carbon dioxide regulations but how much," said Mark Meyer, the PSC commissioner who led a task force examining the issue.

The gasification technology is the best one suited to capturing the carbon dioxide and preventing the release of the greenhouse gas into the atmosphere, the report says.

The report's release, after nine months of study, comes as the state's largest utility is preparing to look closely at whether to use the technology in a new power plant it says it will need to build by 2015.

We Energies already has two coal-fired power plants under construction in Oak Creek that are scheduled to open in 2009 and 2010. But electricity demand is projected to continue to rise, and older plants will likely need to be replaced, meaning another new coal plant will likely be needed around 2015, utility officials say.

The company plans to take "a good hard look" at deploying the new technology, We Energies Executive Vice President Rick Kuester said during a recent investor conference call.

We Energies proposed a coal gasification plant as the third power plant in Oak Creek six years ago. But the commission determined a third plant wasn't needed and that the gasification technology wasn't yet well demonstrated.

"This is something that this state and all states are going to have to come to grapple with, particularly for a state like Wisconsin that does rely to a great extent on coal for (electricity) production," commission Chairman Dan Ebert said.

Utility officials said Thursday that they would review the report. Bruce Nilles of the Sierra Club's Madison office said the report represents a step toward Wisconsin following the lead of other states to deal with global warming.

"This report begins to answer the question, can coal be a part of our future, because it's a very dirty fuel," Nilles said. "It highlights the critical importance of doing something other than continuing our over-reliance on coal."