June 15, 2008

Global Monitor (June 2008)

GAO deems coal-to-gas switch impractical

The ability of U.S. power-generating units to make a large-scale switch from coal to natural gas is not only limited but could also result in “adverse economic consequences,” the U.S. Government Accountability Office (GAO), Congress’s investigative arm, has determined.

The agency had been directed by the House Committee on Appropriations to report on whether existing U.S. coal-burning, electricity-generating units were able to switch to burning natural gas, and what the associated economic implications would be. The report—“Economic and Other Implications of Switching from Coal to Natural Gas at the Capitol Power Plant and at Electricity-Generating Units Nationwide”—was the secondary focus of a larger assessment, which aimed to find out how practical it was to use natural gas instead of coal at the Capitol Power Plant (CPP). The CPP supplies steam and chilled water to heat and cool the Capitol building and 23 surrounding buildings.

The GAO surveyed available data and interviewed key stakeholders concerning the ability of large-scale U.S. plants to make the switch. It found that because natural gas currently costs four times more than coal per British thermal unit and has shown a higher rate of price increases and volatility over time relative to coal (Figure 7), increasing the nation’s use of natural gas for electricity generation could result in adverse economic consequences. These higher fuel costs, coupled with supply constraints, limit the practicality of making the switch, the GAO said. A widespread switch could force the U.S., a nation with limited domestic production, to become dependant on international supplies—and even these supplies likely would not meet demand, stakeholders told the GAO.

7. No go for gas. According to industry stakeholders, a large-scale switch from coal to natural gas for power production is uneconomical because of high, fluctuating natural gas prices. Source: GAO

Large-scale fuel switching would also require substantial investments in pipeline and storage capacity and new terminals to process imported natural gas—all of which would require regulatory approval. Stakeholders told the GAO that, with respect to the conversion of existing coal-burning plants, “it would be more feasible and cost-effective to construct new natural gas units or dispatch excess capacity at existing natural gas units.” Retrofitting coal units would not only be expensive, but it could decrease the unit’s overall efficiency.

Because of these technical and other issues, a large-scale shift from coal to natural gas could increase electricity prices, residential and commercial heating costs, and fuel costs for certain industries that consume large quantities of natural gas, the GAO said. Therefore, switching coal plants to natural gas—something that has rarely been done before—is unlikely to occur in the future.

Assessing the Congo River’s power potential

Since a two-day international forum under the auspices of the World Energy Council (WEC) last April in London, discussions about building a 39,000-MW hydropower dam complex on the Congo River worth $80 billion seem to have resuscitated interest in the region’s massive power potential.

The WEC talks, attended by governments, utilities, banks, consultants and equipment suppliers, assessed the viability of plans—viewed by some as grandiose—to build the Grand Inga complex in the Democratic Republic of Congo (DRC). The WEC anticipates that the series of 52 turbines of 750 MW each, sited over the Inga Rapids on the Congo River, could be the world’s largest and most powerful dam when operational between 2020 and 2025. It could produce more than twice the capacity of Three Gorges Dam in China and over a third of the total electricity currently produced in Africa.

Construction, which the WEC hopes would begin by 2014, would include building a 673-foot-high dam, a 9-mile-long reservoir, and a plant capable of producing 320 TWh of electricity annually. Power from the dam would be transmitted to Egypt in the north, Nigeria in the west, and South Africa, via new transmission lines.

But the Grand Inga is just one of several major plans in the works for the region. The mighty Congo River has been thought to harbor the potential to produce up to 75 GW of electricity (Figure 8). Two low-output hydroelectric plants, Inga 1 and Inga 2, built in 1970 and 1982, respectively, already operate in the region. A massive third scheme—the Inga 3 project—is in the first of four stages of implementation.

8. Inga power. The Congo River could harbor enough energy to supply a third of Africa’s power. Draining the vast equatorial Congo Basin, it discharges 40,000 cubic meters per second of water at Stanley Pool. Source: NASA

This scheme will tap the flow of the river without building a dam wall and produce an estimated 4,300 MW of power by 2015. Should it proceed, the first phase would involve a diversion of water through a 1.86-mile tunnel at an upstream bend of the river and back into the river’s downstream flow. Three other tunnels, the longest being 5.6 miles, could follow in stages and raise Inga 3’s total capacity to about 12 GW without the need for any dam construction. The project will be overseen by the Western Power Corridor (Westcor), a joint venture owned by power utilities of Angola (ENE), Botswana (BPC), the DRC, Namibia (NamPower), and South Africa (Eskom). It is estimated to cost $6 billion, and Westcor hopes that construction will begin during 2010.

At the end of February, Westcor completed a prefeasibility study for Inga 3’s 4,300-MW baseload capacity station and called for expressions of interest in the construction of the project. Pan-African entities are also showing interest in the project’s feasibility: In May, the African Development Bank approved a grant of about $15.7 million to study hydropower development of the Inga complex, with specific interest in Inga 3. The bank had already approved a grant of $58 million to help rehabilitate Inga 1 and 2.