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  1. 1. 04.15.09 VOL. 12 NO. 1 2009 Why Black Is the New Green: The Enormous Potential of Clean Coal by Gregory H. Boyce Chairman and CEO Peabody Energy T he character for “crisis” in Mandarin has two meanings: danger and opportunity. As the world wrestles with daunting energy, economic and environmental challenges, this ancient wisdom offers a lesson for us all. Our present economic crisis reminds us that affordable energy is the foundation of our fragile global economy and the engine of our recovery. Coal is our opportunity – the only sustainable fuel able to meet enormous long-term energy needs. I have often heard coal called a “bridge to the future.” To this, I say: Coal is the future. Coal alone has the scale and cost advantages to deliver what I call the “Three Es” – energy security, economic stimulus and environmental solutions. The tremendous power of coal to lift people to a higher quality of life is perhaps most evident in Asia. In less Why Coal: The World’s Best Engine for Economic than a generation, China has become a giant of the Growth and Energy Security international economy, navigating industrialization, While near-term energy demands are temporarily softened urbanization and a digital revolution all at once. Less by global economic conditions, the long-term outlook than 30 years ago, more than 600 million people in China remains strong, part of a sweeping transformation among lacked electricity, and only 1 in 500 had a telephone. developing nations. World energy demand will grow Today, China is the world’s third-largest economy behind 45 percent in the next quarter century as massive the United States and Japan, and more than 700 million infrastructure projects advance and billions of people people have gained access to electricity, according to the gain access to electricity for the first time, according to World Coal Institute. Coal fuels China’s remarkable rise, along with the Global coal demand grows 1.5+ billion tons in six years Compound annual economies of scores of other nations. Coal has been growth rate the fastest-growing fuel for each of the past five years Nuclear: 4% 0.6% (Figure 1). Some 80 nations are developing new coal- 2001-2007 Change Oil: 11% fueled generation, and Peabody Energy is fueling much 1.7% of this growth. As the world’s largest private-sector Hydro: 19% 2.9% coal company, it provides 10 percent of U.S. electricity and 2 percent of global power. It serves customers in Natural gas: 19% 2.9% 21 countries on six continents, representing more than half the world’s population. This gives Peabody access to Coal: 35% 5.1% some of the most rapidly growing markets for electricity, 0 5 10 15 20 25 30 35 steel and Btu conversion. We are the global leader in Source: BP Statistical Review of World Energy, June 2008. clean energy solutions from coal, and we are uniquely Figure 1: Coal has been the world’s fastest-growing fuel for positioned to advance the “Three Es.” each of the past five years. 74 World Energy Vol. 12 No. 1 2009
  2. 2. the International Energy Agency (IEA). Global coal use Because it is the world’s most capital-intensive business, is projected to increase 61 percent by 2030 (Figure 2). the energy industry acts much like a rubber band: When Demand for coal will grow more than the combined the economy contracts, generation projects stall, but increase in natural gas, nuclear, hydro, solar and wind when growth returns, demand comes roaring back. consumption through 2025. China, India and the United Without an increase in supply, nations around the world States will lead this growth, expected to account for will compete for scarce supplies, and costs will again soar. 90 percent of the increase in world coal demand into the foreseeable future. Other high-profile forms of energy remain too The world needs all forms of energy to meet long-term demand, but each alternative has inherent limitations. small or too scarce to provide energy at the The world’s most productive oil fields are depleting. What oil is left is harder to find, more difficult to drill scale needed to meet growing global needs. and more expensive to produce. Major oil and natural gas supplies also come from unstable Coal is particularly attractive for nations increasingly nations that are increasingly willing to use resources for seeking energy security that is put at risk from growing political gain. For example, more than 60 percent of the trends toward nationalization and protectionism. More world’s natural gas is held in Russia, Iran and Venezuela. than 200 gigawatts of electricity representing 700 million These are the same nations making headlines for pursuing tons of annual demand are under construction in nations an OPEC-like natural gas cartel to control supply and around the world. This drives enormous economic growth, price. Expanding the ability of a handful of nations in representing more than 4.5 million jobs and $1 trillion in unstable regions to determine the world’s energy destiny direct economic impacts. must be contrary to global energy security. Coal’s versatility only adds to its attraction. New Other high-profile forms of energy remain too small or technologies allow coal to be transformed through too scarce to provide energy at the scale needed to meet “Btu conversion” applications into transportation fuels growing global needs. Coal plants generate electricity and natural gas. when clouds will not break for solar panels and when Coal is mined commercially in more than 50 countries. calm days quiet wind turbines. By the end of this year, Reserves are large and geographically diverse, from a the U.S. Department of Energy will have spent more on variety of nations both large and small, developed and solar and wind research in the past 30 years than the emerging, on every major continent. Trade flows are well total inflation-adjusted cost of the Apollo space program. established. And in the words of the World Coal Institute, Yet the renewables portion of the U.S. energy portfolio “Coal does not need high-pressure pipelines or dedicated has barely budged. supply routes that need to be protected at enormous Solar and wind combined still constitute 1 to 2 percent expense.” Coal can be easily stored, and coal-fueled of U.S. electricity, and all renewable energy forms electricity is well proven and not weather-dependent. account for about 7 percent, roughly the same proportion reported by the Congressional Research Service 30 years 6,000 Coal shows ago. Even with the rapid growth of renewables, more than best long- term growth 80 percent of global energy consumed in 2030 will still Million tonnes of oil equivalent 5,000 trajectory come from conventional fuels, and only 2 percent of 4,000 world primary energy is forecast to come from renewables, according to the IEA. 3,000 Coal’s cost advantage is significant. In 2008, for instance, the delivered cost of coal in the United States 2,000 was 83 percent lower than oil and 79 percent lower than 1,000 natural gas. It is also important that nations not confuse conservation 0 with recession. The secular trend toward greater energy 1980 1990 2006 2015 2020 2025 2030 use will continue – while the current underinvestment Coal Natural gas Oil Nuclear Hydro Biomass Other in energy will make supply-demand fundamentals all the Source: International Energy Agency, World Energy Outlook 2008. more imbalanced when strong global economic growth Figure 2: International Energy Agency projects 61 percent inevitably resumes. growth in global coal use by 2030. World Energy Vol. 12 No. 1 2009 75
  3. 3. Why Coal: Bringing Electricity to Emerging As we conclude the first decade of the 21st century, Nations, Lifting Billions to Better Lives however, isn’t it astounding that more than 2 billion people The need for energy answers is urgent. Global populations around the world still lack adequate access to electricity? are growing at an unprecedented pace, with Asia expanding Another 1.6 billion – more than five times the population at rates that dwarf the Western world’s industrial in the United States – have none at all, according to revolution. For every child in France, 30 are born in India. the IEA and World Coal Institute. They seek power for Some 600 million people fill China’s cities; German the most basic needs: clean drinking water, lighting and cities have 62 million. In its International Energy Outlook, home heat. Many still spend hours each day collecting the U.S. Energy Information Administration forecasts dung and wood to burn, dangerously, in their homes. that the Middle East will increase its energy consumption The average Chinese man or woman uses one-fifth the by more than 17 quads by 2030, India will grow by 17 quads electricity as the average citizen of a developed nation. and China will grow by 88 quads. With populations that reach billions, both China and India will account for more than 50 percent of new As we conclude the first decade of the power generation and half of the world’s energy demand growth by 2030, according to the IEA. 21st century isn’t it astounding that more Furthermore, while Asia’s projected energy needs are staggering, more mature economies will also continue to than 2 billion people around the world still demand affordable power to sustain our modern way of life. Coal’s affordability and abundance make it a fuel for lack adequate access to electricity? social progress even in the most advanced economies. A growing collection of studies demonstrates the Billions of people in emerging economies are correlation between electrification and improvement awakening to the benefits of modern energy, one of life’s in health, longevity and quality of life. A major study necessities. Multiple studies – and plain common sense by Daniel Klein and Ralph Keeney shows that low-cost – indicate that citizens in nations with good access to electricity from coal saves lives, preventing at least energy are far more likely to have longer, healthier lives, 14,000 to 25,000 premature deaths in the United States eat better and enjoy a higher education level. each year. Another study, by respected epidemiologist As the Global Energy Institute reported last year: M. Harvey Brenner of Johns Hopkins University, “Every single one of the United Nation’s Millennium concludes that removing coal from the energy mix would Development Goals requires access to electricity as a result in approximately 150,000 deaths each year in the necessary prerequisite.” United States. 76 World Energy Vol. 12 No. 1 2009
  4. 4. 250% How Coal: Technology Makes Coal Clean and Green GDP 207% Coal’s vital role in energy security and economic stimulus 200% carries over into environmental progress. Coal’s improving 150% Electricity from coal 187% environmental track record gives it a new green profile as the world’s favorite fuel. Technologies that are now 100% Index = 1970 under development, too, are changing the color of coal, Energy consumption 50% enabling us someday to achieve the ultimate green goal 50% Population 47% of near-zero emissions with carbon management. 0% That is why I like to say black is the new green. It 1970 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 is a statement that surprises some, inspires friends and -50% U.S. emission reductions per ton of coal -84% intrigues the vast majority who hear it. But it also strikes -100% at the core of the case for coal. So when the “why coal” Source: U.S. Energy Information Administration, Annual Energy Review, June 2008; Peabody analysis of U.S. Environmental Protection Agency Air Emissions question is answered and the follow-up turns to “how,” Trends Data for sulfur dioxide, nitrogen oxide and particulates, August 2008. the simple answer is: cleanly. Figure 3: Electricity from coal tripled since 1970 as emissions The United States demonstrates that clean coal comes significantly improved. in two distinct phases. Phase one has already achieved impressive success. Carbon capture and storage (CCS) technologies are Utilities have invested tens of billions of dollars in clean- under rapid development around the world, with the coal technologies to eliminate emissions over the past ultimate goal of near-zero emissions from coal-fueled several decades. As gross domestic product and electricity generation. Technology is being advanced worldwide from coal have tripled in the United States since 1970, toward a low-carbon future that ultimately will capture coal’s environmental efficiency has dramatically improved, and store carbon as part of a near-zero future. resulting in an 84 percent reduction of regulated The technologies separate the CO2 from coal use emissions per ton of coal, based on an analysis of U.S. and compress it into a fluid-like state that is as dense as Environmental Protection Agency data (Figure 3). liquid, making it easier and less costly to transport via Phase two – green coal – builds on this enormous pipelines. The CO2 is injected deep underground in oil progress, zeroing in on a reduced carbon footprint. New fields, caverns and saline fields, and deep beneath the coal plants have a lower carbon-emissions rate than the ocean floor in geographic formations that have stored existing fleet due to improved efficiency. This progress methane, coal and oil through the millennia (Figure 4). will continue in the United States and around the world Technology uses carbon dioxide for enhanced oil recovery with clean-coal technology. or underground storage in oil and saline fields Employing advanced coal technologies has created 3 5 tremendous environmental progress in the United States. 2 To achieve similar success with carbon management, technology must be commercialized to capture and store carbon, and regulatory certainty must be created. Both 1 elements must be in place before setting artificial caps. 6 Technology first, then controls. 4 While a cap-and-trade regime has worked for sulfur dioxide, the challenges for carbon dioxide (CO2 ) are much greater. Reducing CO2 is a global issue. There is no low-carbon coal and no known costs for scrubbers 7 or other carbon-reducing technologies. Initiating a cap before technology is ripe would only serve to pave the way for industry and emissions to flow to nations who simply choose to opt out. 1. Clean coal fuel supply 5. Enhanced oil recovery 2. Carbon capture 6. Carbon dioxide injection The Advantage and Necessity of CCS 3. Electricity production 7. Saline aquifer storage Coal is ultimately a dense, high-energy product that 4. Carbon dioxide injection makes it excellent for use in electricity generation and Figure 4: Technology uses carbon dioxide for enhanced oil other end uses. This use results in the release of CO2. recovery or underground storage in oil and saline fields. World Energy Vol. 12 No. 1 2009 77
  5. 5. CCS is projected to be the lowest-cost low-carbon A Four-step Path to Near-zero Emissions solution – less expensive than nuclear, wind or natural gas To advance all three “Es,” I advocate a multistep plan – according to a recent Carnegie Mellon University study. that recognizes coal’s growing role in energy supply while advancing toward near-zero emissions. Steps include: The magnitude of the carbon challenge is 1. Building advanced supercritical combustion plants with improved efficiencies to help the environment enormous, and increased focus, funding and and stabilize our baseload electric reliability for the next 15 years. These plants typically have CO2 rules clarification all are needed. emissions that are 15 percent below the existing fleet based on the efficiencies of design and provide a The world has ample room for carbon storage. Just as crucial step toward satisfying reliable energy needs. we are blessed with good geology for coal, nature has 2. Demonstrating and then commercializing integrated also bestowed good geology for carbon storage. In the gasification-combined cycle technology and CCS. United States, for instance, we could sequester CO2 for Enhanced oil recovery can help to drive down the the next century and would not even use up 10 percent cost of CCS while improving energy supplies. of the potential geology that is suitable for storage, based 3. Developing coal-to-gas and coal-to-liquid technologies on an analysis by Pacific Northwest National Laboratory. with CCS. The coal-to-gas process, or methanation, There is enough capacity for hundreds of years of storage already captures a very pure CO2 stream, so the task around the world. of storing the CO2 is made far easier. CCS can also produce greater supplies of other energy. 4. Retrofitting existing coal-based plants with CCS One of the most promising early applications for carbon technologies. Remember that we have thousands storage is in aging oil fields for enhanced oil recovery. of coal-fueled generating plants around the world. This process alone could lead to production of another Developing the technologies to remove the CO2 2 to 3 million barrels of oil per day in the United States, from these plants, as has been done for many other according to the National Coal Council. emissions, is important to accomplish any meaningful Other promising technology paths beyond coal gasifica- reductions in CO2 over the next several decades. tion include reducing CO2 in an oxygen-rich environment The Group of Eight (G-8) industrialized nations during combustion or using scrubbing agents for removal. have set a goal of developing 20 large power plants that would capture and store carbon by 2010. Major regional We know that the world will use significantly carbon storage projects and partnerships are under way around the world. Governments have set aside more more coal in the next several decades than it than $20 billion for demonstration plants, and nearly 120 projects are in development, according to Emerging uses today. Energy Research. Global partnerships and projects like these are The magnitude of the carbon challenge is enormous, essential for securing our energy supplies and achieving and increased focus, funding and rules clarification our climate goals. Peabody continues to target energy all are needed. In a recent analysis of CCS, the IEA and environmental policies that advance both of these concluded that current spending levels are nowhere near aims. For instance: enough to achieve deployment goals. I agree. • In Asia, China’s multiphase 650 megawatt The development of CCS is not optional. In the GreenGen power plant would be among the world’s words of former British Prime Minister Tony Blair: “The largest commercial-scale, near-zero emission coal vast majority of new power stations in China and India plants. Peabody is the only non-Chinese partner in will be coal-fired. Not may be coal-fired – will be. So, GreenGen. developing carbon capture and storage technology is not • Australia, the world’s largest coal-exporting nation, optional, it is literally of the essence.” has established an AUS$100 million global clean-coal We know that the world will use significantly more institute to help channel public and private investment coal in the next several decades than it uses today. The into low-emissions power projects. Peabody is a question is whether that coal will be used in a low-carbon founding member. Australia has multiple near-zero fashion. I say yes, with CCS. emissions power initiatives through the coal industry’s COAL21 program, which Peabody helps fund. 78 World Energy Vol. 12 No. 1 2009
  6. 6. • In the United States, Peabody is a founding member international economy is linked to our energy choices. of the FutureGen Alliance, a consortium of some of We have the power to make change. Let’s capitalize on the world’s largest energy and coal companies that the single resource that is most needed to deliver secure, seek to develop a 275 megawatt near-zero emissions affordable energy supplies and environmental solutions: prototype with carbon storage. FutureGen would be our own willpower. ■ sited in the Midwest. Peabody also works on multiple levels to build under- standing about coal, and we are seeing strong results. A Gregory H. Boyce is Peabody Energy’s chairman and recent poll shows that 72 percent of U.S. opinion leaders chief executive officer. He was elected to the board support the use of coal for electricity generation. In the of directors in March 2005, assumed responsibility as same national poll, 69 percent view coal as a fuel of the president and CEO on January 1, 2006, and was elected future. chairman of the board on October 10, 2007. He joined Peabody in 2003 as president and chief operating officer Shining a Bright Light Forward and has extensive U.S. and international management, President Barack Obama may have summarized the need operating and engineering experience. for coal best when he said: “Clean-coal technology is something that can make America energy independent. Previously Mr. Boyce served as CEO of energy for Rio This is America. We figured out how to put a man on the Tinto PLC. His prior positions include president and CEO moon in 10 years. You can’t tell me we can’t figure out of Kennecott Energy Company, president of Kennecott how to burn coal that we find right here in the United Minerals Company and director of government and States of America and make it work.” public affairs of Kennecott Corporation. He also served as The president recognizes that the era of vague and executive assistant to the vice chairman of Standard Oil. wishful policy prescriptions is over and that the moment for significant funding increases in all forms of energy – Mr. Boyce’s leadership positions include vice chairman especially clean coal – is now. His message to Americans of the World Coal Institute and the National Mining applies equally to the citizens of nations around the Association. He is a member of the National Coal Council world. We must build the new coal plants and develop (NCC) and was the study chair of NCC’s 2006 report, the coal-fueled technologies that create both jobs and “Coal: America’s Energy Future.” Mr. Boyce serves on low-cost energy, which in turn drives economies and the board of directors of Marathon Oil Corporation. He improves lives. And we can do so while achieving our is also a member of the Coal Industry Advisory Board of long-term carbon goals. The urgency of this message has the International Energy Agency. He is a board member never been so apparent. of the Business Roundtable and the American Coalition It is time we recognize that the strength of our for Clean Coal Electricity. World Energy Vol. 12 No. 1 2009 79