The Role of Coal Threats and Opportunities

Transcription

1 The Role of Coal Threats and Opportunities Pittsburgh Coal Conference Sept. 3, 2005 Michael J. Mudd Manager Technology Development

2 National Coal Council By letter dated December 3, 2003, U.S. Secretary of Energy Spencer Abraham requested that The National Coal Council prepare a study identifying which opportunities could expedite the construction of new coalbased electricity generation. He included in his request that the Council also examine opportunities and incentives for additional emissions reduction including evaluating and replacing the oldest portion of our coal fired power plant fleet with more efficient and lower emitting coal-fired plants. The Secretary expressed his belief that this report will serve as a blueprint for industry while acting as a guide to promote the construction of new coal-fired facilities. National Coal Council Report Opportunities to Expedite the Construction of New Coal-Based Power Plants 2

3 A Need for Infrastructure Construction has not kept pace with growth 70% load growth in past 25 years Lagging investment in generation and transmission infrastructure Existing plants are approaching their operating limits Nuclear: 990, 66% capacity factor 2004, 9% capacity factor Coal : 990, 59% capacity factor % capacity factor Demand expected to grow another 20% over next 0 years U.S. set new record for power demand week ending Jul. 23, 2005 Capacity Added (GWs) U.S. Coal Capacity Additions, Industry Growth Trend Not Seen in 50 Years 3

4 Fuel Strategy is Critical There are serious gas supply problems and price volatility in North America LNG imports will harm U.S. trade imbalance Can we license a PC unit? Is current technology adaptable to new environmental regulations? Mercury, HAPs, CO 2, what else? Market-based solutions inhibit technology risk and new technology deployment Renewables (particularly wind) promising, but infrastructure/intermittency limits penetration Nuclear could be revived, but probably decades away from a major resurgence No one silver bullet Need a portfolio 4

5 Low-Cost Electricity from Coal: Coal Fuels 50%+ of U.S. Electricity Retail Cost Per kwh & Percent of Coal Generation.3 % = average retail price per kilowatt hour for % 6. 7% % 5.0 0% % % % = percent of total generation from coal 0.8 8% for 2004 < % % % % 5.6 5% % % % % % % % % 6. 86% 5.8 5% % 7. 35% % % % % 6. 56% % % 6. 60% = < 7.0 = < 8.5 = 8.5 Hydro 5. 99% % 8. 55% % 8. 30% 2.0 6% % 6.2 4% 9.4 % NH.4 7% VT. 0% MA % RI 0.8 0% CT 0.4 3% NJ 0.2 9% DE % MD % Source: Energy Information Administration, March

6 Coal Use Grows While Emissions Decline Percent Increase Since % 50% 00% 50% 0% -50% -00% Coal used for electricity has tripled since 970 while emissions have been significantly improved +77% Electricity from Coal NOx 0% SO 2-35% PM0-87% E Source: EPA National Air Pollutant Emission Trends, EIA Annual Energy Review 2002 (October 2003). 6

7 Air Emissions Will Be Reduced Emissions: Clean Air Interstate Rules (CAIR) and utility mercury reduction rules finalized by the U.S. EPA in March 45,000 MW of new scrubbers in the Eastern U.S. by 200 (00,000 MW already scrubbed) 5 0% of the coal fleet (smaller, older plants) expected to be retired CO 2 : Climate Change 7

8 The Path Toward Near-Zero Emissions from Coal-Fueled Generating Plants Emissions from Coal-Fueled Generating Plants 0.94 Pounds Per Million Btu Sulfur Dioxide Nitrogen Oxide U.S. Average 2004* 0.6 Clean Air Interstate Rule Clean Air Interstate Rule Existing IGCC (Permit Level) 0.82 New Midwest Minemouth New PRB Plant New IGCC Projection Near-Zero FutureGen Goals * Estimate Source: EPA s Clean Air Markets database; EIA 2004 Annual Energy Outlook; GE Energy; SFA Pacific. 8

9 Numerous coal plants have been announced; will they be built? New Coal Plants Announced Since 2000 Fuel Levelized Cost of Electricity, $/MWh (2004$) Constant Dollar Levelized Cost of Electricity for Pulverized Coal with Pit #8 Bituminous Coal 500 MW Plant Size, 200 Startup, Coal Cost = $.50/MBtu with 0% real escalation GW 2.5 GW 0.5 GW GW GW GW.6 GW GW GW 4.4 GW GW 0.5 GW GW 0.8 GW 0.7 GW 2.6 GW 3.4 GW O&M Capital Levelized COE GW 3 ATC Historical Pricing (April 2004-August 2005 MTD) 3.0 GW.8 GW 0.8 GW GW 0.5 GW GW.4 GW GW 5.0 GW.0 GW GW 0.4 GW 0.6 GW.0 GW.4 GW State with proposed plants 2.4 GW 3.3 GW 0.2 GW PJM PV ERCOT ENTERGY CINERGY HRS Number of proposed new coal-fueled generating plants and gigawatts of capacity. Source: U.S. Department of Energy, National Energy Technology Laboratory, February 24, Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Jun-05 MTD 9

10 Threats What is in the way of new coal plants? UNCERTANTY 0

11 Threats Delays in permitting new coal plants has been an impediment Length of permitting time Redundant permitting requirements Delays often do not impact ultimate plant design Perception of walking through a minefield

12 Threats Environmental regulatory approaches have been an impediment Regulatory approaches favor retrofits on existing plants Recovery of capital cost investment requires life extension 2

13 Threats Carbon management uncertainty is an impediment Uncertainty about future environmental regulations about CO 2 emissions Impacts decisions whether to repower or replace Impacts the decision whether to consider carbon-friendly technologies such as IGCC 3

14 Threats Several infrastructure hurdles are impediments to the construction of new coal-based power plants Transmission congestion Declining domestic engineering resources Lack of skilled construction workers Declining domestic manufacturing capability Regulatory hurdles to new coal mines Overseas competition for critical commodities 4

15 Opportunities Coal is and will remain the fuel of choice >50% of US Generation 250-year supply Coal is secure, affordable, and environmentally compatible. 5

16 Opportunities Coal provides a pathway for greater energy independence EIA forecasts continue to favor natural gas Expected source: imports from Canada & imported LNG 2,00 Billion KWhrs Renewable (excl. Hydro) Natural Gas Nuclear Coal A better alternative for energy independence is to build more domestically-fueled coal-based power plants. 6

17 Opportunities Coal is coming back! Increases in natural gas prices Historical volatility of natural gas Long-term stability of coal prices Impaired investments in NGCC Plants There is a renewed interest in coal-based electricity generation. 7

18 Opportunities Generators are expected to remain credit worthy Wall Street believes the outlook for generators is generally stable IPPs will generally require more time than IOUs to maintain creditworthiness Structural differences between IOUs and IPPs 8

19 Opportunities Incentives are still needed Past incentives have facilitated R,D&D New advanced technologies require additional support for deployment. The purpose of incentives must be to bring the riskadjusted COE to near that of competing alternatives. The Energy Bill provides those incentives for new advanced coal plants Energy Bill incentives are expected to make a difference 9

20 NCC Recommendations Streamline the permitting process Integrated, flexible, streamlined approach Assurances that regulations will not change in the short term Cooperation between DOE & EPA for Implementation 20

21 NCC Recommendations Recognize the strategic importance of IGCC Reward IGCC potential to offset use of natural gas Recognize future upside potential for IGCC Poly generation Carbon Capture Capability 2

22 NCC Recommendations Recognize the importance of other coal-based technologies Importance of PC and CFB technologies Impact of coal type on optimum technology selection Importance of USC designs R&D in Carbon Capture 22

23 NCC Recommendations Encourage regional planning Encourage a regional planning approach for capacity additions. Reward investments that transcend the individual territory of any one state or IOU 23

24 NCC Recommendations Continue with meaningful R&D Continue research and development work on advanced, efficient and lower-emitting technologies. Keep pace with the goals set forth in the DOE/CURC/EPRI Roadmap. Include adequate funding and support for flagship programs such as FutureGen and the Hydrogen Initiative 24

25 NCC Recommendations Continue with technology demonstration Ensure that proper programs and mechanisms are in place to demonstrate not-yet-mature and first-of-a-kind technologies. Continue with the Clean Coal Power Initiative. 25

26 NCC Recommendations Provide meaningful incentives for commercialization/deployment Develop incentives to commercialize advanced technologies The menu includes tax incentives, production incentives, public/private cost-sharing, accelerated depreciation, loan guarantees, and federal credit 26

27 NCC Recommendations Maintain a balanced portfolio of R&D,D,&D Properly fund all of the three steps of Research & Development, Demonstration, and Deployment Ensure that proper funding is allocated to all three elements of technology development 27

28 NCC Recommendations Work with state regulators for cost recovery of new advanced coal plants Facilitate the development of a new regulatory mechanisms Innovative cost recovery proposals should address both state and regional concerns Additional vehicles could be developed to insure recovery of new capital investment as well as any stranded capital from the retirement of older facilities 28

29 NCC Recommendations Continue to be a champion for coal The Department of Energy, should continue to strongly reinforce as often as possible that: Coal is a vital resource for our country, It provides energy security and reliability, It has been and will continue to be the major fuel for electricity generation in the country, It should be encouraged as an alternative feedstock for chemicals and fuels, Appropriate incentives and regulatory approaches should be provided to encourage its use in as clean a manner as possible, The use of such clean coal technologies should be fostered, encouraged and promoted in other countries where coal is a vital resource. 29

30 FutureGen One billion dollar, 0-year demonstration project to create world s first, coal-based, zero-emission electricity and hydrogen plant with sequestration President Bush, February 27,

31 FutureGen Industrial Alliance Membership: American Electric Power BHP-Billiton CONSOL Energy Inc. Foundation Coal Kennecott Energy Company Peabody Energy Southern Co. Characteristics: >45% of U.S. Coal Production >5% Coal-Fueled Electricity Production Represent all major coal types Open membership policy with an active recruiting effort 3

32 FutureGen Industry s View of the Facility Electricity/Hydrogen Generation Backbone with CO 2 Sequestration/Monitoring System State-of-the-Art Gasification Technology Platform Air Air Separation Unit O 2 Gasification Coal Slag Gas Clean-Up** CO 2 Separation** Syngas Syngas CO 2 H 2 Electricity Generation** Sequestration Platform Potential Additional CO 2 Source CO 2 Sequestration & Monitoring Transportation and other H 2 uses **Candidate for Multiple Technology Upgrades over FutureGen s Lifetime. Stakeholder Involvement & Research Platform Air Advanced Oxygen Separation Research User Facility Advanced Coal Conversion Syngas Syngas CO 2 H 2 Advanced Gas Clean-Up Other Technologies Advanced CO2 separation Electricity, H 2, or other Products Advanced Electricity Generation 32