Slow but Steady: King Coal Keeps on Keepin’ on
Then there is coal, the Rodney Dangerfield of generation: It just doesn’t get any respect. Surprise: New coal-fired projects, unlike the nukes, are actually under construction in the U.S., and some are likely to start pushing out power soon. Despite deep political opposition from environmentalists and competing technologies, coal still generates more than half of all U.S. electricity. It’s a reminder of Billy Joe Shaver’s 1950s bluegrass hit, "I’m just an old lump of coal (but I’m going to be a diamond someday)."
According to the Department of Energy’s National Energy Technology Laboratory, in June 2009, 36 coal-fired plants were either under construction (23), near construction (4), or permitted (9), for a total of 19.4 GW of new capacity. That’s in the face of a heavy assault on coal by environmental groups concerned with carbon dioxide emissions. Also joining the no-coal chorus in Appalachia are local opponents of mountain-top mining and others challenging coal ash waste disposal at power plants, in light of the Tennessee Valley Authority’s 2008 major ash dam collapse.
Not all of those coal plants the EIA identified will actually join the grid. It’s not a walk in the generating park. For example, in November, MDU Resources Group Inc. announced it was canceling its planned 600-MW Big Stone II coal project in South Dakota. The reason was that its partners in the project were unwilling to pony up the cash for the plant. But some new coal projects will succeed, as coal continues to be the pragmatic least-cost approach to baseload power.
Financial results demonstrate coal’s staying power. West Virginia – based Massey Energy Co., the fifth-largest U.S. coal producer, and the largest producer of central Appalachian coal, at the end of October reported profits for the third quarter of 2009 of $16.5 billion (19 cents per share) on revenues of $536 million, a bit below third quarter 2008 figures. For the first nine months of 2009, Massey’s EBITDA (earnings before interest, taxes, depreciation, and amortization) was $374 million, compared to $242 million for the first three quarters of 2008. This is not the picture of a dying industry.
Coal has many overt enemies but also lots of grassroots support. Miners and other union workers in the industry support the dusky diamonds ("dirt that burns," as some have described the mineral). Coal mining, both underground and on the surface, creates high-paying jobs in places where there often are few other opportunities for work. Those jobs translate into economically viable communities, as miners and their families support local businesses from grocery stores to car dealers to dentists. In southwestern West Virginia and eastern Kentucky, flat land is hard to find, and mountain-top removal has plenty of friends, not just miners but also business folks and local consumers. That translates into political power for coal-state politicians.
Will generating and anti-pollution technologies impact the coal equation? Industry hype about coal claims it can be "clean," citing as-yet-unproven technologies for gasification, carbon capture, and CO2 sequestration. At the same time, environmentalists claim that "clean coal" is an oxymoron, akin to "military intelligence." Neither side has made its case. Nor is it likely the verdict will come in 2010.
The coal industry and the DOE are subsidizing projects to strip CO2 out of coal-fired plants and stuff the greenhouse gas into places yet untested. Carbon dioxide, of course, was once thought to be a beneficial byproduct of burning coal. Now, quite the opposite.
So far, nothing in the world of capturing CO2 from coal and storing it somewhere else approaches commercial scale. Indeed, some analysts are suggesting that coal plants should not be the major focus of attempts to reduce U.S. CO2 emissions. Instead, they argue, as reported in a fine New York Times article, there are more emissions bangs for the buck in working on capturing CO2 at "oil refineries, chemical plants, cement factories and ethanol plants, which emit a far purer stream of it than a coal smokestack does."
Look for further carbon capture technology research in 2010. This technology is a long way from commercial development and may slow investment in further large-scale coal plant projects in the year ahead.
Congressional energy legislation in 2010 could pressure coal, as Congress searches for ways to reduce greenhouse gases. Those political moves against coal may prove quixotic. Coal is too powerful in Congress to take a major hit. In addition to generating 55% of U.S. electricity, coal is found (although not necessarily mined) in more than half of the U.S. states and used to generate electricity in far more than those. Coal has major political muscle in both business and labor camps.
The new head of the AFL-CIO, Rich Trumka, former chief of the United Mine Workers of America, is a western Pennsylvania coal miner who worked his way through college and law school with a miner’s helmet and lamp on his head. It’s unlikely coal will see its business or political position eroded in the year ahead if the savvy Trumka has anything to do with it. There’s a good bet he will be behind the political stage and helping to direct the drama.
The Green Machines
It isn’t clear these days which technologies — coal or nukes or water — are the environmental movement’s true bête noir (dark beast). Nukes are out of the question for some because of waste. Coal attracts loathing because of conventional pollution, CO2 emissions, and land-use issues. Hydro kills trout and smaller fish you have never heard of.
What’s left are wind, solar, biomass, geothermal, and conservation (and who can argue with conservation?).
Niche generation, widely known as "renewable energy," a term without a rigorous definition, accounted for about 8% of U.S. energy consumption in 2008, according to the EIA. That portion of the market should grow in 2010. Renewables may be able to increase their market share through state renewable energy portfolio standards and various state and federal subsidies. Any federal legislation mandating a renewable standard would be unlikely to have any impact in 2010 or 2011.
The self-proclaimed "green" generating technologies will continue to occupy small market opportunities, not supplanting conventional baseload generation such as coal and nuclear, or dispatchable generation such as coal, hydro, and gas. That’s clear from government statistics.
What is renewable? The definition is important. Many environmentalists conveniently ignore large hydropower as "renewable," an omission that makes some political-correctness sense (the opponents of hydro don’t like turbine blades that kill fish). Historically, some of the environmental movement’s deepest roots — those connected to John Muir and David Brower — are intimately bound to opposition to hydroelectricity dams. Hydro is, for these folks, out of the question when it comes to substantial energy generation.
Eschewing water power is nonsense in terms of renewable electric capacity. The EIA says that of the 372 billion kWh of generation from renewables in 2008, 248 billion kWh came from "conventional" hydroelectricity, meaning big water such as Hoover Dam, Glen Canyon, the Missouri River system, the Columbia River system, the Lower Colorado River Authority, and others. By contrast, wind, the next-largest contributor to renewable generation, provided only 52 billion kWh. Solar checked in at a tiny 843 million kWh, last place among the EIA renewable technologies.
Wind and solar will continue to grow exponentially in 2010. That’s easy. They start from a very low base, so exponential growth remains trivial. Will wind and solar make major contributions to electric generation and electric supply in 2010 and displace statistically significant amounts of fossil generation? The chances are slim and none. Slim just left the room.
Which Way Is Wind Blowing? The American Wind Energy Association (AWEA), the Washington lobby for wind power, reported that its industry installed some 1,200 MW of new capacity in the U.S. in the second quarter of 2009. That’s a solid performance, bringing the wind total for the first six months of 2009 to 4,000 MW, well ahead of the first six months of 2008. In a press release, AWEA acknowledged that it is "seeing a reduced number of orders and lower level of activity in manufacturing of wind turbines and their components." AWEA said this is "troubling in view of the fact that the U.S. industry was previously on track for much larger growth."
However, translating pure installed capacity into useful generation leaves much to be desired. The Electric Reliability Council of Texas (ERCOT), where wind turbine construction leads the world, now sports 10% of its installed capacity as wind against 65% natural gas. ERCOT’s annual summer assessment noted that there are 8,135 MW of installed wind capacity. However, when calculating the portion of that capacity that is available to help manage peak demand, ERCOT takes a very pragmatic view: "For summer peak capacity, ERCOT counts 8.7 percent of wind nameplate capacity as dependable capacity at peak in accordance with ERCOT’s stakeholder-adopted methodology." So for every 1,000 MW of wind power installed, only 87 MW are predicted as available to trim the summer peak. ERCOT’s installed generation capability is 72,700 MW. A summer peak demand of 64,056 MW is predicted for 2010.
The wind supply chain, noted AWEA, is experiencing troubles as companies "have stopped hiring or have furloughed employees due to the slowdown in contracts for wind turbines. Wind turbine component manufacturing investment was one of the bright spots in the economy in 2008, with over 55 facilities added, expanded or announced that year." No more, it appears.
Denise Bode, AWEA’s CEO, said, "Manufacturing investment is the canary in the mine, and shows that the future of wind power in this country is very bright but still far from certain. The reality is that if the nation doesn’t have a firm, long-term renewable energy policy in place, large global companies and small businesses alike will hold back on their manufacturing investment decisions or invest overseas, in countries like China that are soaring ahead."
Deconstructing Bode’s canary metaphor, if the future of the U.S industry is bright, the canary must be doing quite well, and singing gleefully. It doesn’t appear that the canary is gasping for air in her scenario, although the implication of her statement is that Tweety Bird has a raspy cough. The windy canary, it seems, is neither a positive nor a negative indicator.
One of Bode’s previous jobs was serving as head of a lobbying group promoting natural gas, a product that will kill canaries quite quickly (and people, too, under the right circumstances). Her AWEA statement is further evidence that Washington lobby-speak is often incoherent.
Scoping out wind’s prospects, Shane Mullins of Industrial Info Resources (IIR) said in late September, "After a record-setting year in 2008, wind power is on target for a mediocre 2009, but prospects for 2010 and beyond are extremely bright. Last year was a great year for wind power installations, so good, in fact, that a lot of projects scheduled for construction in 2009 were pulled into 2008. But last year’s collapse of the tax equity market cut new wind construction in half."
In 2008, said Mullins, construction began on more than 9,000 MW of new wind power capacity in the U.S., but through mid-September 2009, construction had begun on only 4,162 MW of new wind projects, according to data collected by IIR. "For all of 2009, we’ll be lucky if we see construction begin on a total of 4,500 MW of new wind projects," said Mullins. For 2010, who knows?
Slow Slog on the Solar Road. Solar electric generation has become the stepchild of politically correct renewables. While wind has boomed, relative to its starting position, solar has seen a much slower path to gaining market share and much less attention in the news media. Solar’s consistent problem has been cost. With generous subsidies and tax benefits, wind has reduced its nominal (including subsidies) upfront costs to below those of coal and nuclear. No so for sun power.
Solar energy, both photovoltaic (PV) and thermal, has seen capital cost reductions. A recent Lawrence Berkeley National Laboratory study of grid-connected solar PV technology found a substantial trend of cost reductions, averaging over 3% per year for a decade, mostly driven by government subsidies. But the starting point was so high that the solar generating technologies remain uneconomical for most uses.
A McKinsey and Co. analysis of solar’s prospects is cautiously bullish about the sun. Says the review, "A new era for solar power is approaching. Long derided as uneconomic, it is gaining ground as technologies improve and the cost of traditional energy sources rises. Within three to seven years, unsubsidized solar power could cost no more to end customers in many markets, such as California and Italy, than electricity generated by fossil fuels or by renewable alternatives to solar. By 2020, global installed solar capacity could be 20 to 40 times its level today."
But the McKinsey report, featuring its conditional verb — "could" — notes that the technology is starting from a tiny base and "is still in its infancy. Even if all of the forecast growth occurs, solar energy will represent only about 3 to 6 percent of installed electricity generation capacity, or 1.5 to 3 percent of output in 2020." The places that McKinsey projects solar could be competitive are already extremely high-priced markets.
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