Bill Totten's Weblog

Saturday, December 18, 2004

The Energy Challenge 2004 - Coal

by Murray Duffin

http://www.energypulse.net (September 30 2004)


Coal may be the most interesting of the fossil fuels, and it is certainly the most abundant and the most controversial. The environmentalists hate coal because of its ecological footprint in mining, its emissions (particularly mercury and carbon dioxide), and its gross inefficiency as a source of energy. The coal producers fight any kind of progress in safety, efficiency, pollution or alternatives, afraid their costs or sales growth will be impacted. Progress in improving efficiency and reducing emissions comes mainly from government research, in cooperation with electric utility companies. The environmentalists are wearing blinkers, and the producers are irresponsible.

In the meantime, coal production in the USA climbed about 2.4% per year over a long-term average (doubling in thirty years), through 1996, flattened through 2003 and then jumped to growth rate above 3% in 2004; and is likely to continue growing for another forty to fifty years. Consumption could increase by a factor of more than two before it peaks, and while we should be thankful it can do so, unless we see management changes we should strive to prevent it.


Coal Resources

The USA estimated recoverable reserves are about 275 billion short tons, but the EIA notes that "much of this may not be mined because of sulfur content, unfavorable quality, mining costs and/or transportation infrastructure". Actual production in 1998 was about 1.1 billion short tons, and this is where the National Energy Policy Development Group (NEPDG) gets their figure of a 250-year supply, (275/1.1).

In fact, the Coal Demonstrated Reserve Base (CDRB) <1>, which is a relatively high- confidence factor estimate, is 508 billion short tons (25% of world reserves). However, the EIA estimates that 17% of this is off limits or otherwise not accessible, and 34% is lost in production, leaving 55% recoverable, that is, 275 billion short tons.

We now have to consider two sets of factors that pull in opposite directions:

<> The not mineable, due to sulfur, quality, cost, etc.

<> The potential available from reducing "off limits", reducing "lost in production" and reducing sulfur problems, all with better technology.

In the moderately pessimistic case, we probably have 150 years, and in the optimistic case 300 years at 1998 production rates, that is, 165 and 330 billion short tons respectively. However with petroleum and natural gas supplies in decline, the use of coal will grow. If it grows at 2.5% per year (with no change in efficiency of use) we will double coal useage before 2035, and triple it by 2050. At that rate of sustained growth we would use 100 billion short tons by 2050, and would have between fifteen and fifty years supply left at the then use rate. We will certainly increase the efficiency of coal use, thus stretching this schedule, but it is almost certain that the rate of coal production will also peak and go into decline before 2050, as the available seams become deeper and/or thinner. Coal may be the form of fossil fuel that provides the energy bridge we need to transition from fossil fuels to renewables, but by itself it is not a solution to the problem of oil and natural gas shortages.

The problem with coal in the short term is not shortage; it is inefficiency and pollution.


Coal Challenges

There are some major problems with increasing coal use.

<> Diminishing returns. As we use more coal, we will, over time, be mining both deeper and thinner seams, driving up cost and driving down energetic yield. The modest growth of 2004 has already seen eastern anthracite prices double.

<> We use petroleum to mine coal. As we experience diminishing petroleum availability, we will have to use coal to mine coal, with much lower efficiency and much higher carbon dioxide output (unless we develop carbon dioxide sequestration technology).

<> Because of the difficulty of mining and transporting coal, its lower energy density, and the inefficient way we burn it to generate electricity (throwing away the heat), it has been estimated that coal has only 40% of the energetic productivity in the economy of oil, and less than 1/7th that of primary electricity. (See Note 0). New IGCC plants (Integrated [coal] Gasification Combined Cycle) using best available technology can burn coal about 30% more efficiently, but if 100% of old plants were replaced, it would only move coal productivity to 1/5th of primary electricity at best.

While our first energy problem will be to replace natural gas we will also shortly need substitutes for oil. Oil companies, with a liquid fuel mindset, have done a lot of work on using coal to develop fuel liquids, in order to use the existing refining and distribution infrastructure. The problem with this approach is that using the present USA average coal quality as feed stock, we would have to more than double coal production to replace 1/3rd of our petroleum, (about 27 quads of coal to replace 13 quads of oil). We would have to build 100 large liquefaction plants and greatly increase the mining infrastructure. Not a very feasible solution.

It would be better to use the investment for renewably generated electricity and a hydrogen infrastructure. About 90% of coal used in the USA is used to generate electricity. Three or four quads of primary electricity from wind or solar would replace about 21 quads of coal, as noted above.

An alternative to using coal for liquid fuel is using coal in IGCC4 (Integrated [coal] Gasification Combined Cycle) <5> plants to generate electricity and hydrogen, and use the hydrogen for automotive fuel. With today's best available technology, this alternative is probably about 30% more efficient than the liquid fuel choice. Of course, in the short run, using otherwise wasted night time electricity to generate hydrogen is very efficient. We still have the problem of the hydrogen infrastructure.

It seems likely that as we make the transition to a hydrogen economy we will continue to increase coal use for some decades, simply for lack of an early alternative. However, to minimize the problems inherent in such a course, and recognizing that petroleum shortage is a proximate issue, a thoughtful energy policy must prioritize transportation efficiency first, and then focus on other efficiencies, renewables, and the electricity/hydrogen infrastructure.


A Clean Coal Future

As coal will not go away soon, we must also develop clean efficient coal technologies (see ZECA - the Zero Emissions Coal Alliance) <2,3> and more efficient coal fired generating plants. The ZECA fuel cell approach holds promise of doubling the efficiency of generating electricity from coal, while approaching zero pollution. It is interesting to note that electricity generation was less efficient in 1998 than it was in 1959. During forty years, regulated monopoly electric utilities have made no progress, even though technology has evolved, because they didn't have to. It is this kind of management incompetence and lack of progress by both coal producers and users that is driving our present problems. Over the next thirty years we can probably reach 70% more electricity output from coal with no greater number of generating plants and burning no more coal than today. However history tells us it won't happen voluntarily and will be impeded by the coal industry.

The ZECA approach involves fluidized bed coal gasification to generate syngas from which hydrogen is derived to fuel a high temperature Solid Oxide Fuel Cell (SOFC). It results in very high efficiency (near 70% projected) through high heat utilization, and very low emissions, better than natural gas combustion. It also has the promise of economic carbon dioxide capture in the form of mineral carbonate. The theory appears sound, but much technological development is still required, especially for the fuel cell.

An interim step is the IGCC (Integrated [coal] Gasification Combined Cycle) generating plant which uses the front end technology envisaged for ZECA for syngas generation from coal (or other fuels like petroleum coke, orimulsion, or heavy oils), and uses the syngas in a combined cycle turbine generator. Hydrogen can be a byproduct. All of the technology for the various elements of an IGCC is well developed, and a few fully integrated plants have been operating for enough years to assure expected operation in new plants. The pilot plant technology-debugging phase has now been completed. Existing plants have achieved over 40% HHV efficiency, compared to less than 35% typically for a conventional coal fired steam boiler (PC) plant. New plants are expected to achieve 45 to 50% efficiencies.

The main advantage of IGCC plants is reduced emissions. Sulfur and Nitrogen Oxide are much lower than for a PC plant, and more than 98% of the mercury can be eliminated at very low cost (a few mils per kWh). The capital investment <5> required to build the next generation of IGCC plants is generally estimated to be approximately twenty percent higher than investment required to build the next generation of PC plants. However the cost of carbon dioxide capture from an IGCC plant is estimated at 1.0 to 1.7 cents per kWh versus 2.2 to 3.3 cents per kWh for a PC plant. With mandated limits and a cap and trade scheme for mercury and carbon dioxide, IGCC would be the more economic choice. With coal prices rising, they may be more cost effective only due to efficiency.


Management Barriers

Even with all of these benefits, new plants now being approved are mostly traditional rather than IGCC. Note the following from the Chicago Tribune (August 24 2004):-

"Everyone speaks well of a technology that could turn Illinois coal into energy, but hardly anyone wants to spend money to use it. A once-vibrant industry, coal mining in Illinois has lost thousands of jobs in recent years, brought down by clean-air legislation of the early 1990s. The state's coal is loaded with sulfur, forcing the coal-fired generating plants that supply nearly half the state's electricity to buy cleaner fuel from western states. But a technology known as coal gasification (IGCC) radically reduces the pollutants expelled from the exhaust stacks of power plants. It is those substances - mercury and compounds of sulfur and nitrogen - that are among the nation's principal sources of air pollution and acid rain. But there is no reason to expect it to be used in the state anytime soon. Several power plant developers are toying with the idea, which is being used at plants in Indiana and Florida. But the two big electric-generating plants expected to open in Illinois in coming years - one Downstate and one on the former Joliet Arsenal site in Will County - have rejected it, saying conventional technology is cheaper."

And there we have an example typical of industry mindset. Don't worry about jobs, or pollution, or efficiency, just go with cheaper first cost, and don't even consider that legislation might soon make the cheaper decision more expensive. (See The New York Times, August 26 2004 "US Report, in Shift, Focuses on Greenhouse Gases" by Andrew C Revkin). If a carbon dioxide cap and trade scheme is enacted, and that is probable in the next few years, the IGCC will prove to have been the cheaper choice as well as the best.

Aggravating the problem of power industry conservatism we have an even worse situation in the coal mining industry. Almost every independent article one reads about coal deals with opposition to environmental constraints, or pollution controls, or renewables, or efficiency, or miner safety, or any other socially responsible proposal. For a typical example see "Friends in the White House Come to Coal's Aid" by Christopher Drew and Richard A Oppel Jr, New York Times (August 09 2004):-

"Coal producers are among the biggest political spenders, dispensing millions of dollars per year on campaign contributions, lobbying, and disinformation campaigns. Heaven forbid they should divert such spending to say R&D in the national interest. (Note the lack of American coal companies in the ZECA)."


Government Action

In fairness some developers claim that they cannot get financing for IGCC plants because they are new and untried. (Excess conservatism is certainly one of the problems of the electric power industry). Clearly this situation has to change, urgently. "Third Party Covenant" <5> financing would solve this problem and more than offset the cost differential with lower cost of capital by allowing for eighty percent federally guaranteed debt, a significantly higher percentage of debt at a lower interest rate than available under traditional utility financing. Note that such a scheme would cost the government only about 1/10th the cost of a thirty year production tax credit. However we need new federal legislation to enable such financing.

To jump-start IGCC we need legislation limiting emissions, especially of carbon dioxide and mercury, or an enabling scheme like the "third party covenant" or both. Unfortunately the power industry, in their usual "head in the sand" fashion, is likely to oppose, rather than support such legislation.

Conclusion

Coal is one of the keys to a safe transition from a world of fossil fuel energy to a world deprived of fossil fuels. Natural gas and petroleum will become the first depletion problems. By definition coal will be a growth industry for at least some decades, so coal company management can stop worrying about sales and stop opposing renewable energy sources and efficiency initiatives. Their future is secure.

However for coal to do its job without contributing more problems than it solves, we need progress in clean and efficient coal fired electricity generation. Both the coal and power industries need to step up and accelerate the transition to cleaner, more efficient technologies, starting immediately. IGCC looks like the first step and ZECA represents the ultimate goal.

With the changes hurtling towards us, driven by declining availability of natural gas and oil, and the near certainty of more needed environmental legislation, the country cannot afford the type of management typical of the coal mining and coal-fired power industries. These industries are too important to the nation's energetic future to be managed hitherto as they have been heretofore. We need forward looking, progressive, socially responsible management that promotes rather than opposes innovation, and technical and social progress. Until such management becomes the norm, we will have to depend on legislation and the need for appropriate legislation is urgent.

Notes

Note 0: Regarding relative productivity in the economy of different fuels. As primary source see the paper by Cleveland found at http://dieoff.com/cleveland.pdf , page 5 of 17, (or page 305 of the referenced journal). Cleveland, in referring to Adams and Miovic speaks of, "petroleum 1.6 to 2.7 times and electricity as 2.7 to 14.3 times more productive than coal in producing industrial output". He than provides a table with minimum and maximum average product ratio calculations done at different times. Simply averaging the ratios given, and the cross ratios implied, (for example, from oil:coal and gas:coal one can infer oil:gas), we end up with productivity ratios as: electricity to oil 1.7 to 5.8 times, electricity to gas 2.3 to 6.3 times and electricity to coal 3.8 to 16.7 times.

Weighting more recent data more heavily on the theory that the wide range of estimates reflects different kinds of work done (eg more of the energy in coal is used productively for heat than it is for electricity), and more recent estimates would better reflect the current mix in the economy, and adjusting the averages slightly so that, for example, coal to oil and oil to electricity would come out much like coal to electricity, and rather than use a range calculated to one decimal place averaging the range and rounding to the nearest whole number in the direction that favors fossil fuels, (to be conservative), on average in the economy, one quad of primary electricity does the work of 7 quads of primary energy in coal, 3 quads of primary energy in natural gas and 3 quads of primary energy in oil. This result may be somewhat unfair to natural gas relative to oil, but to get closer we have to use 2 significant digits, which is surely not justified.

The biggest room for error is that for different kinds of work we have a range from 4 to 17 for the electricity:coal ratio, and the mix that produces that range is not known. If it is heavily weighted to either end the above number could be quite wrong. Collapsing a range to a single number may be questionable, but it seems like a useful simplification.

Note 1: the primary energy quoted by the EIA for nuclear is simply three times the electricity produced because on average USA reactors dissipate two watts as heat for every watt of electricity produced. Thus we have a three times productivity factor for primary electricity vs nuclear.

Note 2: As gas gets used more for efficiently producing electricity rather than hydrogen, heat and cooking (including BBQ grills) its productivity will rise sharply, so maybe we should think of it as better than oil now.


References:
1 www.eia.doe.gov/cneaf/coal/reserves
2 www.ch2bc.org/ZECA_files/frame.htm
3 http://www.zeca.org/
4 http://www.bechtel.com/PDF/BIP/22008.pdf
5 http://bcsia.ksg.harvard.edu/publication.cfm?ctype=book&item_id=394


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