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Back To Coal: Why Utilities Must Reconsider This Cheap, Plentiful Fuel
Peter R. Savage Reports, Sep 2004, Pages: 228
EXECUTIVE SUMMARY
This report is intended for executives in the power industry (especially those involved in planning and strategy), industrial consumers of power, banks and other suppliers of capital, regulators, those engaged in the exploitation of coal resources, and engineers striving to perfect systems based on the cheapest, most reliable source of hydrocarbons for power-raising purposes.
Over the past few decades, coal has fallen out of favor with the public, despite its hunger for cheap, plentiful and reliable supplies of electricity. Not so with power utilities, who still depend very heavily on coal as a fuel for older power stations throughout the world. But new construction in that recent period has heavily favored the use of natural gas—sold to the industry as a clean, cheap and plentiful resource. Only the 'clean' part of this equation remains indisputably true.
There are distinct signs that utilities in the US—and certainly elsewhere—are beginning to see 'the penny drop,' and recognizing that long-term security lies with a low-cost, price-stable and plentiful resource, namely coal. In saying this, we do not wish to denigrate the clean aspects of gas, nor the intrinsic long-term reliability and safety of the nuclear power cycle. Nuclear facilities have their own problems—the hidden costs of decommissioning old facilities and the incomplete nature of the fuel cycle, making waste disposal both expensive and controversial. But the 'clean' advantage of gas is becoming of secondary importance as technologies to ensure that coal-fired facilities are acceptably, if not equally, clean. As for energy alternatives—wind, wave, solar and geothermal power—we conclude that there are more promises than chances of significant commercial reality within the next decade.
Consider the principal problems of coal as a fuel:
- It's a solid and requires special handling
- Its quality is highly variable in thermal terms, and it can be wet
- On combustion, you are left with large amounts of ash to dispose of, and the gas produced is apt to be high in sulfur oxides or other environmentally undesirable components
All of these disadvantages are soluble, at moderate cost:
- Solids are just as easy to handle as liquids or gases: you use trains, trucks, backhoes and conveyor systems instead of pumps and pipelines
- Coal can be upgraded and pre-treated to make it of acceptable quality for boiler use
- Technology exists to remove any deleterious materials from combustion gases or stack gases
Economic advantages are manifold:
- Coal is cheap and its long-term pricing is stable
- Reserves are far greater than those of alternative fossil hydrocarbons
- The footprint of a coal-fired power plant is essentially the same as that of any other type (which cannot be said for wind farms)
- Per-MW costs of coal-generated electricity are significantly lower than power from other generation modes, and apt to remain that way, whatever the add-on costs of environmental compliance
- Advanced processes for coal combustion are making significant improvements in the relative economics of coal use.
- If the global warming scenario is included in utilities' thinking, coal offers several advantages with respect to the CO2 generated in combustion, promising more thrifty carbon sequestration, should that become economically or politically necessary
- If progress toward a hydrogen economy is required, the use of coal as the raw material to produce the necessary syngas, during the early days, is also supported by proven technology
- Though nobody can say exactly when it will happen, an oil peak is on its way. Pessimists think the signs are already showing for an oil peak later this decade. Optimists see the peak appearing in the 2020s. But, whoever is right, the rate of new oil discovery is pretty sure to fall behind relentlessly growing annual consumption at some point. When that is reached, it will have a profound effect, whose macroeconomic and geopolitical ramifications are not entirely clear. Suffice it to say, coal's contribution to power generation will not be so easy to deride.
- Widely viewed as cheap and abundant, gas is proving to be neither in the United States. There are also serious geopolitical risks associated with dependence on imported gas, whether by pipeline or in the form of LNG.
- Power companies are already maximizing the electricity output of their coal-fired facilities, in recognition of the short-term realities of the situation. When those short-term realities become recognized as the shape of the future, the stampede will begin.
It's frequently been said that coal could make a comeback, if users could 'get their act together,' usually implying that some radical change in technology is required before this can happen. We agree that advanced combustion techniques and 'clean coal' initiatives are going to be very important in the pending rebound, but also argue that existing technologies, with a more modest upgrading, can also advance the cause. The difficult choice, then, is not whether to seriously make some choice that involves coal—it's almost a no-brainer—but how much technology risk a company is ready to undertake. This report aims to help you make such decisions.
Structure of The Report
We aim to cover the full spectrum of possibilities of this return to coal in a linear fashion, with a few tangential excursions. There is a minimum of history, except where needed to clarify the origin and role of older technology.
In Section 1: Why Coal Is Coming Back, we summarize the economic case for coal versus other fossil fuels (with an emphasis on natural gas) as a power option. We also assess the possible disruptive factors: liquefied natural gas imports, fuel oil and syncrudes from low-quality crude oil, tar sands, etc., and the roles of oil and coal producers.
In Section 2: Coal, we discuss the various ranks of coals and their availability and prices.
In Section 3: Upgrading, we discuss methods of improving the quality of mined coal or pre-treating it for power station use.
In Section 4: Combustion, we examine current proven and developmental techniques for efficient combustion of coal.
In Section 5: Higher Efficiency, we consider more advanced concepts like gasification, combined cycle power generation and possible hydrogen co-production.
In Section 6: Gas Treatment, we examine current and emerging technologies for desulfurization and removal of other environmentally harmful components in post-combustion products.
In Section 7: Disposal, we consider methods of disposing of ash, sulfur and other by-products in an economically neutral or value-added manner.
In Section 8: CO2, The Universal Leveler, we consider an emerging issue that confronts all fossil hydrocarbon energy sources: is carbon dioxide sequestration feasible?
In Section 9: The Poisoned Chalice, we discuss the factors that are delaying progress of clean coal and more efficient coal-fired plants. These include inertia, fear of change, politics, red tape and uncertainty.
Section 10: Making A Case considers how companies can strategize the permitting process, and how they can seek to counter extremist environmentalist arguments and win community support. How 'being green' can avoid many roadblocks and build consumer support.
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