From E&E News ($ub req’d): Indiana has approved a $2 billion, 630 MW integrated gasificiation/combined cycle coal plant.

Two billion divided by 630 MW = $3,174/kW.

If we assume that coal equity investors expect to recover their investment over 20 years, with an 11 percent return, that works out to 5.7 cents/kWh just to pay off the capital for the power plant. Add in another 3 cents or so for transmission and distribution, and a couple cents for fuel and operating costs, and this plant will work out to over 10 cents in retail prices.

This in a state where the current average retail electric rate is 6.79 cents/kWh.

So why was it approved? Simple:

“In the Midwest, coal is plentiful and low-cost, and finding ways to burn it cleanly is fundamental to meeting our customers’ demand for power,” Duke Energy Indiana President Jim Stanley said in a statement.

The head spins.

Excerpts of the story below the fold.

Indiana utility regulators approved Duke Energy’s proposed $2 billion coal-fired power plant equipped with advanced pollution controls about 100 miles southwest of Indianapolis.

The Indiana Utility Regulatory Commission decision followed more than two years of planning by Duke’s Indiana subsidiary and its predecessor, Cinergy/PSI Indiana, which was acquired by Duke in May 2006.

The 630-megawatt, integrated gasification combined cycle (IGCC) plant, which still must obtain permits from the Indiana Department of Environmental Management, could begin construction in Knox County early next year with an expected startup in early 2012, Duke officials said.

“The Edwardsport facility could very well be the cleanest coal-fired power plant in the world once it’s completed,” Stanley said.