By Steve Blankinship, Associate Editor
Program Committee Chair, COAL-GEN
The coal-fired sector could well be poised to face the most profound changes since the days when coal units routinely operated without any emissions control equipment and draglines strip-mined coal.
Coal gasification has been commercially used for more than a 100 years. But its ability as a potential source for power and substitute natural gas that can be used for power (and also help augment conventional natural gas supplies) has only recently captured the attention of the power sector, regulators and environmentalists. That’s because by its very nature, gasification is highly amenable to the concentration and capture of coal’s array of historically regulated pollutants, mercury and, yes, CO2, before the fuel is ever burned.
That inherent ability for pre-combustion capture of pollutants and CO2 sets gasification apart from post-combustion strategies. And it has the potential to make the high price of gasification turn out to be more than cost-competitive with traditional post-combustion capture approaches. Factor in the advantages of a combined cycle process–with its relatively low water consumption compared to pulverized coal (PC) plants–then add the potential to make a myriad of products along with electricity and gasification becomes a lustrous alternative to the status quo.
Make no mistake: Coal will remain front and center on the energy stage for a long time to come and not just in supporting role. Coal currently supplies more than half of the electricity produced in the United States. And even at a current 2 percent growth rate in annual electricity demand, the need for additional needed generating capacity is enormous. When factoring in the retirement of old coal units, it means the U.S. must continue to build about 20,000 MW of new capacity every year for the foreseeable future.
There appears little doubt that for the next few years, most of that new capacity will be in the form of supercritical PC units. It also appears that post-combustion carbon capture technologies for both new PC units and existing units are on the horizon. Oxy-fired pre-combustion approaches may also find commercial viability for future PC units.
Nonetheless, higher natural gas prices tied to greater demand and flattening production both domestically and worldwide, coupled with greater concern for prudent resource utilization and the potential need to capture carbon, all but assure a significant niche for the flexibility that coal and petcoke gasification provides. Jim Rollyson of Raymond James & Associates recently told an audience composed largely of coal developers that gas prices continue to “look good.” Coming from an energy commodities market analyst looking at current supplies and demand for natural gas, “looking good” means continued high prices–great if you’re in the natural gas business. And great for coal.
Specifically, Rollyson said that despite the fact the natural gas prices are currently declining relevant to recent historic highs, they will almost certainly remain high and ultimately trend up. Natural gas storage, which recovered after a year of no Gulf Coast hurricanes, is projected to be down from 2006 levels before the end of this year. Noting the historic relationship natural gas prices have to oil prices, he noted similar plateauing of worldwide oil supplies, saying that excess production capacity remains low and stockpiles are decreasing. Furthermore, most producing countries are approaching maximum output and heading toward decline just as consumption is going up. He said that gas prices are expected to continue to tighten throughout 2007 and reassume their traditional 7:1 ratio with oil. Natural gas drilling has to increase 10 to 15 percent a year just to maintain current output. Even so, new wells being drilled see a 50 percent reduction in output after only a year of operation. Canadian production is down as well. The decline in domestic U.S. production, despite increased drilling activity is being offset by increased LNG imports–not an attractive strategy if the U.S. seeks to even maintain its dwindling level of energy independence.
But “good” in the case of natural gas prices certainly validates the prudence of power providers who decide to build more coal capacity. Despite the fact that coal prices too are moving up – a natural event in light of rising gas prices–Rollyson notes that coal continues to look good compared to coal in terms of cost.
All this supports the logic for building new coal capacity. But from here forward, new coal capacity will not necessarily mean the traditional coal plant. It could mean any number of options. Without doubt, gasified coal plants–in a variety of permutations–will almost certainly increase in number.