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Future Of Coal: Rhetoric vs. Reality

February 6th, 2009 by Fereidoon Sioshansi, EEnergy Informer

Environmentalists like to see an end to conventional coal, projected trends suggest otherwise.

Everybody agrees that coal is the most abundant and the cheapest fuel for electricity generation – which explains why it is the dominant fuel in the electric power sector in many parts of the world. Even its ardent proponents, however, admit that coal is carbon-loaded and a major contributor to the rising concentrations of CO2 in the atmosphere – which many scientists are concerned about.

Coal currently half of the pie, and to stay that

Coal currently half of the pie, and to stay that way
Global mix of electricity generation, 2004 and projected for 2030, in TWhs and %
Source: International Energy Agency

The disagreement is on the future of coal. And on this, opinions diverge. The coal-lobby, consisting of powerful companies engaged in coal mining, transport and power companies with major coal-fired plants, are happy with the status quo. Coal is abundant, cheap and that means lower electricity costs. Why rock the boat?

Those concerned about climate change – a diverse and rapidly growing global community – are adamant that we must put a moratorium on new coal-fired plants unless the carbon can be captured and stored. Some go even further, advocating a total ban on coal mining and export.

Naturally the two camps do not see eye to eye, each ridiculing the position of the other as absurd, unrealistic, dangerous, and irresponsible. Both sides offer convincing arguments supporting their positions. A lot is at stake on how these divergent views are reconciled. Meanwhile, the developing world, plagued by insatiable demand for electricity, continues to build coal-fired plants unperturbed by what they see as an interesting but academic debate.

Clearly, the developed countries, who have the means and the resources, should tackle the problem before they can ask the rest of the world to consider similar options. Many are hopeful that under the Obama administration, the US would lead the way by providing sufficient clarity on long-term future of coal (see related article on factories of death).

Last year, for example, Henry Waxman, a Democratic Representative from California and now the Chairman of powerful House Committee on Energy and Commerce, introduced the Moratorium on Uncontrolled Power Plants Act of 2008. That bill would have placed a total ban on building new coal-fired power plants without carbon capture and storage (CCS) capability. Since CCS technology is not yet available on a commercial scale, the bill would have had the effect of stopping construction of virtually all new coal plants in the US. Others are likely to propose similar measures in the coming months.

Mr. Obama’s own views – at least prior to becoming President – are unequivocal on the subject of coal. In early 2008, he was quoted in the San Francisco Chronicle, “If somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.” (Coal Gets Wakeup Call On Both Sides Of Atlantic, Jan 09).

What climate change?

What climate change?
China’s power generation growth, fuel mix and installed capacity
Source: Joanna Lewis, Q. Chai and X. Zhang compiled from Sinton et al., 2004; NBS and NDRC, 2006; IEA, 2007

The rhetoric on coal, however, must not be confused with the realities on the ground. Coal currently generates roughly half of US electricity, and Energy Information Administration (EIA) projects this to drop only nominally from 49% to 47% between 2007 and 2030. This is not a pretty picture for those who would like to see a quick end to coal. In countries like China, coal’s share – currently below 80%, are projected to increase.

EIA’s 2009 Annual Energy Outlook projects that an additional 46 GW of coal-fired electricity generation, approximately 75 new plants, by 2030. The good news is it is down from 100 plants in EIA’s 2008 projection – so at least it is moving in the right direction.

But these numbers dwarf the existing fleet of roughly 1,500 US coal-fired plants that are expected to be around for a very long time. Proposals like the one introduced by Mr. Waxman, even if they pass, will only affect new plants. Which is why the coal industry is working feverishly to develop and test commercial scale CCS technology. A unit of Southern Company has submitted an application for one.

The problem with CCS, aside from the fact that it is probably a decade or more from commercial deployment on a wide scale, is that it is likely to be expensive. It is difficult to know what the price premium will be but current estimates, including one from the Electric Power Research Institute (EPRI), suggest that the cost of electricity from new coal plants designed for CCS will be 40-80% higher than from conventional coal-fired electric power plants.

Aside from the extra costs of the sophisticated hardware, such plants would probably lose 30% of energy they generate to capture, compress, and transport

The rhetoric on coal, however, must not be confused with the realities on the ground. Coal currently generates roughly half of US electricity, and Energy Information Administration (EIA) projects this to drop only nominally from 49% to 47% between 2007 and 2030. This is not a pretty picture for those who would like to see a quick end to coal. In countries like China, coal’s share – currently below 80%, are projected to increase.

EIA’s 2009 Annual Energy Outlook projects that an additional 46 GW of coal-fired electricity generation, approximately 75 new plants, by 2030. The good news is it is down from 100 plants in EIA’s 2008 projection – so at least it is moving in the right direction.

But these numbers dwarf the existing fleet of roughly 1,500 US coal-fired plants that are expected to be around for a very long time. Proposals like the one introduced by Mr. Waxman, even if they pass, will only affect new plants. Which is why the coal industry is working feverishly to develop and test commercial scale CCS technology. A unit of Southern Company has submitted an application for one.

The problem with CCS, aside from the fact that it is probably a decade or more from commercial deployment on a wide scale, is that it is likely to be expensive. It is difficult to know what the price premium will be but current estimates, including one from the Electric Power Research Institute (EPRI), suggest that the cost of electricity from new coal plants designed for CCS will be 40-80% higher than from conventional coal-fired electric power plants.

Aside from the extra costs of the sophisticated hardware, such plants would probably lose 30% of energy they generate to capture, compress, and transport the CO2 for storage. EPRI believes that this figure may be reduced to 15% as the technology matures, but the basic message remains that while coal is cheap, CCS will be expensive.

What number should we use?

What number should we use?
Levelized cost of electricity from select sources, ¢/kWh at 2004 prices
Source: Gilbert Metcalf,” Federal Tax Policy Toward Energy,” National Bureau of Economic Research Working Ppaer 12568, Oct. 2006

Even if one assumes that the developed countries can agree to put a moratorium on conventional coal and/or require a phase-in of CCS over time, it is hard to imagine developing countries following suit. The International Energy Agency’s (IEA) World Energy Outlook 2008, for example, projects that fossil fuels will still account for 80% of world’s energy requirements by 2030 with 90% of the projected growth coming from developing countries. Coal, like it or not, is not going away any time soon.

F.P. Shioshansi

This post is extracted from EEnergy Informer, February 2009 issue.

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3 Responses to “Future Of Coal: Rhetoric vs. Reality”

  1. Carlos Ferreira Says:

    Indeed it won’t go away. The situation still rests on that elusive price of carbon. Yes, you can create the plants, no it won’t be as cheap as it is nowadays. The price of carbon will probably rise until it equates the marginal cost of CCS; but the consequence, either we all like it or not, is that electricity is bound to be more expensive.

  2. Rinaldo Sorgenti Says:

    One of the main argument often considered against the use of Coal is its higher Carbon content so producing more CO2 when burned to produce Electricity. Right.

    To avoid and prevent this huge amount of CO2 going to the atmosphere, the international community (in the frame of the C02 debate) is considering to capture the CO2 emissions from fossil fuels burning and sequester same underground. This is going under the acronym of CCS (Carbon Capture & Storage).

    It is certainly right saying that just pumping underground the CO2 in depleted oil and gas deposits or caverns is a costly pure nonsense. Quite a different matter if the CCS is linked or related to EOR or ECBM, where the CO2 help to recover additional quantities of OIL and GAS otherwise left in the ground.

    A perfect example of this is in Weyburn/Canada where the CO2 – produced from a gasification Plant based in Beulah/USA then moved by a pipeline 300 km. north and cross the border with Canada in Weyburn. The capture and compression/transportation costs are more than compensated by the extra volume of oil recovered from the Weyburn oil fields.

    In relation to the above topic and in general to the clear speculations going on in relation to the higher CO2 emissions from COAL fired Power Plants, I would like to suggest the reading of the below excerpt from an article written at the end of 2008 in relation to the same CO2 naturally present in all natural gas fields/deposits and naturally extracted with the natural gas during exploitation. Where, normally, all this CO2 is going to? Simply vented to the atmosphere. The silly question or point is that this is NOT accounted for by anybody and the famous IPCC scientists are just totally forgetting to account for this huge amounts of CO2 emissions (look at their IV IPCC Report as a confirmation for what above (they simply mention the CO2 content of the major natural gas fields in the world by showing the CO2 figures AFTER the CO2 had been removed from the wells’ natural gas flow, before pumping the gas into the pipeline or converting it to LNG to transfer same to the final destinations! A logical question would then be: why?

    Q U O T E

    ” The Wall Street Journal of Europe: 26/12/2008 “Exxon could benefit from emissions work” by Russel Gold. “ …. Exxon …. is spending $70 million to expand by 50% the plant’s capacity to capture carbon dioxide, brought to the surface along with the natural gas. The plant separates the natural gas from impurities. Note: “ About 1/3 of the world’s natural-gas reserves are mixed with high levels of carbon dioxide (CO2), according to Exxon Mobil. That means, producing more natural gas will lead to even more carbon dioxide being vented into the air. Just an example: In Exxon’s natural-gas fields near La Barge (USA), about 65% of the gaseous mixture from the wells is carbon dioxide (CO2). Natural gas is only 22%. “

    U N Q U O T E

    Someone correctly wrote that CO2 is a gas on which life is based on our Planet, while speculations are not necessarily helpful to the humanity.

    It would be useful and interesting if all interested and involved with the above topic try to investigate and debate about same in all working groups.

    Kind regards.

    Rinaldo Sorgenti

  3. Bianca Allitsch Says:

    Considering a scenario “business as usual” the world energy consumption will constantly increase over the next decades. A major part of this augmentation will result from the economic growth in developing countries. Especially these countries are rich in coal deposits and will clearly take advantage of this abundant and cheap fuel for electricity generation.
    If we are interested in limiting the rising concentration of CO2 in the atmosphere to protect our planet from an irreversible damage then this is the area we have to focus on. The question remaining is how to proceed to obtain the result we aspire to?

    I absolutely agree with the author when he underlines the role of the developed countries. How can we demand awareness on climate change from developing countries whose history of CO2 production in fact is far shorter than ours, before we by ourselves seriously tackle this problem?
    In my opinion developing countries have to install more and more strict regulations for future projects as well as for existing ones to expedite research activities. The more the cost for CO2-production increases, the more their producers will be interested in investing money on finding solutions or alternatives. I am convinced that it is inevitable to penalise energy sources that have a high environmental impact, what militates against including the “environmental costs” in the price of electricity? Nowadays the price of electricity should not just include the input of raw materials and the costs along its production process but also the “environmental input”.
    What might be the outcome? Alternative or especially renewable energies would become more competitive, the effort on lowering the environmental impact concerning conventional energy sources would naturally increase which in turn will lead to new achievements in technologies we maybe don’t even imagine at the moment.

    Of course this question does not only concern the coal industry, we shouldn’t forget recent fatal environmental accidents caused by oil exploitation or related to nuclear energy generation. There are various environmental impacts of other energy sources due to their specific risks and for some of them we might not even know their extents yet like for example in the case of nuclear waste.

    In short every energy source is impacting the environment in a different way and more or less intensely and therefore should be penalized in an appropriate degree. Certainly it is difficult to evaluate and compare these impacts but as I see it this is exactly the challenge for the future developed countries have to face to create a new environmentally acceptable energy markets.

    What about consumers? Let’s be honest, a large price increase is the only chance that could make us reconsider our energy consumption and seriously start to work on the important issue of energy efficiency.

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