Image source: Scientific American (courtesy of American Electric Power).

Two pieces of news provide evidence of a fightback by coal. American Electric Power’s Mountaineer plant in West Virginia is reporting significant success for its small scale carbon capture project. And the UK has just licensed exploratory boreholes for offshore Underground Coal Gasification (UCG), a woefully under-researched technology that may make CO2 sequestration easier. The scale of the challenge facing the globe’s coal users is enormous but with determined research and development, the fuel may remain usable for power generation in a low-carbon world.

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Mountaineer
Vattenfall’s Schwarze Pumpe coal plant has been separating CO2 for a year or so. It hasn’t been putting the gas back into the ground because of resistance from citizens not wanting CO2 under their back yards. AEP started collecting and storing some of the CO2 from its Mountaineer electric power plant in early autumn 2009 using Alstom’s chilled ammonia process and injected the gas into permeable rocks 2.5km underneath the plant. Today’s process captures the CO2 from just 20 MW of the plant’s output. An upscaling of the plant will multiply this ten-fold by 2015.

Today (Wednesday 9 December 2009), the Wall Street Journal reports that the plant’s operators are pleased with the early success. AEP says that the energy penalty from operating the carbon dioxide separation and sequestering process is less than expected. (The Alstom process uses energy to heat the ammonia to separate the CO2 after it has been captured.) AEP’s CEO is reported as saying that the cost increase is no more than 4 US cents a kilowatt hour. Even this, however, would approximately double the cost of electricity produced at the plant. The optimism at AEP matches Vattenfall’s cautiously upbeat projections for the long-run cost of CCS when capturing the CO2 from a large power station’s entire output.

Clean Coal Ltd
Underground Coal Gasification (UGC) drives off useful combustible gases from coal seams. The gases are then burnt to produce electricity in a conventional gas power station. The technology has been known about for a century or more but technological advances have been slow. In recent years, the level of interest around the world has increased, partly as a result of concerns about climate change but also because of worries over the long-term availability of natural gas.

UGC is a ‘clean’ process in that it avoids the need for mining and burning coal and extracting sulphur and other pollutants. But it does face real environmental challenges in, for example, avoiding the pollution of local water supplies around the gasification sites. UGC is also not truly ‘clean’ in that it offers only a marginal improvement on conventional coal power stations in the amount of CO2 it produces. (This fact tends not to be mentioned by UGC proponents.) The world leader in UGC, Linc Energy of Australia, puts CO2 output per kWh of electricity at around 750 grams, compared to 400 grams for a combined cycle gas-fired power station.

The advantage of UGC is that it may offer cheaper sequestration of CO2 than a conventional coal station as well as much lower capital costs to build than a surface coal gasification plant. The gas coming up from the coal seam will be largely hydrogen, carbon monoxide, methane, and carbon dioxide. CO2 can be stripped from the combustible gases relatively easily because it is at high pressure. The remaining gases are then burnt in a gas turbine, producing water and nearly pure CO2. It may – only may – be possible to re-inject the gas into the coal seam for permanent storage. Some industry proponents think that this technique will eventually offer the lowest cost carbon capture and storage from coal.

The UK government has just licensed some experimental wells to be drilled by Clean Coal Ltd, a US/UK company run by industry pioneers. The wells will be in thin seams of offshore coal that would never be economical to exploit by conventional mining techniques. Offshore drilling also avoids some of the problems of subsidence that may occur when the coal is gasified underground in onshore locations.

The company’s press release says:

The UK Coal Authority has awarded Clean Coal Ltd licences to investigate the potential for underground coal gasification at 5 sites in the UK.  If the investigations over the next 12-18 months prove to be successful, commercial operations could start by 2014/15 and could lead to underground coal gasification producing 3-5% of the UK’s total energy requirement by that date.

This statement is over-ambitious. Other UCG projects around the world have taken much longer and gas production from underground coal is still something of an art. Although the Soviet Union ran UCG plants, only one of these remains open today. One of the leading scientists in the field, Dr Julio Friedmann of the US Lawrence Livermore lab, says, ‘A large number of basic science questions remain in the field of UCG.’[1]

Importantly, the Clean Coal press release is very vague about carbon capture and storage at its UK sites. Powerfuel, which is intending to use mined coal for surface gasification in Yorkshire, has been more specific and recently achieved EU funding for its plans. Without CO2 capture, Clean Coal Ltd is unlikely to be able to move forward in the UK or elsewhere, but the quickening worldwide pace of interest in UCG is a good sign.

The UK’s huge reserves of coal make it particularly important that the country invests in the research and development necessary to take the technology forward. Unfortunately, as ever, we are late to the game. China has graduated over 100 PhDs in UCG from one mining university and Linc in Australia is far more advanced with its plans for onshore gasification. As with several other technologies, the arguments for investing hundreds of millions in UK research and development over the next five years are overwhelmingly strong.

Footnote
[1] S. Julio Friedmann, ‘Accelerating Development of Underground Coal Gasification: Priorities and Challenges for U.S. Research and Development’, Coal Without Carbon: An Investment Plan for Federal Action (Clean Air Task Force report, September 2009), p. 8; available here in PDF format.

Ed Miliband, Minister for the Department of Energy and Climate Change. Photograph: David Levene/Guardian.

The government wants to emphasise the affordability of climate change mitigation. It produces low estimates of the cost of low-carbon technologies. In the recent 2009 budget documents, the government estimated a cost of 1% of GDP to meet the tough new 2020 targets. In his pronouncement on carbon capture at coal-fired power stations, energy and climate change secretary Ed Miliband later said that his proposals will add 2% to electricity bills.

Are these numbers reasonable? Professor Sir David King, the former chief scientific adviser, says no. In a BBC interview of 26 April, he indicates that he thinks that the cost of reducing the UK’s emissions is much higher than the government indicates but also that the financial implications of not dealing with the climate change threat are far higher than even Nick Stern suggests.

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I strongly suspect that David King is right about the costs of decarbonisation. Let’s look at the electricity supply industry. Almost all of our electricity today comes from fossil fuel and nuclear power stations. Before 2020, we have committed to multiplying the contribution from renewable electricity 10-fold. This is not a misprint – and it was repeated in the budget statement of April 2009. And then this extraordinary pace will have to quicken further. To get on the road to near-full decarbonisation of electricity supply by 2030, which is the key plank in the Climate Change Committee’s recommendations, we need to take the following measures as a country: a) complete carbon capture on coal- and gas-fired power stations; b) huge growth in renewables; c) possibly huge investment in nuclear power stations; and d) an unprecedented investment in an improved and expanded transmission grid.

How much will these actually cost? Here are some rough-and-ready numbers:

• a) Complete carbon capture and storage on fossil fuel plants: Most estimates suggest that this will add approximately £30 to the cost of producing a megawatt hour of electricity. On top of today’s wholesale price of about £50 per megawatt, this will add about 60% to the cost of producing electricity from fossil fuels.
• b) Huge growth in renewables: Onshore wind would be cheaper, but it looks as though only offshore wind is politically acceptable. Very substantial growth in new generating capacity is possible. Perhaps costs will come down, but including the cost of ‘grid balancing’ to deal with intermittency, the incremental cost of offshore wind above today’s wholesale prices is probably between £30 and £40 a megawatt hour.
• c) Nuclear power stations: The Climate Change Committee offered an extremely optimistic cost for nuclear electricity, suggesting it is cost-competitive today. Frankly, I think they were dreaming when they let this assumption into their hugely impressive December report. All the evidence is that robust and safe nuclear power stations are going to need at least £25 a megawatt hour more than today’s fossil fuel power stations.
• d) The cost of a new grid: We need new connections of very substantial transmission capacity between Scotland and England and between this country and Scandinavia, the Netherlands, and with France. The key purpose of this is to allow easier flows from where power is plentiful to where it is scarce. When the wind isn’t blowing, the UK will need power from Norway. And, by the way, we will have to pay handsomely for it because the Norwegians don’t partly want their enormous hydro capacity to be tapped to provide power security for the late-moving British. It’s little more than a guess but new grid investments may add as much as £5-£10 to the cost of each megawatt hour.

These numbers are at the highest level of approximation. But they suggest that the market price of electricity at the wholesale level will need to rise from about £50 to about £80-£90 a megawatt hour within two decades. And, importantly, the cost will have to jerk upwards soon, otherwise the crucial investments will not be made by private industry in time.

What is the overall impact of the likely sharp rise in electricity prices? It will probably add about a third to prices paid by final retail customers like businesses and homeowners. This alone will cost the equivalent of 1% of today’s GDP. This is before considering the need to divert very large budgets into government-sponsored R+D for offshore wind, tidal power and (dare one say it) nuclear. In other words, decarbonising electricity generation will alone cost as much as the government’s rather easy assumption of the costs of climate change avoidance measures. It may be worth pointing out that electricity supply is only about a third of total UK carbon emissions.

But the high cost of building an entirely low-carbon electricity industry is a cost worth paying. You don’t have to believe in the urgency of the climate threat to realise that fossil fuel resources are going to get more expensive. The right comparison to make is not between the cost of fossil fuel electricity today and what it is going to cost in the low-carbon future. No, the correct assessment should estimate the likely cost of energy in ten and twenty years time. Then the incremental cost of low-carbon energy may well actually be negative. But none of us should be in any doubt that electricity prices are going to be much higher in 2030 than they are now. It would be better for the government to admit this, rather than hide behind what I think is the comfortable fiction that the climate change and energy security problems can be dealt with at minimal cost to living standards. As a society we also urgently need to recognise that electricity prices will have to rise sharply soon – this is not a problem that can be dealt with by a slow and graceful upward curve. The implications of this for the poorest members of British society must be addressed now.

The Committee on Climate Change says the most important prospective source of cuts in greenhouse gases lay in the ‘decarbonisation’ of electricity generation. Photograph: Graham Turner/Guardian.

The budget confirmed the acceptance of the Committee on Climate Change’s recommendation for carbon emissions in 2020. The UK will have to reduce its CO2 output by about 110m tonnes by 2020, equivalent to a 21% reduction on actual emissions in 2005 (and 34% on the 1990 figure). The proposed rate of emissions reduction is far faster than the UK has achieved thus far and the chancellor’s budget shows the government has started to recognise the scale of the challenge.

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The committee told the government in December last year that the most important prospective source of cuts in greenhouse gases lay in the ‘decarbonisation’ of electricity generation. This can happen by increasing the percentage of renewable electricity, by capturing carbon at power stations and from switching to low-carbon fuels such as nuclear and gas.

The budget had incentives to encourage all of these changes. Most importantly, it improved the prospects for offshore wind. The budget recognised that the decline in bank credit, the falling price of carbon permits, and the sharp drop in the price of fossil fuels have made offshore projects increasingly difficult to fund. The worrying prospect that the 400-turbine London Array might be abandoned in the next few weeks forced the chancellor to increase unexpectedly the subsidy for electricity generated offshore.

He claims it is new government support. This isn’t quite right: we will all be paying through higher electricity bills. The new subsidy encourages the developers of this vital scheme to place their turbine orders in the next twelve months. My guess is that the government may not quite have done enough and that further fiscal bribery will be needed to get this vital project completed. This scheme, the largest offshore wind farm in the world, cannot be allowed to fail if the UK is to achieve the necessary ten-fold increase in renewables generation by 2020.

The second major measure from Darling was an unexpectedly large increase in the money going into carbon capture and storage. Energy experts have warned that the UK would not be ready to install capture technology on power stations until after the crucial 2020 date, meaning that the government’s carbon budget would be likely to be breached. So £90m is offered for ‘preparatory studies’ by the electricity generators to try to encourage more rapid progress.

There was also a remarkably vague promise to fund a further three working demonstrations of carbon capture in addition to the single contract that is likely to be awarded to the new Kingsnorth power station. We urgently need more detail on this policy change.

There were some crumbs offered to the micro-renewables industry to stop it collapsing entirely in the next twelve months. £45m is not going to go far, perhaps putting solar panels on 5,000 homes compared with the millions around the rest of Europe.

By contrast, energy efficiency measures were emphasised by the chancellor. He promised £400m for research and development, although it is unclear how much of this money is additional to existing allocations. We are definitely seeing progress in government commitments to financing fundamental work in energy efficiency and power generation. But, for comparison, the UK spends about £2.5bn a year on basic defence research and development, over six times as much as the new figure for energy.

The Committee on Climate Change’s other priorities for meeting the carbon budget included an emphasis on low-carbon vehicles and the chancellor has already announced some remarkably detail-lacking plans for subsidising electric cars. In the budget he also committed to spending £20m installing a network of battery-charging points in a couple of UK cities. This is a good start, but he would have been better changing the harsh tax treatment of electric delivery vans. This is the single measure that would do most to get silent, non-polluting vehicles on our urban streets.

He also made some perverse changes to car tax. The owners of existing cars that were among the most efficient when they bought them will now pay higher rates of duty. Owners who thought they were being virtuous are now going to be penalised. The Treasury’s not-so-subtle reasoning must be that the car tax revenues, which are tied to the carbon emissions of the vehicle – providing about 6% of all government receipts last time I looked – will start declining sharply as more and more people buy ultra-efficient cars.

As for the extraordinary car scrappage scheme, the less said the better. It would have been far more effective to pay people to tear up their driving licences and promise to use public transport.

Two further measures were also the opposite colour to green: the excise duty on lorries was held down to placate the road transport industry. And a number of incentives encouraged more drilling for oil and the extraction of the last barrels from existing fields.

Nowhere was the inconsistency between these proposals and overall emissions reduction noted by the chancellor.



This article was originally published in the Guardian on Wednesday 22 April 2009.