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Coal backlash

With the announced acquisition of TXU earlier this week, Fortune magazine has published a story analyzing the future of coal.

Coal fired electric generation accounts for 48.8% of US electricity production. Of the fossil fuel choices, coal is the least expensive and most plentiful of fuels, costing just $1.67 per million BTUs, though the price is up from $1.20 per million BTUs in the year 2000. To bring the BTUs measurement home, 1,000,000 BTUs is equivalent to around 293 kilowatt hours, enough to power a small home in the US for a month. Experts claim there is a coal reserve in the US of around 1.3 million square kilometers (~500,000 square miles) that should last at current burn rates for around 250 years. At present, there are some 150 new coal fired plants in planning through construction phases in the US.

Every 1,000,000 watt/hours of power produced by coal results in 1,000 kg (2,200 lbs) of carbon dioxide and 15 kgs of sulphur and nitrogen oxides into the atmosphere. Coal mining happens in one of two ways, shaft mining and strip mining. Shaft mining is just what it sounds like, a shaft is sunk into the earth at some angle and the coal vein is followed underground with the coal being transported out of the mine for processing. Strip mining works for shallow veins where the non-coal material (overburden) is removed to access the coal vein which is removed and processed, and then the overburden is replaced and the land is reclaimed.

New research is underway to make coal cleaner and less damaging to the atmosphere including gassification and carbon sequestration technologies. Gassification is happening to some extent now and carbon sequestration may or may not work – the idea of capturing the carbon post burn and injecting it into the earth for storage sounds a little farfetched until one thinks about how natural gas is stored. There are several large salt domes that have been hollowed out by pumping in water to dissolve the salt then the resulting brine is pumped out leaving a chamber. Natural gas is then injected and stored in these reserviors. I don’t know if that’s exactly what researchers have in mind for carbon dioxide, but there is an existence proof of some sort.

These facts are important when considering the future of coal. Environmental objection is but one variable in the coal equation, and perhaps the least important when considering how to positively impact climate change. Another variable is cost, the most important and most influential variable. I believe cost is the key. Until and unless coal generated electricity becomes more expensive to produce other energy sources will not be sought with the vigor that is required to make a large impact.

The good news is, we can already see the cost factor coming into play. The TXU plants on the docket are slated to cost on the order of $1B a piece, or about $1M per megawatt of generation capability. Natural gas costs $0.75M per megawatt. Wind costs $1M per megawatt, but it’s not baseload power due to the fickle nature of wind. Solar is still a couple of technology generations away costing around $8M megawatt, it also suffers from capacity factor, it’s not generating power at night. Geothermal power is baseload, but with exploration costs included, it comes to $2.5M per megawatt. Geothermal exclusive of exploration is in the $1M per megawatt range. Coal gassification plants come in at around $2.5M per megawatt now and who knows what carbon sequestration will add in terms of cost. As you can see, coal plant construction prices are starting to encroach on renewable plant cost territory.

Operations costs are also creeping higher. The more stringent the emissions regulation, the more expensive it becomes to operate a coal fired plant. If we add in the cost of fuel over the 40 year lifetime of a plant, all of the sudden baseload renewable generation like geothermal looks pretty darned attractive.

That brings us to the most important variable, emissions regulation (which will be the largest single driver of coal electricity production cost.) A policy the new Congress could take on is to mandate new coal plants to have emissions no greater than a geothermal plant (I’ll accept 1980’s vintage Geysers plants as the benchmark even though new binary plants in a closed system would be better.) This would serve notice that investment must go into clean electricity generation and would have lasting impact over the next 20 years on climate change.

One thing is certain, market forces alone are not enough to tip the investment from coal to other clean technologies. The market needs a push in the form of strict emissions control which will cause the price of coal generation to rise sufficiently to cause alternate behaviors. Now is the time.

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