Clean-coal costs could spark coal rout, ex-World Coal chair concedes

If only coal wasn't coloured black ?!? .... then people wouldn't have all these hang ups about it being dirty and polluting ... let's get rid of this color bar ... affirmative action for coal power now ?!

Clean-coal costs could spark coal rout, ex-World Coal chair concedes

By: Martin Creamer
Published: 16 Mar 07 - 0:00
It’s damned if you do, damned if you don’t.Coal simply has to clean up its act. But if it does, it might well lose its market.Outgoing World Coal Institute chairperson Roger Wicks conceded that to Eskom MD: resources and strategy Dr Steve Lennon during question time at the packed Fossil Fuel Foundation of Africa annual general meeting in Johannesburg.The thinking is that the European Union (EU) will force carbon capture and storage (CCS) on all big coal users by 2020.German Chancellor Angela Merkel is apparently paving the way for an EU impri-matur on CCS enforcement come the G8 Summit in June.But the problem is that CCS won’t come cheaply. At the Anglo American-Shell Monash Energy project in Australia they’re thinking of piping errant carbon dioxide (CO2) 200 km into emptying oil reservoirs in the Bass Strait.Lennon reckons it could put 20% on to coal use, which could prompt an even intenser swing to nuclear, which is already breathing down the neck of coal.This prompted Lennon to sketch a repeat of the exit of oil by power stations after the oil crisis of 1973 and the move into gas in the mideighties, but this time a coal rout.Wicks, also head of energy at Anglo American plc in London, conceded that a “very significant and swift” shutdown of coal-fired power stations could result if CCS were forced on EU coal users by 2010, as was anticipated, which could be a blow to the coal market.But he added that the extent to which that could then backfire, because of the cost of investment in new and different plant, had also to be taken into account, however.Earlier, Wicks had told the meeting that the pace of adaptation to climate change was “really ratcheting up” and that the EU could pose “a very significant shift”.Customers were in any event coming under increasing pressure to implement clean-coal technologies, which would add to the cost of using coal.“We have to find ways as producers to protect our interests in the business and possibly even consider investing in clean-coal technologies,” Wicks said.Certainly, CCS on old plant would be at the more expensive end in the range of abatement options. Putting CCS on new plant would also be expensive, but there was no telling how companies would react when pushed, and that was something that the coal industry needed to consider.It predicated a shift to the coal industry being only in those counties where those issues were not legislated. That kind of structural change in the industry would be quite disruptive.Wicks said that the future of coal would have to be clean coal. “We have to have the technologies that are going to enable us to burn coal in a very different way,” he said.The difficulty was that many of the decisions about how, by whom and the rate at which it was used were not in the hands of producers, but in the hands of power companies, cement companies, steel companies and the like.But while the coal producers had an indirect influence on these issues, it was not something that they would simply abandon to the users of coal.It was for that reason the coal producers had become vociferous on those issues and were now involved in understanding the impacts of climate change on themselves and users, and were engaged in carbon mitiga- tion, emission reduction and clean-coal promotion.Proved temperature changes and “very telling” photographs of changes to the Greenland Icecap left little doubt that human activity on the planet was having an impact on climate.Insurers were being faced with soaring losses from extreme weather events, which were affecting the premiums that insurers charged coal companies.The Stern Review, undertaken by Sir Nicholas Stern for the UK government on the economic implications of climate change, motivated immediate action very strongly.It suggested that the cost to the world of acting immediately would be 1% of gross domestic product (GDP) compared to a delayed cost of 5% of GDP.The UK’s Hadley meteorological office research centre was developing detailed models to determine the likely climate-change impacts in distant time horizons.Anglo American itself was considering using the Hadley models to assess the possible implications of extreme weather events on operations in which the company was planning investments.“We haven’t made a lot of pro-gress in that area and it is something we are just beginning to do, but this is how we are having to start thinking as a business,” Wicks said.Anglo American currently had 25 approved projects, worth $6,9-billion – 14 of them in South Africa – and 16 future projects, worth $10-billion to $15-billion, four of which were in South Africa and which were candidates for subjection to these climate-change assessments.Emerging climate-change policy would inform regulation and dictate the pace of presure to adapt, which was “a vexatious area”.Once the provisions of the Kyoto Protocol came to an end in 2012, there was no clarity on what would follow.Lack of clarity was making business life for Anglo American, which was investing in the future and whose activities touched on the climate-change issue, “extremely complicated”, as the company had “no idea” what the future financial impact of climate change might be.Some countries were working actively to undermine international policy frameworks.An example was time spent to get CCS embraced in one of the mechanisms of the Kyoto Protocol, only to be opposed in this by Brazil.The worst scenario for environmentalists would be one in which the world was weak politically and was fragmented – a “dirty dancing” scenario – in which there was no agreement on climate change and international tensions and energy security overrode climate-change concerns.At the same time, there had been a palpable US political shift towards legislation to combat climate change.The impact of water scarcity that could arise from unchecked temperature change was “pretty formidable”.One of the projects in which Anglo American was involved was managing excess water flows from its coal mines in the Witbank area.The company, with BHP Billiton, was building a 20-M8467/d, $43-million desalination plant, from which it expected meet to 20% of municipal potable water demand.There was a growing belief that the battle could not be won without addressing energy efficiency, which was now being referred to as a “fifth fuel”.Anglo Coal had a ten-year programme to increase energy efficiency by 15% and reduce carbon emissions by 10%.It had a carbon working group with representatives from all of its divisions, which looked at policy and market developments.It had a carbon-credit trading facility, which Anglo American’s treasury managed, and investment guidelines that forced new investments to be tested against the carbon price and energy efficiency. “We are getting tougher and more rigorous about that,” Wicks said.Where coal-bed methane, which was 21 to 23 times more damaging to the atmosphere than CO2, was a serious problem from a safety point of view, as in some Australian coal mines, the methane was being converted into clean energy.A 32-MW methane-fired power plant built in Queensland was feeding power into the grid, with Anglo retaining offtake rights.Its benefits were that it was equivalent to displacing a million tons of CO2, planting 1,6 million trees or permanently removing 250 000 cars.Anglo now had plans to build a second of 40-MW capacity, also in Queensland.Mega clean-coal initiatives in which Anglo was engaged were:n FutureGen, a 270-MW power plant in the US, which would use gasification technology with CCS. It had 12 international partners both inside and outside the US and the US Department of Energy was financing it heavily. It was aiming at a demonstration plant by 2013, but the work thus far had identi- fied two states as locations. It was a joint initiative and had set the tone for the manner in which industry had to respond – collectively.n Monash Energy, located on the south-east corner of Australia, 150 km east of Melbourne in the Latrobe Valley, the site of one of the world’s thickest brown-coal reserves. The seams of an existing mine were 200 m thick. With the CO2 burden of that kind of coal, permission to mine would not be granted, even in Australia. What Anglo American intended was to dry the brown coal, gasify it and produce clean synthetic fuels and other products. Australia was experiencing a signifi- cant diesel shortfall, 70% of which would have to be imported after 2010. Fortuitously, immediately offshore and likely to be connected by a 200-km pipeline, were progressively depleting oil reservoirs in the Bass Strait, from which Australia currently drew its oil resources. These undersea reservoirs offered a unique match with the project contemplated, from which it would inject the CO2 captured, into those reservoirs. Anglo American was viewing Monash as a “very important” case study and a demon-stration of an extended business model in which CCS was a key enabler, because, without it, this sort of development could not take place. Having begun on its own, Anglo had since struck up a joint-development agreement with Shell and was obtaining substantial Australian government support.“For coal companies to respond will require supportive policy change and policy clarity. We need governments to assist. We need advance technologies. “China is introducing one new coal-fired plant every week and twice Eskom’s capacity every year, most of it coal fired,” Wicks said.The world is getting “locked into a huge amount” of coal-fired generation, which did not have CCS and which itself needed to be further developed and widely applied at a far quicker pace.“As a coal company, we are going to need investor support for the pursuit of long-term investment in new technologies that may be more costly and may not deliver early returns. That is going to require an enlightened shareholder body,” he said.In South Africa, the Depart-ment of Minerals and Energy had carried out limited exercises in South Africa to begin a pro- cess of mapping prospective reservoirs into which CO2 could be buried.An awful lot of more work needed to be done to make sensible estimates of what would be involved. If developed countries were looking for sensible ways of offering aid to lessen climate change, a package that looked at detailed mapping of potential reservoirs would certainly be a very pragmatic way of assisting.The findings of the Inter-Governmental Panel on Climate Change on CCS a year ago were that it could cope with between 15% and 25% of the CO2 emission that the world was looking to abate in order to return to a CO2 emissions concentration in the atmosphere of between 450 and 550 parts per million.There were many places in the world where this could not be done and other methods would have to be employed in these.Lennon warned that CCS would be both expensive and energy- intensive, which meant that depletion of a nonrenewable resource would be accelerated.The impact of the cost of CCS on power generation could be major and could lead to a shift away from coal, just as there had been a shift away from oil in the seventies and to gas in the eighties.If required to install CCS after 2020, some might find that coal was no longer competitive and by then there would be alternatives.Nuclear was already very close to being competitive with coal: “Add CCS, and you could see strong competition over a 10- to 15-year period,” Lennon said.Wicks said that early indicators were that coal-miners would have to put up berms to protect opencast operations against flooding effects climate change could bring about, and it would be better to go to that expense than be caught out in ten years.For the last five years, coal had, by orders of magnitude, been the fastest-growing fuel in China and the US.Coal consumption was pro-jected to rise significantly and the world needed coal as a secure and abundant energy resource.Coal’s reserves substantially outlasted those of oil and gas, but the future of coal would have to be clean coal.Anglo American was a pro-ducer of 97-million tons a year of energy and metallurgical coal in South Africa, Australia, Venezuela, Colombia and Canada, and had an office in Beijing.