Oct. 30 (Bloomberg) -- An American Electric Power Co. plant in New Haven, West Virginia, may help determine whether the nation’s 1,500 coal-burning power generators become relics of a dirtier age or can flourish in a low-carbon world.

American Electric’s 29-year-old Mountaineer facility this month became the first coal-fired power plant in the U.S. to capture a portion of its carbon dioxide emissions and inject them underground. The company hosted lawmakers, local officials and news media at a ceremony today for the pilot project, which will bury about 1.5 percent of the plant’s emissions.

“This is the beginning of a technological road map,” said Michael Morris, chief executive officer of American Electric. “At the end of the day, coal will continue to be part of the energy mix throughout the world.”

The project, using experimental technology from France’s Alstom SA, may show emissions from existing coal-fired power plants can be reduced enough to meet limits set in legislation passed by the U.S. House and being considered by the Senate.

The U.S., with the world’s largest coal reserves, proposes spending billions of taxpayer dollars on research so the fuel can be used for power under the new restrictions. Coal supplies 50 percent of U.S. electricity and a third of energy-related carbon-dioxide emissions, which scientists blame for global warming.

“If we’re going to keep the lights on, and therefore the economy going forward, we’re going to have to do the retrofits” to reduce carbon dioxide from coal-fired plants, Morris said in an Oct. 28 telephone interview. “You will not be able to retire the existing fleet and replace it with a new fleet in any kind of a timeline that would sustain the electric needs of this country.”

Largest U.S. Producer

Columbus, Ohio-based American Electric is the largest U.S. producer of coal-fired power, depending on the fuel for 73 percent of its generation capacity. The company dropped 56 cents, or 1.8 percent, to $30.22 at 4 p.m. in New York Stock Exchange composite trading and has fallen 9.2 percent this year.

President Barack Obama has backed cleaner coal as part of U.S. climate-change policy. The government has set aside $3.4 billion for carbon capture and storage from its $787 billion stimulus measure.

Mountaineer’s smokestacks are visible for miles before a visitor gets to the plant located along the Ohio River among fields of corn stalks and cows. The plant towers over the town of 1,559 people, which has no stoplights and a store advertising that it’s “not processing deer” at the moment.

Chilled Ammonia

“Over the years coal has been villainized,” West Virginia Governor Joe Manchin, a Democrat, said at the ceremony today. “Coal’s going to continue to be part of the energy equation,” and “we want to make sure we are part of that transition” to cleaner fuels, he said.

American Electric’s project uses chilled ammonia to snare CO2 before it escapes the plant’s flue, absorbing it to form ammonium bicarbonate, then stripping out the CO2 and returning the ammonia for reuse. The carbon dioxide is pumped into deep saline aquifers at the site.

“When it comes to reducing emissions of greenhouse gases, an end-of-stack technology solution for coal-fired power plants could prove a game changer,” said Christine Tezak, senior energy analyst for Robert W. Baird & Co. Inc., a Milwaukee-based asset management fund.

Raises Cost 50%

Tests of the technology show it raises the cost of power by about 50 percent, according to Philippe Joubert, president of Alstom Power.

That premium still leaves coal cheaper than most other sources of electricity, Morris said. An existing coal plant with CO2 capture could make power for about 6 cents a kilowatt-hour compared with 18 cents for wind generation and 14 cents for power from a new nuclear plant, he said.

The technology is still too expensive to be used on most of the nation’s existing coal-fired power plants, said Emily Rochon, climate and energy campaigner for Greenpeace, a Washington-based environmental group.

The U.S. should “stop trying to hang on to coal at all costs” and look to renewable sources to help phase out coal power by 2050, Rochon said.

The carbon-capture method being used at Mountaineer is still “a long way” from being workable on a commercial scale, she said.

A rival method that requires turning coal into a gas is more expensive and can’t be added to existing plants, Joubert said in an Oct. 13 interview.

FutureGen in Illinois

Gasification is the technology that would be used in FutureGen, a $1.8 billion plant proposed for Illinois. The Obama administration revived the project after George W. Bush’s team questioned its cost.

American Electric and Southern Co. said in June they were pulling out of FutureGen to focus on their own carbon-capture efforts.

Retrofitting coal-fired power plants to make them suitable to run in a carbon-constrained world is a “huge problem that we’ll have to solve,” and gasification “cannot solve it,” Joubert said.

American Electric has put its two coal-gasification projects on hold, due to failure to obtain all state regulatory approvals and lower power-demand forecasts because of the recession. Morris said he would opt for coal gasification if he were building a new plant.

Rockefeller’s Estimate

Senator Jay Rockefeller, a West Virginia Democrat, said the U.S. needs to spend about $25 billion on carbon capture and storage, including the stimulus funding and money in the climate legislation.

“Coalminers can’t be afraid of the future,” Rockefeller said today. The senator, who doesn’t support either the House or Senate climate plans, said Senate action on climate change is probably going to be pushed off until next year.

American Electric said in August it was seeking funding from the Energy Department for half of the estimated $768 million it would cost to capture CO2 from 235 megawatts of Mountaineer’s 1,300-megawatt capacity. A response from the government could come this year, Morris said.

The demonstration project, which is costing American Electric about $70 million, captures more than 90 percent of the CO2 from about 20 megawatts. Germany’s RWE AG and the Electric Power Research Institute, an industry-funded organization based in Palo Alto, California, are partners in the project.

To contact the reporter on this story: Tina Seeley in New Haven, West Virginia, at tseeley@bloomberg.net.

Last Updated: October 30, 2009 16:14 EDT