Coal is Heating Up!

Ken Silverstein

September 1, 2005

Coal is trying to clean up its image and developments in technology along with public and private investment are making progress possible.

Pressures to clean the air and water are only going to get more intense, and with coal supplying more than half of the fuel needed to create electricity in the United States, it’s only appropriate that it attract the most scrutiny. Indeed, modern innovations are on the way and purportedly help cleanse coal before it is burned—developments that may soon be partially underwritten by the U.S. government.

“This is all very real,” says Michael Morris, CEO of American Electric Power (AEP) in a personal interview. “These technologies are shown to work and will go a long way to cutting the level of harmful emissions by coal plants.” AEP is not just spending
$1.2 billion over the next three years to install scrubbers that will reduce its sulfur dioxide releases, but it is also expected to build a coal gasification plant that washes the impurities from coal before it leaves the smokestack.

When coal is burned, it produces sulfur dioxide and nitrogen oxide—the stuff that produces acid rain and smog—as well as particulate matter and mercury. Under the government’s Clean Air Act, those pollutants must be removed from exhaust gases that come out of the smokestack on the backend. And that requires expensive technologies that produce varying results. At the same time, the combustion of coal also produces substantial quantities of carbon dioxide, which is not currently regulated, but the pressure to do so is increasing.

By contrast, coal gasification removes the sulfur dioxide, mercury and carbon dioxide from the “syngas” before it is combusted, say experts. And because the syngas is cleaner than raw coal, lower quantities of nitrogen oxide and particulate matter are produced during the combustion or burning process, they say. The carbon dioxide is more concentrated, which makes it easier to capture and seize. Four such plants are operating now: two in the United States and two in Europe.

Cinergy is now in negotiations with General Electric and Bechtel Corp. to design and construct a coal gasification plant in Indiana. All the paperwork should be signed by year-end. Beyond that, it will take about four years to build the generation facility, which will take an existing 160-megawatt coal plant and convert it into a modern 600-megawatt coal gasification facility.

“We need to get a few commercial gasification plants deployed that operate well so that we can get the comfort level up,” says David Denton, with the coal gasification services unit of Eastman Chemical Co. in Kingsport, Tennessee, that manages, operates and maintains such plants for owners. “Compared to conventional coal combustion plants, gasification plants have lower variable dispatch costs and they are more efficient—and without the additional environmental costs associated with cleaning up post-combustion exhaust gases.”

Tight Restrictions

Certainly, the Clean Air Act of 1990 placed much tighter restrictions on emissions and in doing so, gave natural gas a competitive advantage. But natural gas supplies are dwindling and strict regulations mean that developers have a difficult time accessing supplies. Coal, by comparison, is cheap and plentiful with more than 200 years worth of reserves in the ground. And while natural gas will gain market share, the expected increase in future demand will actually lead to greater overall coal usage—not less.

In fact, about 90 new coal plants with a total capacity of 50 gigawatts are under consideration. Today’s coal-fired plants have a fuel-to-efficiency rate of 33 percent to 35 percent. With the new technologies, such as gasification, however, that efficiency rate is said to increase to 40 percent to 50 percent, and potentially as much as 60 percent. The cost to build: about $1,200 to $1,600 per kilowatt compared to $900 with conventional coal plants.

Some utilities and the vendors that supply clean-coal technologies are asking the government to get more involved. The added risk means that government must take a role in bringing such ideas to market, they say, which includes more money for research and development and even production tax credits. Now, the United States is pushing its FutureGen plan that will build a $1 billion coal facility that is expected to sequester all emissions, including carbon dioxide thought to cause global warming.

The need to make coal cleaner is greater now than ever before. As developing nations evolve and their needs become increasingly sophisticated, their demand for power will also escalate. And while other parts of the world have greater access to cleaner burning fuels such as natural gas, they too will rely more increasingly on coal as a fuel source—only necessitating that these new technologies get over the hump and into the market.

“The rest of the world will catch up,” says Charles Bayless, president of the West Virginia University Institute of Technology. “My view is that the U.S. will switch increasingly to coal,” the former CEO of Tucson Electric adds. Meantime, others from around the world may also turn to coal, particularly as clean-coal technologies evolve.

Energy Picture

Environmental and other civic groups, however, are admonishing the U.S. government to steer away from a coal-centered philosophy and toward a sustainable energy future. The logic: coal emits more carbon dioxide, mercury, nitrous oxide and sulfur dioxide than competing fuel sources.

Without such constant reminders, industry and government could become complacent. But realism tempers those demands, recognizing coal for its current role in both the global and domestic energy mix and realizing that green energy sources like wind and solar won’t replace it anytime soon. Indeed, pragmatics suggests that the nation needs a portfolio of fuel sources to hedge against price fluctuations and energy shortages.

Those in the utility industry and under the supervision of government will continue to hack away at coal emissions. In fact, the expected future cost to comply with the Clean Air Act is about $60 billion over the next several years. That’s on top of the $50 billion that’s been spent since the 1970s—efforts that have produced tangible environmental results.

In return, the utility industry is asking for more public support at the state and federal levels. That includes everything from
allowing them to put the cost of new technologies—such as coal gasification—in their rate bases to giving them new funds for research and development, (all part of the energy bill recently passed by Congress).

Fossil fuels and specifically coal will remain an integral part of the energy picture for the foreseeable future. But such market dominance means that the coal industry must continue to work to clean up its act and to convince a waiting marketplace that it can breathe a little easier.