AEP to Install Carbon Capture on Two Existing Power Plants; Company Will be First to Move Technology to Commercial Scale

American Electric Power (NYSE: AEP) will install carbon capture on two coal-fired power plants, the first commercial use of technologies to significantly reduce carbon dioxide emissions from existing plants.

 

The first project is expected to complete its product validation phase in 2008 and begin commercial operation in 2011.  

"AEP has been the company advancing technology for the electric utility industry for more than 100 years," said Michael G. Morris, AEP chairman, president and chief executive officer. "This long heritage, the backbone of our company's success, makes us very comfortable taking action on carbon emissions and accelerating advancement of the technology. Technology development needs are often cited as an excuse for inaction. We see these needs as an opportunity for action.

"With Congress expected to take action on greenhouse gas issues in climate legislation, it's time to advance this technology for commercial use," Morris said. "And we will continue working with Congress as it crafts climate policy. It is important that the U.S. climate policy be well thought out, establish reasonable targets and timetables, and include mechanisms to prevent trade imbalances that would damage the U.S. economy."

Morris will discuss AEP's plans for carbon capture during a presentation today at the Morgan Stanley Global Electricity & Energy Conference in New York. A live webcast of the presentation to an audience of investors will begin at 12:10 p.m. EDT and can be accessed through the Internet at http://www.aep.com/go/webcast. The webcast will also be available after the event. Visuals used in the presentation will be available at http://www.aep.com/investors/present.

AEP has signed a memorandum of understanding (MOU) with Alstom, a worldwide leader in equipment and services for power generation and clean coal, for post-combustion carbon capture technology using Alstom's Chilled Ammonia Process. This technology, which is being piloted this summer by Alstom on a 5-megawatt (thermal) slipstream from a plant in Wisconsin, will first be installed on AEP's 1300-megawatt Mountaineer Plant in New Haven, W.Va., as a 30-megawatt (thermal) product validation in mid-2008 where up to 100,000 metric tons of carbon dioxide (CO2) will be captured per year. The captured CO2 will be designated for geological storage in deep saline aquifers at the site. Battelle Memorial Institute will serve as the consultant for AEP on geological storage.

Following the completion of product validation at Mountaineer, AEP will install Alstom's system on one of the 450-megawatt (electric) coal-fired units at its Northeastern Station in Oologah, Okla. Plans are for the commercial- scale system to be operational at Northeastern Station in late 2011. It is expected to capture about 1.5 million metric tons of CO2 a year. The CO2 captured at Northeastern Station will be used for enhanced oil recovery.

Alstom's system captures CO2 by isolating the gas from the power plant's other flue gases and can significantly increase the efficiency of the CO2 capture process. The system chills the flue gas, recovering large quantities of water for recycle, and then utilizes a CO2 absorber in a similar way to absorbers used in systems that reduce sulfur dioxide emissions. The remaining low concentration of ammonia in the clean flue gas is captured by cold-water wash and returned to the absorber. The CO2 is compressed for enhanced oil recovery or storage.

In laboratory testing sponsored by Alstom, EPRI and others, the process has demonstrated the potential to capture more than 90 percent of CO2 at a cost that is far less expensive than other carbon capture technologies. It is applicable for use on new power plants as well as for the retrofit of existing coal-fired power plants.

AEP has also signed an MOU with The Babcock & Wilcox Company (B&W), a world leader in steam generation and pollution control equipment design, supply and service since 1867, for a feasibility study of oxy-coal combustion technology. B&W, a subsidiary of McDermott International, Inc. (NYSE: MDR), will complete a pilot demonstration of the technology this summer at its 30- megawatt (thermal) Clean Environment Development Facility in Alliance, Ohio.

Following this demonstration, AEP and B&W will conduct a retrofit feasibility study that will include selection of an existing AEP plant site for commercial-scale installation of the technology and cost estimates to complete that work. Once the retrofit feasibility study is completed, detailed design engineering and construction estimates to retrofit an existing AEP plant for commercial-scale CO2 capture will begin. At the commercial scale, the captured CO2 will likely be stored in deep geologic formations. The oxy- coal combustion technology is expected to be in service on an AEP plant in the 2012-2015 time frame.

B&W, in collaboration with American Air Liquide Inc., has been developing oxy-coal combustion, a technology that utilizes pure oxygen for the combustion of coal. Current generation technologies use air, which contains nitrogen that is not utilized in the combustion process and is emitted with the flue gas. By using pure oxygen, oxy-coal combustion excludes nitrogen and leaves a flue gas that is a relatively pure stream of carbon dioxide that is ready for capture and storage. B&W's and Air Liquide's collaborative work on oxy-coal combustion began in the late 1990s and included pilot-scale development at B&W's facilities with encouraging results, burning both bituminous and sub- bituminous coals.

The oxy-coal combustion process will use a standard, cryogenic air separation unit to provide relatively pure oxygen to the combustion process. This oxygen is mixed with recycled flue gas in a proprietary mixing device to replicate air, which may then be used to operate a boiler designed for regular air firing. The exhaust gas, consisting primarily of carbon dioxide, is first cleaned of traditional pollutants, then compressed and purified before storage. B&W, working with Air Liquide, can supply the equipment, technology and control systems to construct the oxy-coal combustion system, either as a new application or as a retrofit to an existing unit.

The B&W technology provides a pre-combustion boiler conversion option for existing plants that promotes the creation of a pure CO2 stream in the flue gas.

The Alstom technology provides a post-combustion carbon capture system that is suitable for use in new plants as well as for retrofitting to existing plants. It requires significantly less energy to capture CO2 than other technologies currently being tested.

Both pre- and post-combustion technologies will be important for companies facing decisions on CO2 reduction from the wide variety of coal-fired boiler designs currently in use.

AEP anticipates seeking funding from the U.S. Department of Energy to help offset some of the costs of advancing these technologies for commercial use. The company will also work with utility commissions, environmental regulators and other key constituencies in states that have jurisdiction over the plants selected for retrofit to determine appropriate cost recovery and the impact on customers.

"We recognize that these projects represent a significant commitment of resources for AEP, but they are projects that will pay important dividends in the future for our customers and shareholders," Morris said. "Coal is the fuel used to generate half of the nation's electricity; it fuels about 75 percent of AEP's generating fleet. By advancing carbon capture technologies into commercial use, we are taking an important step to ensure the continued and long-term viability of our existing generation, just as we did when we were the first to begin a comprehensive, system-wide retrofit program for sulfur dioxide and nitrogen oxide emissions controls. We have completed the sulfur dioxide and nitrogen oxide retrofits on more than two-thirds of the capacity included in the program, and we are on schedule to complete all retrofits by shortly after the end of the decade.

"By being the first to advance carbon capture technology, we will be well- positioned to quickly and efficiently retrofit additional plants in our fleet with carbon capture systems while avoiding a potentially significant learning curve," Morris said.

AEP has led the U.S. electric utility industry in taking action to reduce its greenhouse gas emissions. AEP was the first and largest U.S. utility to join the Chicago Climate Exchange (CCX), the world's first and North America's only voluntary, legally binding greenhouse gas emissions reduction and trading program. As a member of CCX, AEP committed to gradually reduce, avoid or offset its greenhouse gas emissions to 6 percent below the average of its 1998 to 2001 emission levels by 2010. Through this commitment, AEP will reduce or offset approximately 46 million metric tons of greenhouse gas emissions by the end of the decade.

AEP is achieving its greenhouse gas reductions through a broad portfolio of actions, including power plant efficiency improvements, renewable generation such as wind and biomass co-firing, off-system greenhouse gas reduction projects, reforestation projects and the potential purchase of emission credits through CCX.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation's largest generators of electricity, owning nearly 36,000 megawatts of generating capacity in the U.S. AEP also owns the nation's largest electricity transmission system, a nearly 39,000- mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP's utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP's headquarters are in Columbus, Ohio.

This report made by AEP and its Registrant Subsidiaries contains forward- looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP's generating plants; AEP's ability to recover regulatory assets and stranded costs in connection with deregulation; AEP's ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP's ability to build or acquire generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance); resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp. and related matters); AEP's ability to constrain operation and maintenance costs; the economic climate and growth in AEP's service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; AEP's ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including the potential for new legislation or regulation in Ohio and/or Virginia and membership in and integration into regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP's pension and other postretirement benefit plans; prices for power that AEP generates and sell at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.

SOURCE American Electric Power

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