The ambition to reach zero coal consumption

Given a blank slate and, like a computer game, asked to create an energy system from scratch, the player would today construct a system radically different from what might have been chosen 20 or even ten years ago. There is simply more in the toolkit.

The system’s elements, however, would depend on the game’s goals. If the yardstick was low emissions alone, a mix of hydro, on- and offshore wind, solar and maybe a few nukes would suffice. If the criteria was cost and the reward counted in dollars rather than the absence of CO2, then one might go for hydro, until exhausted, and a large stack of coal plants.

If the criteria was security of supply, then, worried about dependence on obstreperous domestic coal unions and the variability of rainfall, one might opt for a more diversified generation base that mixed fuels and generation sources, imports and domestically-produced energy.

The real challenge, of course, is when the game’s master sets all three criteria: the winner is the one who finds an optimal balance among emissions (sufficiently low to avoid global environmental disaster); cheap (enough to be affordable); and secure (both operationally and in terms of fuel supply). What is immediately apparent is that no single generation source can satisfy all three criteria; there has to be a mix.

Also readily apparent is the tradeoff between the criteria; the cheapest option does not deliver the lowest emissions and the best level of security. As such, the winning combination is to find a socially acceptable balance among environmental impact, cost and security. This implies from the start a low carbon generation system rather than a zero carbon one.

Coal-fired generation has played a hugely important role in the industrialization of the developed world and it continues to play a central role in developing economies. China and India, two of the most important growth economies in the world, are also two of the most highly dependent on the fuel source.

The International Energy Agency says in its World Energy Outlook 2013, published in November, that coal provided nearly half of the increase in global primary energy demand over the decade to 2012. What this means is that coal is locked-in in a big way. Billions of dollars have been and continue to be invested in generation assets with 40-50 year lifetimes.

In Europe and the United States, coal fleets are aging and there is the possibility of managed decline. That prospect is some 20-30 years off in China and India. It is a tough enough challenge for major developing economies to meet new demand without adding to the stock of coal generating plant let alone reduce it. To abandon coal is a significantly more problematic, expensive and disruptive proposition for a developing economy than it is for a developed one.

Coal has many advantages, as the industry is generally quick to point out. It is cheap. It is tried and tested. It is abundant and widely distributed. It does not pose any real security of supply issues. It produces reliable, baseload power, whatever the weather. It is not geographically dependent beyond water supply. It is extremely versatile, as its long-standing use in chemicals production testifies. It can be used very efficiently. State-of-the-art Combined Heat and Power plants in Denmark achieve efficiency rates of up to 90%, by using the waste heat from electrical generation to heat homes.

Of course, coal has that fatal characteristic: it is high in CO2 emissions. The environmental lobby would argue that when its external costs in terms of local pollution and greenhouse gas emissions are taken into account, it is not cheap. But any kind of cost-benefit approach has to take into account the fact that coal has facilitated an economic expansion that has resulted in improved living standards for hundreds of millions of people over multiple generations.

An electricity system based solely on wind would have minor emissions resulting from its operations, but would run the risk of being unreliable. One running solely on imported LNG would have clear vulnerabilities to disruption in LNG markets. The introduction of a coal element to either would add benefits in terms of system stability, affordability and security, albeit at the cost of a rise in average emissions per MWh generated. Perhaps the right way to look at the question is to ask at what level of use do coal’s qualities outweigh its disadvantages in terms of emissions and pollution.

Platts