Wednesday, July 3, 2013

Will "Cheap Gas" Outlast "Clean Coal?"

The Wall Street Journal had an interesting article on the status of "clean coal" technology [I'll add link later] that coincides with the opening this month of the first "clean coal" plant in the U.S.  (Regular readers of this space know that I am no fan of coal and I believe "clean coal" is too much of an oxymoron to type without quotation marks.)  In any case, the "technology" (feel my skepticism) for burning coal with lower airborne environmental impact is evolving, albeit slowly.  But will it evolve in time before becoming a relic in the age of inexpensive natural gas?

The utility industry's marqee "clean coal" project has long been the recently opened Duke Energy Edwardsport Integrated Gasification Combined Cycle (ICGC) power plant in Edwardsport, IN, a mess of a project.  The plant is overdue and over-budget, with a price tag of $3.5 billion that doesn't even include carbon capture equipment that could add several hundred million dollars, if ever implemented.  The big technology advance here is the gasification of the coal before it is burned, but without carbon capture on the back end there is no significant reduction in CO2 versus a typical coal plant.  At least many of the particulate pollutants are removed, but the project doesn't quite seem marquee to me without a reduction in CO2.  The price tag for the unfinished Kemper ICGC plant in eastern Mississippi being built by Southern Companies is $4.3 billion and counting.  At least Kemper has carbon capture technology to be able to harness some of the waste CO2 and sell it to oil drillers to stimulate aging fields. But it comes at a monetary price.

But the big question behind all of this money being poured into making coal burn cleaner - but not as clean as natural gas - is:  why bother?

Obviously, making coal more environmentally friendly would benefit coal producing regions and help diversify energy sources for power generation.  That's a good thing for the country.  But what's interesting about the process of developing "clean coal" is that it is being done largely on the back of ratepayer, who is on the hook for most capital expenses.  Sure, the government is funding research in carbon capture (ironically at a facility just a few miles from my late father-in-law's house in central Alabama), but right now it is a losing battle.

If natural gas remains inexpensive (I hate to call it "cheap gas"), the market will eventually figure out that it is cheaper and easier to develop natural gas power plants to meet environmental regulations.  The plants cost less on the front end (easier to get approved too), the fuel is around the same cost as coal and the utility can lower its environmental impact by building for gas rather than coal.  That's a winner.

But there is a big caveat here.  First, as any fan of shale gas will tell you, don't bet against American ingenuity and technology.  Where there is a problem, there likely is a solution, especially if there is a financial payoff in the end.  It's just a matter of time and money, especially if the private sector wants it solved and it has financial support from the feds.  Second, as long as coal has a political base, there will always be pressure to keep using the stuff, even if it means pouring federal dollars into research or thrusting overly expensive plants onto backs of ratepayers.  If nothing else, we will still have face years of "clean coal" TV ads on our 24/7 news channels and we will all advocate for coal just to get the commercials to stop.

But the utilities see the writing on the wall.  As the above article notes, utilities such as American Electric Power Co. (AEP), a big coal burner, and the Tennessee Valley Authority (TVA), which burns a lot of coal when it's not damming rivers, are both planning to shut coal plants and add capacity in gas (AEP) and nuclear (TVA).

Will "clean coal" make it to the finish line before being run off the road by "cheap gas?"  Likely the answer lies in knowing how much longer gas will remain inexpensive and public service commissions remain permissive. 


Anonymous said...

Google "Methane leaks from NG infrastructure". Methane is up to 105 times more potent than carbon dioxide as a greenhouse gas on a 20-year timescale. There is also a growing body of evidence that the release of methane gas from well sites and pipelines is far higher than previously thought. Clean NG is also too much of an oxymoron to type without quotation marks. No energy source is truly clean, some is just cleaner.

Also the only reason we currently have a steady to slightly growing NG supply is because it is a by-product of "dirty oil" production. We will have "cheap gas" only as long as we have "expensive oil".


Anonymous said...

One piece of analysis of why utilities are slow to kick the coal habit is the historical volatility of gas prices. The "shale revolution" is relatively young, and the low price of nat gas over a long term has yet to be proven. With inevitable export of LNG the long term price of nat gas is less predictable than coal's.

Nick Badger said...

Coal is very important but non renewable source of energy. Around quarter of the percentage of world's electricity produced by coal but the major problem with coal is its poisonous fumes which emits while the combustion. The solution to this problem is clean form of coal which puts lesser affect on ozone layer. One more basic solution to this problem is to save electricity, if everyone on this planet save its share of electricity then we won't need such energy product that infects our atmosphere. You can save electricity by planting more trees, keep the environment cool, by using prepaid controlled electricity and others.