by: Janet Gellici, CAE
Chief Executive Officer, American Coal Council

In calling for a moratorium on new coal power plants, the League of Women Voters is clearly out of its league.  Efforts to curtail development of new coal generation are short-sighted and counterproductive; they endanger the economic prosperity of all Americans and the ability to sustainably steward the world’s environmental resources.

Energy is the lifeblood of our modern society. Reliable, affordable electricity provides the means for people throughout the world to escape the grip of poverty.  Electrification is, in fact, being used in emerging economies, such as China and India, to alleviate poverty, spur economic growth and enhance human welfare.  

We shouldn’t lose sight of the fact, however, that the U.S. is also a “developing” nation.  Our population is growing by about 3 million people a year and will exceed 365 million by 2030.  U.S. GDP is expected to rise from $11 trillion in 2006 to over $20 trillion in 2030 – an 82% increase.  

Historically, electricity has enhanced the lives of our citizens and fostered our economic growth.  In the future, our nation’s energy needs will continue to increase to support our population growth and economic prosperity, to enhance our use of computerized technologies and to advance our environmental objectives, including the development and financing of CO2 emission controls and Plug-in Hybrid Electric Vehicles (PHEVs).  

The Energy Information Agency (EIA) forecasts U.S. electricity demand will increase by upwards of 40% between 2004 and 2030.  These needs simply can not be met without the use of coal-fueled generation.

In order to replace the 820 billion kilowatt hours of new coal generation the EIA projects we’ll need by 2030 would require the general equivalent of:

• 7 trillion cubic feet (Tcf) of natural gas – almost as much as the annual production of Texas and Louisiana
• 110 nuclear plants – we currently have 104 – at a construction cost of $358 billion
• 250 more hydroelectric facilities the size of the Hoover Dam

Alternative energy sources, including wind and solar power are indeed promising, but will require significant commercial development before they can scale up to become a viable option for meeting our energy needs.  

The capacity required to replace new coal generation is beyond the scope of other fuels and energy conservation efforts alone.  Coal is the only fuel resource that can meet projected U.S. electricity demand in a timely, reliable, affordable and increasingly clean manner.

Coal is abundant.  The U.S. has 27% of the world’s coal reserves or more than 200 years of supply based on current consumption rates.  

Coal is affordable.  Between 1999 and 2007, the cost of coal rose 45% versus a 175% increase for natural gas and a staggering 270% increase for oil.  Yes, coal prices have recently increased, but our nation’s most affordable energy resource is still coal.

Coal is increasingly clean.  Over the past 30 years, the coal industry has invested more than $50 billion in technologies to reduce emissions.  As a result, today’s coal-based generation is 70% cleaner.  The industry is committed to advancing this record in terms of reducing CO2 emissions.  

The new coal power plants being developed today – including supercritical/ultra-supercritical and Integrated Gasification Combined Cycle (IGCC) units – offer high efficiency power generation with significantly reduced CO2 and criteria emissions.  They also provide us with an opportunity to begin testing commercial development and deployment of carbon capture and storage (CCS) technologies for controlling greenhouse gas emissions.

Initiatives to remove coal as a viable generation option hamper our ability to develop and apply clean coal technologies to existing and new generation, and to provide our citizens with an affordable, secure power source.  The U.S. has the opportunity to take a leadership role in meeting global CO2 management objectives through the aggressive development of a broad portfolio of advanced clean coal technologies.  In proposing a moratorium on new coal power plants, the League of Women Voters is misguidedly hindering our efforts to invest in climate-friendly technologies to serve the needs of our citizens and those of the global community.  Working together, in league, we can achieve these objectives.


The American Coal Council represents coal suppliers, consumers and transporters in supporting the use of coal as an economic, abundant/secure and environmentally sound fuel source.  Comments may be directed to Janet Gellici at jgellici@americancoalcouncil.org.

Jason Hayes, ACC Communications Director has been invited by the editors of a new news and social content website -- www.opposingviews.com -- to join the discussion on important energy issues we are facing today. He was asked to debate two questions, 1) Should the US Build More Coal-Fired Power Plants? and 2) Is Nuclear Power America's Best Energy Alternative?

Janet Gellici, American Coal Council CEO was recently published in Power Engineering magazine. In her article, Janet looks at how utilities are increasingly focused on the need for flexibility in their fuel procurement strategies. She looks at how increasingly tight international fuel markets and rising prices are pushing utility executives to wring every last Btu out of their purchasing dollars.

We have included the full text of her article here. The article can also be accessed on the Power Engineering website.

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By Janet Gellici, CAE, chief executive officer of the American Coal Council

If you were a fly on the wall at strategic planning meetings of utilities across the nation, the most often heard term you'd likely hear would be "fuel flexibility." Today's electric generators are focused on exploring a wide variety of fuel source options in light of increasingly tight supply markets. The need for fuel flexibility is being driven by volatility and uncertainty, spawned over the past decade by a confluence of factors that have left coal consumers vulnerable to supply interruptions.

Jamie Heller, President of the Maryland-based consultancy, Hellerworx, summarizes six key developments leading up to the current situation.

1. Greater use of capital intensive mining techniques, such as longwalls, that have minimized production costs but also eliminated surge capacity.


2. Consolidation of mining operations in large, often publicly traded entities sensitive to shareholder pressures to grow earnings with the subsequent result of more judicious capacity expansion.


3. Jettisoning of less productive excess rail capacity assets which have consequently limited railroads' ability to handle traffic peaks.


4. Consolidation of barge companies and reduction of barge capacity, also resulting in limiting ability to handle traffic increases.


5. Paring of coal stockpiles to reduce inventory carrying costs and comply with Public Service Commission mandates.


6. Compliance with more stringent environmental regulations; installation of pollution control equipment has limited utilities' fuel choice options.

Piling on, U.S. utilities are now competing for supply with international buyers. Coal exports are expected to reach 80 mt in 2008 – up from 49 mt in 2006 – with continued growth expected for the next few years. Export market demand is being spurred by developing nations – India and China – and supply disruptions – flooding and infrastructure constraints in Australia being just one example.

U.S. suppliers have options in today's market – some very attractive options. Coal contracts in 2008 have been settling at historically high levels, fueled in large part by export market demand that seems insatiable and oblivious to cost.

Despite price increases, coal analysts are projecting a 15-40 mt shortfall in supply in 2008 as producers continue to wrestle with numerous supply constraints. Production costs for "must have" items such as steel roof bolts and tires have skyrocketed. A shortage of skilled labor, lengthy and curtailed permitting of new mines, higher bid prices for western leases and increasing expenses for compliance with mine safety regulation have also contributed to supply volatility and uncertainty.

These various factors are prompting many utilities to reach beyond their traditional suppliers and explore alternative sources. Generators looking to diversify their coal sources are taking into account transportation costs and availability, coal quality characteristics and associated operational considerations, such as blending options and stockpile management. Consider some likely scenarios:

• A power plant that has installed a new scrubber learns that its least cost coal supply is a deep Illinois Basin underground coal source that has a chlorine content greater than what the generating unit had specified. Can the utility burn the coal anyway, blend it, or make plant modifications that allow it to burn the cheaper coal? How does it determine what the cost is of burning the high chlorine coal in terms of plant O&M?


• A scrubbed unit can burn a higher sulfur coal at a lower delivered fuel cost, but with higher scrubber reagent costs, more ash disposal costs and perhaps more frequent outages. How does the plant determine the optimal blend of coals to minimize not just delivered fuel costs, but total generation costs?


• A company that is deciding what type of scrubber to install on an existing unit must decide on the range of fuels the scrubbed unit will be designed to burn. To burn high chlorine, high ash, low Btu coals will increase the capital costs associated with the unit, scrubber & SCR. What is the optimal tradeoff between minimizing capital costs while allowing the unit to receive a low cost and reliable blend of coals?


• SO₂ allowances have become more economic lately while costs for construction and installation of scrubbers continue to escalate. Should the plant defer installation of scrubbers and purchase additional allowances?


• Intermodal traffic on the U.S. railroads has weakened somewhat, prospectively easing capacity constraints for coal traffic. On the other hand, further strain is anticipated as a result of increasing export market demand, inventory rebuild efforts and the upcoming grain season; the toll of Spring flooding in the Midwest on rail and barge traffic has yet to be tallied. How should a utility evaluate transportation options vis-à-vis fuel costs in a dynamic transport marketplace?

Answers to these questions are obviously company, plant and unit specific but suggest the need for a thorough, broad-based assessment of the economics of fuel flexibility. While being able to source supply from a different company or a different basin or a different country (imports) has advantages in today's volatile marketplace, there are costs associated with doing so. 

Heller, who is working with the ACC on its upcoming Fuel Flexibility Conference (www.fuelflexibility.org) points to a number of mistakes that have been or may potentially be made absent an extensive economic assessment:

• Constructing a scrubber that cannot burn high chlorine content coal and thereby losing access to a cheap coal source.


• Rejecting the PRB coal option based on the assumption that having installed a scrubber the least cost option will be high sulfur coal.


• Assuming that the "easy to burn" U.S. coals will not be exported long term, creating price and availability problems.

Plant managers and fuel procurement staff must work together to balance coal and transportation costs with operations and maintenance practices that affect unit output and availability. Fuel flexibility can be a powerful tool in a tight supply market.

Janet Gellici is the chief executive officer of the American Coal Council (ACC). The ACC is dedicated to advancing the development and utilization of coal as an economic, abundant/secure and environmentally sound fuel source. For more information, go to www.americancoalcouncil.org.

The ACC, in association with Hellerworx, is hosting a conference on "Fuel Flexibility Strategies & Tactics for Coal Consumers," July 29-30, Inner Harbor Baltimore. For additional information go to www.fuelflexibility.org.

Ms. Gellici may be contacted at jgellici@americancoalcouncil.org

 

Janet Gellici, American Coal Council CEO was recently published in Power Engineering magazine. In her article, Janet considers the notion that now is not the time to panic over the recent spate of coal plant cancellations. (If, however, we continue to demand more and more inexpensive electricty without allowing for upgrades and new construction of generation and transmission capacity, that time could come soon enough.)

The full text of the article is included below. You can also access the article through the Power Engineering Magazine website.

 

It has come to our attention that there were some formating issues in the last (June 2007) edition of the monthly Members' Update. If you were unable to view the Members' Update, or the information in that newsletter was difficult to follow, you can access the newsletter on the ACC's website at http://www.clean-coal.info/june07_e-news.

Please note that you do need to be signed in to view this newsletter as it is member only content.

As always, you are welcome to contact us if you have any questions or concerns.

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Jason Hayes, Communications Director
The American Coal Council
2980 E Northern Ave., Ste. B5, Phoenix, AZ 85028
E-mail: jhayes@americancoalcouncil.org
Web: www.americancoalcouncil.org / www.clean-coal.info
Ph: 602.485.4737 ~ Fax: 602.485.4847
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	Members' Update
A Members Only Service of the American Coal Council June 2007- © American Coal Council