Life After Coal: Coming Sooner than You Think 30 comments
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A couple of years ago, I began to see reports that coal supplies might not last the 200+ years we've all been led to believe, so I wrote an article about what you could do to prepare your portfolio for Peak Coal.
Now two years have passed, and peak coal is undeniably 2 years closer. (Did you ever wonder why people who have been saying that we have 200 years of coal for 20 years aren't now talking about 180 years of coal?) But more than being 2 years closer, the evidence continues to mount. Caltech Professor David Rutledge, has been spreading the peak coal word for most of the time since. I recommend the video of his 2007 lecture on the subject.
It's great that the NY Times is asking "Is America Ready to Quit Coal?" but the real question may be "Will we have any choice?"
On February 12th, Clean Energy Action released a report on Powder River Basin coal supplies, based in part on a 2008 USGS report. The Powder River Basin matters because Western coal has been the only source of new coal production in the U.S. for the last two decades. Appalachian and Interior coal production has been declining, despite mostly increasing prices, and uniformly increasing prices since 2003. Northern Appalachian coal production having peaked in the middle of the last century, while Interior coal production peaked at the start of this decade. When production declines in the face of rising prices, constraints other than economics must be coming into play. Future increases in production in these regions seems unlikely.
Of the top 6 coal producing states in the U.S., only Wyoming and Montana are still increasing production. West Virginia, Kentucky, Pennsylvania, and Texas all peaked in the 1900s. With existing Wyoming mines, which dominate current production, all having less than 20 years of reserves remaining, only Montana will remain... and we simply don't know much about the geology to know how much can be recovered. Jim Hansen, author of the Master Resource Report, tells me that available rail supply lines out of Montana are likely to be another critical limiting factor on that state's production.
The 2007 report from Energy Watch Group (which triggered my earlier article), David Rutledge, and Clean Energy Action all found that what we don't know about our coal reserves far outweighs what we do know. What we do know should be very worrying to anyone who hopes that we might be able to replace our current coal fired electricity generation with any sort of "Clean Coal." Any attempt to sequester CO2 by pumping it underground or to the bottom of the sea would require considerably more energy than simply releasing it into the atmosphere, as we do now. That energy would come at a cost of less net energy from what will likely prove to be very limited coal supplies.
Peak Coal Accounting
If "Clean Coal" can be made to work, and we are able to replace part of our electricity supply with this technology, it seems increasingly unlikely that we will be able to supply as much electricity from coal 30 years from now as we do today. Coal plants are intended as 50 to 60 year investments, and part of the reason they are considered so "cheap" is that the construction costs are depreciated over more than half a century of payments. If, in reality, those construction costs must be paid over a shorter period, the effective cost of coal fired electricity will be considerably higher... even if the accounts do not yet show it.
Transitioning away from coal now makes sense both from an economic and climactic standpoint. If new coal plants will have shorter than expected useful lives simply because of the limited supply of coal, an honest accounting cannot spread construction costs 60 years, as has been done in the past. A shorter useful life means significantly raising the accounting cost of coal power per kWh, even before we place any price on carbon emissions or other environmental damage.
Carbon Capture and Storage
That is not to say that improving Carbon Capture and Sequestration technology will not be useful. Even without building new coal plants, we have a massive fleet of existing coal plants which are already spewing carbon into the atmosphere. According to a recent Inside Renewable Energy podcast, French utility EON puts current carbon capture technology costs about $40 per ton of CO2, and it hopes to get the cost down to $20. This does not include the cost of pressurizing the gas and injecting it into some form of permanent storage. (Even permanent storage may not be so permanent.)
Capturing CO2 for industrial uses can make economic sense today, and the economics will only get better when we begin to have reasonable prices for carbon emission. However, cleaning up the emissions of currently built fossil-fueled generation is not the same as investing new money in generation which we hope to clean up later.
We have the technologies today to begin this transition, and other promising technologies at least as near to development as "Clean Coal." Wind power is nearly as cheap as coal with current accounting. If we reassess the useful lives of prospective new coal plants, and put a price on carbon emissions, it will be much cheaper.
Building out the Smart Grid and additional Transmission capacity will allow us to integrate much more wind than skeptics currently think is possible. A recent report from the researchers at the Rocky Mountain Institute and the University of Colorado Boulder found that optimized diversified portfolios in the Midwest of wind and solar generation were 55% more reliable (measured by the variability of output) than the average individual site used in the study.
For large scale baseload and dispatchable generation, Concentrating Solar Power needs only continued price improvement which will come from mass deployment, and a more robust national grid. For large-scale clean baseload power anywhere in the U.S., Enhanced Geothermal Systems are likely to be easier and cheaper to develop than "Clean Coal."
All of these are the right investments for the country, but they are also likely to be good moves for investors. We may still have 30 years before coal production in the U.S. peaks. The stock market reaction will not wait until the actual peak... the stock market reaction will happen when sufficiently many investors realize it's coming.
How many more reports will that take, I wonder?
Disclosure: None
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The reason the Danes have a good working windpower grid is beause it is hooked up to the German grid. When the wind fails the Germans provide the power. The Germans rely mostly on coal plants although they now have a good solar power system (heavily incentivized) hooked up to the electric grid.
perhaps you could combine your message[herein] with the work of R. Bryce in his 2008 book, "gusher of lies" to construct a convincing argument. it would be helpful to the investing public who is mistakenly hoodwinked by the coal/uranium enterprises. this analysis would also help the larger non investor community of the socio-economic tradeoff.
Well of course PRB coal has been increasing and while App coal has been decreasing. Its not because the coal is not there to be had, but the economics favor PRB coal. PRB coal has been selling for $10/ton at the mine vs. App coal which has been selling for between $60 and $120/t at the mine. Add $30/ton to PRB coal for additional rail freight and its still much cheaper per BTU than App coal. Also PRB coal is ultra low sulphor coal which means that power plants that switched to PRB coal did not have to invest a ton of money in new scrubers to meet new emission laws. In addition, new permits for new App mines have not been at all available for three years because of environmental activists. That however does not mean that there is a shortage of coal. The US has coal out the kazoo in Montana, Wyom, Utah, Colorado, Ill Basin, Arizona, New Mexico, Alaska...
One more "obvious" issue is this. The production of US coal can not increase until the demand increases. Funny thing, but every year, production and demand must exactly balance out. There has simply not been much of an increase in the demand for coal because more power plants are now being constructed to burn Nat Gas and because wind is being used more to bring in at-margin power. But the fact that demand is falling slightly really means that the 200 year supply we have will last longer if we choose to use it.
On Feb 16 05:22 PM Igorsky wrote:
> Jimbo
>
> The reason the Danes have a good working windpower grid is beause
> it is hooked up to the German grid. When the wind fails the Germans
> provide the power. The Germans rely mostly on coal plants although
> they now have a good solar power system (heavily incentivized) hooked
> up to the electric grid.
The Clinton Admin was keenly interested in continuing its funding but decided on political grounds not to offend the enviro support they had.
Now Argonne has re-started the research under the Bush admin and if Obama keeps it going we will have something to show for it based on a documentary of recent date on Argonne's efforts.
Coal, nuclear, wind power and solar all seem to have their supporters as long as government subsidizes the stuff.
Yes, even coal is subsidized from the Reagan Admin deciding to offer the Powder River Basin leases cheap back in the 80's. They could have gotten more for them.
For cost effectiveness to be properly measured at current levels we have to see the impact on the retail consumer, not the tax benefits or subsidies. Which geo-thermal also benefits from.
There appears to be nothing "CLEAN" of government subsidy.
The reason that PRB coal is so cheap is do to the geological nature of the coal. The PRB coal lies near the surface and the coal seam is 100 ft thick. What's that mean? The average PRB miner produces 38 tons of coal per hour, while the average Appalachian miner worling in a productive mine, can only 6 tons of coal per hour. That's why it costs $50 to $75/ton to produce Appalachian coal while it costs less than $10/ton to produce PRB coal.
The IRS may assume a 29 year life for coal plants, but that is not the same as what the utility regulator may assume. In a rate case I'm currently involved in in Colorado, a new coal plant (Comanche Unit 3) is expected to be depreciated over a 60 year life. This is different from the IRS tax treatment; it's more like GAAP, where the depreciation schedule matches the plant's *assumed* useful life.
On Feb 16 09:08 AM john s. gordon wrote:
> the internal revenue code classifies power plants as 29-year property
> for depreciation purposes. in 1969 the lawyers in congress just assumed
> that when a plant achieved 29 yrs life it would be scrapped immediately
> & replaced by a new clean plant with state of the art controls.
>
>
> in 1969 when the clean air act came in, if you had a 28-year old
> plant you had a valuable piece of property because you could keep
> it running forever without installing pollution controls. this is
> why we have so many old polluting inefficient plants in the midwest,
> they are valuable pieces of property. on a case by case noncompliance
> basis, some have been forced to add controls under provisions of
> state implementation plans, but the process has kept a lot of lawyers
> busy for a very long time.
>
> in 1973 i was doing some consulting work for american electric power
> on fly ash controls (they had their engineering offices in NYC @
> that time). they were under pressure to add scrubbers or else stop
> burning ohio-NW west virginia coal because of the sulfur problem.
> they took out full page ads in the WSJ hysterically screaming that
> they would never install a single scrubber @ any of their plants.
> their solution to the standoff was, they bought coal mines in utah
> and at enormous expense shipped the low sulfur coal over the continental
> divide all the way to ohio. under the terms agreed to by the state
> regulator, the ratepayers got to pay for this excess expense thru
> the fuel cost clause. you can see the types of distortions that can
> occur if legal provisions are not carefully thought out.
On Feb 16 06:07 PM zenstar666 wrote:
> Prepare my portfolio NOW for peak coal? Okay, I'll immediately sell
> all of my coal stocks and buy wind, solar and other renewables with
> the proceeds in anticipation they will provide more than the currently
> less than 7% energy source for generating our electrical requirements.
> Maybe a 50 year long term outlook might be appropriate? LOL!
On Feb 16 06:14 PM fran wrote:
> many good comments/corrections. your theme highlights much worthy
> thought. but like many articles, the proof/validation is missing.
> i miss the numeration using fuel source, energy density, cost, scale.
>
>
> perhaps you could combine your message[herein] with the work of R.
> Bryce in his 2008 book, "gusher of lies" to construct a convincing
> argument. it would be helpful to the investing public who is mistakenly
> hoodwinked by the coal/uranium enterprises. this analysis would also
> help the larger non investor community of the socio-economic tradeoff.
On Feb 16 06:22 PM beegdawg007 wrote:
> Tom's entire argument is flawed. Tom's argument is based on this
> observation.. "The Powder River Basin matters because Western coal
> has been the only source of new coal production in the U.S. for the
> last two decades. Appalachian and Interior coal production has been
> declining, despite mostly increasing prices, and uniformly increasing
> prices since 2003."
>
> Well of course PRB coal has been increasing and while App coal has
> been decreasing. Its not because the coal is not there to be had,
> but the economics favor PRB coal. PRB coal has been selling for $10/ton
> at the mine vs. App coal which has been selling for between $60 and
> $120/t at the mine. Add $30/ton to PRB coal for additional rail freight
> and its still much cheaper per BTU than App coal. Also PRB coal is
> ultra low sulphor coal which means that power plants that switched
> to PRB coal did not have to invest a ton of money in new scrubers
> to meet new emission laws. In addition, new permits for new App mines
> have not been at all available for three years because of environmental
> activists. That however does not mean that there is a shortage of
> coal. The US has coal out the kazoo in Montana, Wyom, Utah, Colorado,
> Ill Basin, Arizona, New Mexico, Alaska...
>
> One more "obvious" issue is this. The production of US coal can not
> increase until the demand increases. Funny thing, but every year,
> production and demand must exactly balance out. There has simply
> not been much of an increase in the demand for coal because more
> power plants are now being constructed to burn Nat Gas and because
> wind is being used more to bring in at-margin power. But the fact
> that demand is falling slightly really means that the 200 year supply
> we have will last longer if we choose to use it.
On Feb 16 06:25 PM beegdawg007 wrote:
> The Danes have a good wind power grid because they have wind.. and
> because they do not have either coal or nat gas. What real choice
> do they have. Also, there are only 6 million people in Denmark.
>
> jack
> jack
Regards,
bd
On Feb 17 01:53 AM Tom Konrad wrote:
> Your argument does not seem to account for the increasing prices
> of all grades of coal. If the rise of PRB coal were solely due to
> its economic and environmental advantages, would not the prices of
> Appalachian and Central coal be falling?
"Rethinking U.S. Coal Reserves and Resources". by James Mayer...
Very informative!
Read it and let me know if you still think that the U.S. will run out of usable/recoverable coal anytime in the foreseeable future.
74.125.95.132/search?q...
The author of this article explains how the US EIA (Energy Information Agency) estimates the various categories of reserves, i.e. recoverable, demonstrated, hypothetical, identified etc. To start off, he makes note of this most often referenced coal reserve statistic, which is that the US has recoverable coal reserves that are estimated to be 270 billion tons, which is 200 years worth of coal! Now even that is a lot of coal. However, the author than goes on to explain why the actual reserve tonnage is "at least" 2 times that, and probably more than four times that 270 billion ton EIA estimate.
This is a lengthy and detailed article, which I know most who visit here would not be interested in reading from beginning to end. So, allow me to just use one quote from this 13,000 word article to demonstrate why this authors view is probably on target;
The author states...
" Alaska provides a dramatic example of coal potential ****unrecognized**** by the EIA, (US Energy Information Agency). Total hypothetical coal resources in Alaska exceed 5.5 trillion short tons, [note that is TRILLION, not Billion] according to the most recent comprehensive "state" coal resource assessment.i By comparison, the EIA/USGS estimate of total U.S. resources, including hypothetical measures, is 3.9 trillion tons. Alaska accounts for a meager 6.1 billion tons in the 2004 DRB estimate, even though state experts state that coal reserves in Alaska very likely surpass all coal resources in the lower 48 states. This report asserts that the EIA’s 500 billion ton DRB (Demonstrated Reserve Base) estimate reasonably reflects the ultimately recoverable U.S. coal reserves. To put this in perspective, it is believed possible that 500 billion tons of coal may ultimately be recoverable from Alaska alone."""
Coal in a resource which the U.S. has mismanaged for the past 30 years. Had we learned how to liquif and/or gasify coal to run our cars, we would be not be importing oil from anyone. We would have saved $trillions$ on pointless wars, and tens of thousands of U.S. soldiers would still be alive. Tom, do you realize that 1 shrt ton of PRB coal, which sells now for just $13/ton, contains 17.6 Million BTUs of energy? Let me better highlight the potential of that. The 17.6 Million BTU's of energy contained in $13 worth of Wyoming PRB coal is equivalent to the total BTU energy equivalent contained in 140 gallons of gasoline!
The cost per ton is not of PRB coal is not really important. The issue is the cost per mm BTU. Right now PRB coal is selling for about $0.74 per mmBTUs, while eastern coal on average is selling for about $2.50 per mmBTUs. The moisture content is somewhat higher for PRB than it is for most appalachian coal but that's really not much of an issue when coal is used to generate power. PRB coal is an ultra low sulphur coal which is a real advantage. The key disadvantage is of PRB coal rail freight because PRB customers are located far from the mines in northeastern WY and Mnt. Right now it costs about $4.00/ton/100miles for coal rail freight. So a thousand mile rail trip adds $40 or more dollars to the cost of the coal. However, eastern coal also travels by rail so the disadvantage to PRB coal is not the entire $40.
PRB miners are steadily selling more coal further east. In 1994, Wy coal sales were 237 mm Tons. In 2008 WY coal sales are in excess of 450mm tons. Also the DOE projects that Western Coal sales, 90% of which are PRB, will continue to grow annually through the foreseeable future while Eastern Coal sales are in the process of topping out. The Eastern coal sales are topping out because of supply limitations in the east which are resulting from ever more difficult/expensive geological conditions combined with the inability to get new mining permits. The most encouraging segment of Eastern coal development is the Ill basin which contains over 100 B tons of recoverable coal that lies relatively close to some important customers. The value of Appalachian coal is really in the quality and the amount that can be used as either hard coking coal or PCI coal for making steel. Appalachian coal is also a good coal export product because of the proximity to shipping ports on the east coast and in the Gulf.
PRB coal exists in 100 to 150 ft thick coal seems which lie only slightly below the surface. These seems are mined using enormous drag lines which scoop the coal out two train car loads per scoop. According to the EIA, the average WY coal miner produces 38 tons of coal per hour, while a miner working in a typical underground App mine may produce only 3 to 6 tons per hour. That is why WY and MT mines produce the cheapest coal in the world. But PRB coal is not a crappy dirty lignite coal like that which remains in Europe. PRB coal is typically 8500 to 8800 BTU/lb coal which is ultra low in sulphur, which is important because it is the sulphur which unites with H2O to form sulphurus acid rain. PRB coal is fine for generating electricity, and that is why BTU, ACI, and FCL combined will sell nearly 300 mm Tons of PRB coal in 2009, and more in 2010 and more in 2011..etc...
Check this out...
www.eia.doe.gov/oiaf/a...
Regards,
b d;?D
On Feb 17 03:51 PM john s. gordon wrote:
> beegdawg - PRB coal is worth less per ton than higher-rank coal because
> it has higher moisture content and lower calorific value. costs more
> to ship to chicago because of that. there have been processes to
> upgrade the material before shipment but they have not gained traction.
Dang.... it looks like someone just stumbled upon another 400 year's worth of new coal in Central Australia! Not kidding... this really just happened!
www.mineweb.com/minewe...
Massive Australian coal deposit has great CTL and gasification potential
A huge coal formation has been defined in central Australia which could contain 1 trillion tonnes of coal or more suitable for underground gasification or CTL development.
Author: John Chadwick
Posted: Thursday , 19 Feb 2009
LONDON -
A new report has identified an area of the Simpson Desert straddling the South Australian-Northern Territory border as sufficiently promising to be a serious contender in Australia's rapidly emerging underground coal gasification, coal bed methane and gas-to-liquids (GTL) industries. The report, the full text of which will be released shortly, found potential for well in excess of 1 trillion t of coal in the Purni Formation of the Pedirka Basin with estimates suggesting the coal seam potential is very well identified between 200 and 1,000 m depth. "cont'd"
Appearance has been created by this violation of charter that EPA has, in fact, improperly favored Arizona new construction industry by initially permitting Desert Rock and then by issuing a Prevention of Significant Deterioration permit (AZP 04-01) authorizing construction of the Desert Rock Energy Facility (Desert Rock) without explanation of why the new electricity is needed or the damage done to the environment, both in New Mexico and Arizona, by possible new construction.
EPA's failure, in the case of Desert Rock, to follow its own rules, we feel, have voided the permitting process.
Therefore, we ask that EPA deny Desert Rock permit for failure of EPA to follow its own rules and possible EPA collusion with Arizona new construction industry for an attempt to improperly obtain that permit.
If EPA does not grant this request, then please inform us of any appeals processes as well as procedures for filing complaints against those at EPA may have been improperly involved with Arizona new construction interests in the permitting process.
Please respond by March 2, 2009...."
www.prosefights.org/co...
From: bpayne37@comcast.net
To: tom@altenergystocks.co...
Cc: bpayne37@comcast.net
Sent: Saturday, February 21, 2009 5:28:30 AM GMT -08:00 Tijuana / Baja California
Subject: A phd? In what?
I am having some fun.
home.comcast.net/~bpayne37/entelec/ent...
Why haven't I got a response to my application???
cheers
bill