My air is more expensive than your air

China and India lead the charge in forecasted coal-fired electricity demand. Growth rates in China this year are expected to be 143% of 2010 levels, while India will have a 148% jump.

The chart below shows (no surprise) that the bulk of CO2 emissions is going to come from China. So clearly our look at coal’s future must include China, and it must include limiting CO2 emissions.

Here’s a chart of reserve-to-production ratios that shows how long a country’s coal reserves will last at current production rates. You see what could potentially happen down the road if there’s a moratorium on coals with low caloric content (the “dirty” type of coal).

All of a sudden, our proven and probable reserves don’t look quite so comforting. Nor do these numbers take into account any ramp-up in production. It’s clear that producers with mostly high-caloric reserves—such as those in North America, Russia, and Australia—would be the winners, but overall, a ban on low-caloric coals would cause a significant supply shock.
Put together, the message is that demand for power will increase, but emission controls will tighten.
Enter the clean-coal initiative.

Cleaning Up Coal’s Act

The clean-coal initiative has become more than a buzzword in recent years—it’s a very big deal, with hundreds of millions of dollars being poured into the sector. Many of these projects are still in their infant stages, so the cost of capital is very high. For example, there’s a large project in the works in South Korea, where in 2011 the government commissioned the construction of a clean-coal power-generating facility to the tune of $3 billion.

The United States and China are leading the way in large-scale, integrated carbon capture and storage (CCS) projects, with 19 and 12 respectively out of 60 worldwide.

These are the three types of CO2 capture:

1. Post-combustion capture, commonly known as scrubbing, is the oldest method. The technical name is called flue-gas desulfurization (FGD). The process involves spraying a solvent into the flue gas that absorbs the CO2. The result is a liquefied form of CO2. (Calcium carbonate, better known as limestone, performs a similar scrubbing action for SO2.) Post-combustion capture requires steam and thus reduces the plant’s efficiency. The additional energy load is usually around 20% of the base plant’s net electrical output.
2. Pre-combustion capture, or gasification, turns the coal to its gaseous state by combining intense pressure with steam. The end result is very clean generation of energy—emissions are reduced by 90%—but very expensive. Duke Energy (DUK) and Southern Co. (SO) both have gasification plants, which have been subject to hundreds of millions of dollars in cost overruns. Coal-gasification costs currently run about $1,300/kW. Right now, there are only four active gasification projects in operation.
3. The oxyfuel method uses pure oxygen for burning fuel instead of normal air, which produces steam as a byproduct and high-purity CO2. The main disadvantage of this method is the high price tag of cryogenic oxygen. The GreenGen project in China, a 250-megawatt (MW) plant that uses the oxyfuel method, comes with a $1.5 billion price tag. That will build you a fair-sized nuclear power plant.

Some of this high cost is to be expected at the beginning of the learning curve. Here’s the forecast for costs between now and 2040.

What to Do with That Captured CO2

Half the battle is keeping CO2 from going into the atmosphere—but what to do once you’ve captured it?

Here are the current options, of which two are similar.

1. Using CO2 injection-enhanced oil recovery is the process of piping stored CO2 to mature oil fields, where the CO2 is injected into the basin and acts as a lubricant for the oil. It creates better flow rates and adds to the longevity of the basin. A CCS facility operates at nearly full capacity in Texas, where it has stored CO2 and injected the gas into Valero Energy’s West Hastings oil field. An annual increase from 1.6 to 3.1 million barrels of oil was the payoff. The price tag on the facility was approximately $431 million.
2. Coal bed methane deposits and saline aquifers act as deep underground storage facilities where the gas cannot escape.
3. Circulating fluidized beds (CFBs) take a very different approach. This technology combusts fuel at a significantly lower temperature, which decreases the release of toxic pollutants. The CFB-style power plants also can burn a wide range of fuels, including biomass.

Most recently KOSPO, South Korea’s state-run power company, purchased a Foster Wheeler CFB power plant that’s expected to cost upward of $3 billion. Britain-based Foster Wheeler (FWLT), an engineering and construction company that specializes in power generation, has built 300 CFBs all over the world.

Image of coal flyer by Russ Walker