Clean coal isn’t cheap

The point is increasingly well made by numerous sources: once you add carbon sequestration, coal is no longer an economically attractive option. In Indiana, a 630 megawatt coal plant is being built for $2 billion. That’s $3,174 per kilowatt. If we expect investors to seek a an 11% return on investment over a 20 year span, the capital cost of the plant is about 5.7 cents per kilowatt hour. On top of that, you need to pay for transmission, fuel, staff, and maintenance. On average, electricity in Indiana sells for about 6.79 cents per kilowatt hour.

The nominal price of the plant and the power it generates also doesn’t consider other coal externalities: like how mining it is dangerous and environmentally destructive. While this plant uses Integrated Gasification Combined Cycle technology and is capable of being attached to carbon sequestration infrastructure, it will not actually sequester the carbon it emits. As such, it will be only incrementally better than a standard coal plant with the same electrical output.

The only possible justification for this is that this is a demonstration plant that will help to make the technology much cheaper. Of course, when it is considered in that way, it seems at least equally sensible to spend $2 billion on experimental renewable power plants, in hopes of reducing their capital costs. The more you think about it, the more it seems like coal is densely packed carbon that is conveniently already in the ground. It should probably remain there.

Author: Milan

In the spring of 2005, I graduated from the University of British Columbia with a degree in International Relations and a general focus in the area of environmental politics. In the fall of 2005, I began reading for an M.Phil in IR at Wadham College, Oxford. Outside school, I am very interested in photography, writing, and the outdoors. I am writing this blog to keep in touch with friends and family around the world, provide a more personal view of graduate student life in Oxford, and pass on some lessons I've learned here.

21 thoughts on “Clean coal isn’t cheap”

  1. It’s fine to say that the universal human interest is for coal to stay in the ground, but reconciling that universal interest with the short term and particular interests of individual states is what’s hard.

    The extent to which this kind of cool-headed logic can be made to be internationally politically coercive is probably the big question about whether global warming can be effectively mitigated.

  2. Google Goes Green

    “Google today announced its RC<C project to make renewable energy cheaper than coal in the near future. The company, and its charitable arm, plan to invest hundreds of millions of dollars in the initiative. Larry Page stated: ‘With talented technologists, great partners and significant investments, we hope to rapidly push forward. Our goal is to produce one gigawatt of renewable energy capacity that is cheaper than coal. We are optimistic this can be done in years, not decades.'”

  3. “The newly created initiative, known as RE<C, will focus initially on advanced solar thermal power, wind power technologies, enhanced geothermal systems and other potential breakthrough technologies. RE<C is hiring engineers and energy experts to lead its research and development work, which will begin with a significant effort on solar thermal technology, and will also investigate enhanced geothermal systems and other areas. In 2008, Google expects to spend tens of millions on research and development and related investments in renewable energy.”

  4. The extent to which this kind of cool-headed logic can be made to be internationally politically coercive is probably the big question about whether global warming can be effectively mitigated.

    Even if coal is expensive, it may be logical to use. Sometimes, climate change and ‘energy security’ prompt similar policies. Coal is the big exception: terrible for the climate, but helpful for avoiding imports of foreign fuel.

  5. Tristan,

    Limiting the use of coal will certainly tricky. Being able to effect positive change in the area requires awareness of the major technical and economic considerations, including those described above.

  6. “Why build extravagantly expensive coal plants? Because coal is cheap!”

    Only if one does not factor in externalities! If one does account for and partially correct the externalities then (as Milan points out) the costs of energy from coal plants which sequester the CO2 make coal pretty expensive.
    If costs were assigned to externalities other than greenhouse gas emissions then the costs would rise even further. For instance, the huge expansion in coal-plants in China is predicated on not assigning costs to the scores of workers killed in Chinese coal mining, which is generally regarded as one of the most dangerous occupations on the planet.

  7. Averting our eyes
    A guest essay from climate scientist James Hansen

    “A substantial fraction, about one-fifth of our fossil fuel CO2 emissions, stays in the air for more than 1000 years. Thus, whether we burn a fuel and release the CO2 today or next year does not matter all that much with respect to the end result. Conservation of precious fossil fuels is important — it is needed to give us time to develop energy sources and lifestyles to fit the era “beyond fossil fuels” — but we must realize that there is a limit on the total fossil fuel CO2 that we inject into the atmosphere.We cannot burn all of the fossil fuels (oil, gas, coal and unconventional fossil fuels such as tar shale and tar sands) and release the CO2 into the air without creating a different planet.

    Burning all fossil fuels, if the CO2 is released into the air, would destroy creation, the planet with its animal and plant life as it has existed for the past several thousand years, the time of civilization, the Holocene, the period of relative climate stability, warm enough to keep ice sheets off North America and Eurasia but cool enough to maintain Antarctic and Greenland ice and thus a stable sea level. We cannot pretend we do not know the consequences of burning all fossil fuels.”

  8. Fossil-fuel energy companies are well-served by having CCS technology remain on the drawing board, devoid of any “industrial-scale” field deployments. It lets them point to technology that will eventually make them clean — forestalling complaints that coal should be done away with completely — while allowing the companies to claim they can’t build something that hasn’t already been built.

  9. “The projected cost of the FutureGen project has increased from $975 million in 2004. The 13 non-profit alliance members will pay a total of $400 million under an agreement that calls for the U.S. government to pay 74 per cent of FutureGen’s costs.

    Several utilities this year have said they plan to scrap or delay plans for IGCC facilities because of regulatory hurdles and rising costs.

    Teco Energy Inc., which operates one of the two existing U.S. IGCC plants, in October halted plans for a $2-billion unit in Florida. Southern last month said it was cancelling an IGCC unit in Florida, two months after the U.S. energy secretary appeared at the site to celebrate its groundbreaking.

    “There are more plants being cancelled than being announced,” said Mudd. “The sticker shock of building new coal plants, especially IGCC plants, has been a big hurdle.””

  10. The Energy Department has not approved the selection of Mattoon, Ill., as the site for the FutureGen clean coal power plant over concerns that the projected $1.8 billion cost of the facility is too expensive and must be cut down.

    DOE — the project’s chief financier covering 74 percent of the total cost of the site — recently told the project’s consortium of financial backers that they must rework the design for the power plant if they want to have access to the taxpayer funds set aside for FutureGen.

    The industry team involved with FutureGen announced Dec. 18, 2007, that they had selected Mattoon from among four project sites that were under consideration for the 275-megawatt advanced coal plant.

    The developers cited the interests of time and money in moving ahead with the Mattoon announcement. “Every month of delay can add $10 million to the project’s cost, solely due to inflation,” FutureGen Alliance CEO Michael Mudd said.

    But DOE was not present at the press conference last year when Mattoon was selected, and the agency has not yet issued a record of decision on the site, which is a prerequisite for putting the money in place so that construction can begin.

    DOE spokeswoman Julie Ruggiero declined to discuss the matter publicly and referred to letters sent last month to the alliance by DOE acting Principal Deputy Assistant Secretary James Slutz.

    Last month, Slutz wrote that “projected cost overruns require a reassessment of FutureGen’s design,” and that DOE “believes that the public interest mandates that FutureGen deliver the greatest possible technological benefits in the most cost-efficient manner.”

    Slutz questioned the timing of the site announcement, complaining in a letter to Mudd that developers were moving too fast and without consulting DOE.

    Illinois Gov. Rod Blagojevich (D) recently told DOE Secretary Samuel Bodman that “any delays will only drive up costs and postpone the benefits FutureGen promises to deliver”

  11. The Expensive Myth of Clean Coal
    9 Jan 08

    “Clean coal” is a term that is getting a lot of coverage these days but the moniker makes as much sense as calling Paris Hilton “pedantic”.

    As a fuel source, coal is as filthy as they come – emitting about 67% more CO2 per unit of energy than natural gas.
    The process of coal mining itself also releases large amounts of trapped methane gas into the atmosphere. The US Geological Survey estimates that there is an incredible 700 trillion cubic feet of methane trapped in domestic coal deposits.

  12. Climate Neros fiddle while Rome burns

    Jan 28, 2008 04:30 AM
    Tyler Hamilton
    Energy Reporter

    Governments and industry love to talk about the things they plan to do, perhaps to detract attention away from what they haven’t done or aren’t doing.

    How many radio or television debates have shown an environmentalist pointing out the devastating effects of oil sands and power production in Alberta, only to have industry officials tout concepts like “clean coal” or “carbon capture and sequestration” – as if the solution is here and the problem is being overcome as they speak?

    As Keith pointed out, there’s been no shortage of press releases. According to Emerging Energy Research of Cambridge, Mass., more than 20 major carbon-capture power generation projects were announced around the world last year – most of them proposed in Canada, the United States and Australia.

    Not one, said Keith, is certain to move forward.

    Last September, for example, one of the biggest “planned” projects in Canada was abruptly cancelled. The project, which would have involved construction of a 300-megawatt pulverized coal plant in Saskatchewan, was originally estimated to cost $1.5 billion. That figure expanded to $3.8 billion within no time, and that’s excluding the carbon sequestration part of the equation.

    What was the industry’s excuse for cancelling it? The government, they said, wasn’t throwing enough money at it. That’s right, the same federal government that keeps talking about this technology as the solution to our woes did not want to commit financial resources.

  13. Coal: getting expensiver

    More details on the new, really-really-expensive AEP coal plant in West Virginia.

    It seems like just yesterday that I wrote that the 17 percent rate increase announced by AEP would not be the last one, given the cost of this plant. Two days later, here they come.

    Specifically, “Customers could start paying as early as next year with rate hikes starting at $1 per month in 2009 and eventually climbing to $7.70 per month. AEP customers could pay nearly $160 million during construction and $116.23 million per year after that to fund the new plant.”

    And why do we need those rates? Because this plant will be “the single most expensive utility project in the state’s history.”

    And why do we need the coal plant? Because … [drum roll] … coal is cheap!

  14. Best Post Ever?
    By Eric de Place

    Given that coal and oil companies aren’t run by idiots, it’s clear that they’re not going to make arguments of the form “we shouldn’t act to ward off preventable environmental disaster because that would be bad for our shareholders and executives.” Instead, polluting energy firms are going to ride on to the scene as apostles of class warfare, condemning carbon pricing, congestion fees, energy efficiency mandates, and everything else under the sun as an undue burden on the poor.

    As readers know, I think that argument is often factual off-base. But at other times it has some real truth to it. If you make energy more expensive to use, this will inconvenience everyone to some extent, but it’ll be much less of a problem for more prosperous people. But what this analysis leaves out is that the price of inaction will also fall hardest on people of modest means. If changing weather patterns make food more expensive, then burden falls hardest on the poor. If natural disasters destroy people’s homes, then it’ll be hardest for the poor to rebuild. If water shortages lead to scarcity and black markets, it’s the rich who’ll be able to get what they need. This is the general virtue of having a lot of money — it can be exchanged for tangible items of value. Consequently, the downside impact of any widespread change will be hardest on those who have little of it. But that’s not a reason to never change our policies if the status quo is going to lead to even worse outcomes. You’re not ultimately doing the poor any good by condemning them to live in a world of climate catastrophe.

  15. G’AO!
    Government report criticizes U.S. plans for carbon dioxide burial
    Posted by Guest author (Guest Contributor) at 12:15 PM on 21 Oct 2008

  16. Southern Company and Mississippi Power announced Wednesday afternoon that they would suspend all coal gasification operations at a Kemper County plant and simply use natural gas instead. The decision comes after the Mississippi Public Service Commission (MPSC) recommended that the plant burn only natural gas, which is cheaper at the moment.

    The Kemper County plant was supposed to be a cutting-edge demonstration of the power of “clean coal,” and, despite running five years late and more than $4 billion over budget, Kemper was able to start testing its coal gasification operations late last year. The plant used a chemical process to break down lignite coal into synthesis gas, or “syngas,” which was then fed into a generator. The syngas burns cleaner than pulverized lignite coal does. In addition, emissions were caught by a carbon capture system and delivered to a nearby oil field to help with oil extraction. That, Southern and Mississippi Power said, would reduce the greenhouse emissions of burning lignite by up to 65 percent.

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