Though Newer Sources of Power Are Being Built, Coal Remains a Cheap BTU

I decided to spend yesterday, Earth Day, thinking about Coal.

First on my list was a trawl through Google Images, looking for massive displays of global coal consumption. Coal porn, if you will. Next up was to send out a bunch of cheeky twitter messages, whose intent was to mash-up coal, earth day, and popular culture. I basically just wanted to wish everyone a Happy Coal Day. Or perhaps just remind them that coal was still very much with us, and that the world remained on its merry pathway of coal consumption. Finally, I got down to the innnards of the BP Statistical Energy Review and was reminded that China, for example, doubled its coal use in just 7 years: going from 667 toe (tonnes of oil equivalent) in 2000, to 1311 toe in 2007.

My point: it’s hard to win a fight against a cheap BTU. Wind is good. Solar’s even better. And as my readers know, I’m delighted that each are advancing. From China to South America, from the deserts to the Great Plains the world continues to build new sources of power generation. In the EU, Wind Power is now the fastest growing new source of megawatts and this looks also to be the case in the US. China, which has suffered a series of ghastly coal disasters is also scrambling to add cleaner power and is expected to spend as much as 55 billion in the next fifteen years on Solar. The US is of course further tightening the regulatory environment for coal. This trend is several decades old, and explains the contribution of natural gas to the US power grid. The problem however is that for much of the world, coal remains both a cheap and portable (and storable) source of energy. In fact, coal has a nasty habit of pricing itself just below nearly all other energy sources. This is why I’ve called coal a kind of anti-hero.

The country that got me thinking about Coal yesterday was Indonesia. This is the fourth most populous nation on earth and for over 40 years it exported oil. But, having turned net oil importer in 2005, Indonesia officially left OPEC at the end of last year. And so I wondered, to what energy source will Indonesia’s 240 million people now turn? Well, my answer would be coal. After all, Indonesia is the seventh largest producer of coal in the world.

A barrel of oil currently runs you about 50 dollars USD. That is quite cheap and gets you 5.8 million BTU. But a ton of thermal coal will cost you 60 dollars USD and contains more than 20 million BTU. And there’s another problem: while the easy coal is now gone in many areas of the world, coal remains generally far cheaper to extract than oil.

Coal is also easily portable. Requiring no special containers, and can easily be broken up into small amounts and carried by animals and wagons. It stores well, and burns slowly. And is quite versatile for both large scale power generation, or low tech industrial use and home heating. And unlike natural gas, it can be cheaply transported across oceans. This is why coal, like oil–but unlike natural gas–trades at a converged price globally. Now add to these characteristics the fact that OECD nations, where per capita incomes are higher, continue to raise the price of coal use through regulation, and you can see why coal for export continues to boom. Coal remains therefore the energy source for the world’s developing nations, and we are only too happy to ship it to them.

Wisely recognizing that coal was the arch-nemesis in the world’s energy and climate matrix, Google.org set out in November 2007 to undertake a noble battle: it would challenge the world to create killowatts of energy from renewable sources more cheaply than from coal. They named the project appropriately: RE<C. At the time, I recall being quite impressed that Google (GOOG) understood the problem so well. Until Solar, Wind or other new sources of power generation cost as little to set up as coal, the developing world would continue to reach hard for its usual cheap BTU. Over the past 18 months I have tried to learn how Google.org is progressing. They’ve not announced any news.

And thus, I return to Asia where despite the addition of Wind, Solar and Hydro the buildout of coal-fired electrical power continues at a furious pace. China alone is expected to build as much coal capacity in the next 10 years as currently exist in all of the US. And that’s just China. In this context, I found Earth Day–and the carbon and climate plans of many OECD nations–to be a tad ironic. For it hardly seems like an accomplishment to stop burning coal here–so that it’s even cheaper to burn someplace else.

Hope you had a happy Earth Day.

Photo: Sebastiao Salgado: Workers emerging from coal mine, Dhanbad, India, 1989

Comments

[jack kreg:]

Great point, and well made with comparison of power costs for coal and other energy fuels.
Yes, the hypocrisy runs deep in the global warming, oh wait, since the last decade is absent global warming, the alarmist have switched to climate change.
Those of us out trying to protect the greatness of American have our hands full, with those who want us to run out of power. Sadly, if they get what they want, what is left of our industrial production will simply close up shop and move to Asia.
Thanks for great article.

Apr 23 11:44 AM

[billp37:]

BTUs are not of concern for solar and wind electricity generation according to SOME at PNM.

We, however, currently believe that HEAT RATE does apply to solar and wind generated electricity.

home.comcast.net/~bpayne37/pnmelectric...

Apr 23 11:49 AM

[keithfeather:]

Well done. "For it hardly seems like an accomplishment to stop burning coal here–so that it’s even cheaper to burn someplace else" This could be the tag line for the future.

Apr 23 11:54 AM

[beegdawg007:]

o your insightful blog, I would add, these comments.

First, most do not realize that as of 2007, China and India combined already consume 50% more coal than Europe and North America combined. During the next decade, China and India will increase their coal consumption by an amount equal to all the coal currently consumed in North America. The future of coal is in the hands of Asia.

Next.. By law, thanks to the Greens, by 2020 Germany must close all 17 of its nuclear power plants. Germany is reluctant to switch to imported natural gas from Russia for obvious political reasons. Germany is turning to …. clean coal. In addition, the UK will shut down 2 nuclear reactors do to age. Only two new nuclear power plants are currently planned between now and 2020, one in France and one in Denmark. It is unlikely that Europe's dependence on coal - Europe burns almost as much coal as the USA – will diminish at all during the next 10 years. Google – Germany and “clean coal”.

Finally, Energy Sec Chu is very aware that coal must remain the backbone of the US energy policy. I listened to his testimony in the House of Representatives yesterday during the Energy Bill hearings. Steven Chu is very aware that China and India plan to continue to use more coal. He is supportive of clean coal technology development. Last night he stated that it would take at least 8 years for clean coal technology to become mainstream. Based on what I heard during the testimony yesterday, I believe that the liberal press has truly misrepresented Chu's view of coal. This guy has his eyes open.

Finally, based on what I heard during the testimony and grilling yesterday during the House review of Waxman's energy bill, Cap and Trade has zero chance of passing. I posted a detail post about that on the KOL message site earlier today. I doubt that this bill will ever even be brought to the floor for a vote. It simply lacks support from many key democrats.

Apr 23 01:17 PM

[Ferdinand E...:]

Coal is lovely, isn't it. I remember how, as a boy in Chicago, I spent many happy days shoveling it into the furnace in our house. I also suspect that many of my academic colleagues would like for me to have kept shoveling it, instead of bothering them. Of course, there is something that I would like to see them shoveling.

In any event, despite what you might hear from the distinguished energy team of our new president, the TV audience/voters are not going to turn their backs on coal, and that coal is NOT going to be cleaned.

Apr 23 01:53 PM

[TinyTim:]

We have it, we should use it. Centralized coal fired plants at least allow cleanup equipment like scrubbers to prevent acid rain.
Last I heard, CO2 in the atmosphere takes several hundred years to change. If that's true, we all better make other arrangements.

There is a mountain made of coal in Arizona named, appropriately enough, Black Mesa. Peabody operates the mine. In as close to perpetual motion as phyics will allow, there are trains that transport the coal about 100 miles to a Lake Powell generating station. A portion of the electricity generated is routed back to the overhead wires of the electric unit trains to keep the coal coming.

Another portion of the coal is ground to dust, mixed with water to form a slurry and pumped hundreds of miles via a pipeline to a generating plant in Laughlin, NV where the water is removed and the dust is burned. Sound hairbrained?

How can anything else compete?

Apr 24 04:52 PM

[beegdawg007:]

Coal and your utility bill. The average American consumes about 950 KWH/month worth of electricity. The bill for the cost of energy being produced by coal powered electric plants is about 10-12 cents/KWh. What is surprising is that of this 10-12 cents, very little is actually as a result of the cost of the coal. A typical ton of coal contains 20M BTUs of energy which is equal to 5900 KWH. When this coal is burned to produce electricity the efficiency rate is about 40%. So, to produce 950 KwH of energy for the typical home requires 950KWH / (.40 x 5900) = .403/shrt tons of coal. According to the EIA, the average coal in the US now costs about $38/t. Eastern coal is much more expensive than Western coal but about half the coal burned in the US is very cheap PRB coal which now sells for about $12/t. Therefore, on average, a US home which uses electricity delivered from a coal powered electric plant spends only $15/month - 50 cents a day - 1.6 cents per KWH - for the coal that creates its electricity. All the rest of the bill is what the cost of the infrastructure (support and construction) and profit. That is why building windmills makes virtually no economic sense. A power system for a city must assume that it can deliver on peak power requirements on days when the wind is not blowing. Therefore, any windmill constructed is "incremental" infrastructure cost which does not result in any "incremental" income. And, as I just demonstrated, the cost of the infrastructure is typically about 85% of our utility bill. No wonder power companies have thus far resisted doing something as stupid as building wind turbines. It makes sense for T-Boone to build wind power because he is selling that wind to cities in Texas for a profit as a result of the CO2 hysteria. But, realize that these wind turbines provide incremental supply even though there is no incremental demand for power in Texas. T-Boone's wind turbines are simply adding incremental cost for a demand curve which has not expanded. I wonder if any of the Texas politicians have taken the time to explain that to the average Joe and Mary who must pay for this nonsense?

Apr 29 04:06 PM

[beegdawg007:]

Coal's surprising new value proposition. Using coal can "reduce" CO2!!! Hadn't heard that one before myself, but here it is toward the end of this article..
money.cnn.com/2009/04/.../
""Sokol says, energy companies will need to produce more energy while emitting less carbon dioxide.

Electric cars will be one answer. They generate fewer greenhouse gas emissions than cars that burn gasoline, and they have lower fuel costs, even when oil is cheap. That's because electric engines are more efficient than internal-combustion engines, and because generating energy on a large scale (in coal or nuclear plants) is less wasteful than doing it on a small scale (by burning gasoline in an internal-combustion engine).

The numbers look something like this: Assume you drive 12,000 miles a year, gas costs $2 a gallon, and electricity is priced at 12¢ per kilowatt, about what most Americans pay. A gasoline-powered car that gets 20 miles to the gallon - say, a Chevy Impala or a BMW X3 - will have annual fuel costs of $1,200 and generate about 6.6 tons of carbon dioxide. Equip those cars with electric motors, and fuel costs drop to $400 a year and emissions are reduced to about 1.5 tons. """

I'm not sure if the actual numbers prove this to be true. However, even if overall CO2 in China does not decline from the development of electric cars, something of equal importance will happen. With a plug-in electric car, compared to an internal combustion engine, most of the pollution will be created out of the cities and much further into the country. For hundreds of millions of Chinese, air polution in the city is a real health issue. Also, an electric plug-in car that could go 60 miles without burning any petroleum would allow China to substitute energy from its vast reserves of coal for that of imported oil. The potential for plug-in electrics to move pollution out of the cities is a story worth watching.

What the US can do that China can not is use NG as a transportation fuel. China does not have vast enough NG supplies to do that. What America should be investigating in is plug in PLUS NG powered cars and light trucks. Couple that with NG powered commercial vehicles and America could lower greenhouse gas emissions while reducing the price of driving and reducing our dependence on foreign oil. Right now, 1M BTU s of NG cost less than $5. It takes seven gallons of gasoline to provide a million BTU s.

Apr 30 10:32 PM