Coal may be in vogue again
TYLER HAMILTON
Business Reporter
Toronto Star
Feb. 14, 2006
Alberta's Energy Minister Greg Melchin believes coal, whether we like it or
not, is poised to become the most important fuel in Canada's future.
And he's not reluctant to say that in Ontario, where the government has
vowed to shut all coal-fired plants by 2009. And where the Ministry of
Energy estimates nearly 700 people a year die from pollution caused by coal
plants, and where more than 300,000 suffer illnesses.
At a business lunch last week in Toronto, Melchin strongly urged Ontario to
reconsider its seemingly inflexible position on coal. "The opportunity is
enormous."
He wasn't just talking about any coal. Melchin was touting "clean coal" — an
umbrella term for a variety of technologies and power-plant designs that
promise to take the dirtiest and most abundant fossil fuel on the continent,
clean it up and turn it into low-emission electricity.
North America has roughly 250 billion tonnes of recoverable coal reserves,
accounting for about a quarter of worldwide reserves. As global demand for
energy skyrockets, boosted by spectacular economic growth in India and
China, there's a growing movement to make coal a cheap, secure, domestic and
environmentally acceptable alternative to nuclear power and increasingly
expensive natural gas.
"The coal plants that appear in the next decade or so will be unrecognizable
to those familiar with their ancestors," says The Thinking Companies Inc., a
Maine-based energy-consulting firm that argues coal is back in fashion.
Modern coal plants, based on designs from General Electric Co.,
ConocoPhillips Co. and Royal Dutch Shell PLC, will be "clean, highly
efficiently facilities able to produce electricity with perfect reliability
at low cost," the report asserts.
Many challenge the claim, calling the term "clean coal" an oxymoron, but by
all accounts the coal renaissance has begun:
* Alberta Premier Ralph Klein told energy executives last month that he was
a "coal guy" at heart. He hinted he will use his annual TV address to
Albertans this month to outline a plan, involving clean-coal technologies,
to unlock value from the province's massive reserves.
* A group of coal producers and power generators called the Canadian Clean
Power Coalition has plans to build a $1.5 billion clean-coal demonstration
plant by 2012. And, George W. Bush's proposed 2007 budget has earmarked $285
million (U.S.) for research and development into coal technologies and
another $54 million for FutureGen, an initiative to build the world's first
zero-emission fossil-fuel plant based on coal.
* Some American states, such as New York and Pennsylvania, have more
aggressively embraced clean coal by setting up special investment funds,
establishing incentives and offering low-cost loans to spur development of
new technologies and power plants.
Meanwhile, French-based power equipment giant Alstom SA recently reported
that the coal industry will account for the lion's share of its power
generation equipment sales over the next 10 years, representing 40 per cent
of the market compared with 35 per cent for natural gas and even less for
nuclear.
Executives with the company said clean coal advancements are making the fuel
more attractive to many countries, particularly China, which will need to
build hundreds of new coal plants over the coming years and at the same time
manage a worsening environmental crisis.
Ontario is moving in the opposite direction. The Lakeview Generation Station
in Mississauga has been shut and three more coal-fired plants are to close
next year. The massive 4,000-megawatt Nanticoke plant on Lake Erie is to be
shut in 2009 if the government can stick with its schedule.
But even in Ontario, some observers say it's premature to write Old King
Coal's obituary.
"Within a 20-year time horizon I suspect it could come back again," says Jan
Carr, chief executive officer of the Ontario Power Authority. "What won't
happen is setting fire to coal in boilers and making steam the way we do
right now. The difficulty with coal is not that it's coal; it's that the
particular way we're using it has a lot of very negative side effects."
Carr says the government's position is a wake-up call to an industry
clinging to the status quo.
The Power Workers' Union, for example, argues that existing coal plants in
Ontario can reduce smog-causing sulphur dioxides and nitrogen oxides, as
well as mercury emissions, by retrofitting facilities with better catalytic
and "scrubber" technologies wrapped under the "clean coal" banner. The union
says the province could save $11 billion by going this route instead of
building new natural gas plants.
But Carr says the approach, which the Ontario Clean Air Alliance claims
would reduce emissions from the province's coal plants by only one-half of 1
per cent, isn't new and isn't really what clean coal is about. "They need to
get their act together on their terminology."
In energy circles, clean coal is much more ambitious and involves an
entirely new way of extracting energy from coal, as demonstrated by the
handful of Integrated Gasification and Combined Cycle plants built in
Europe, Japan and the United States in the past decade.
These modern facilities use high temperatures and extreme pressure to
convert coal into a hydrogen-rich synthetic gas. Throughout this chemical
bond-breaking process, a system of filters and scrubbers removes
contaminants, while activated carbon is used to capture mercury. Carbon
dioxide (C02) is also easily separated from the gas, which is eventually
burned in a power-generating turbine, much like natural gas.
And like most advanced natural gas plants, clean-coal "gasification" plants
operate on a more efficient combined cycle, meaning waste heat from the
process is used in a steam turbine to produce even more electricity.
Ideally, the goal is to reduce coal-plant emissions enough to make them
environmentally competitive with natural gas. In Ontario this is often
referred to as the Witmer Standard — in reference to former environment
minister Elizabeth Witmer, who said the criteria for letting a coal plant in
the province stay open is that it must meet the emission standards of a
natural-gas plant.
"The government should subject all proposals for so-called clean coal to the
Witmer Standard," urges a recent report from the Ontario Clean Air Alliance.
But even if the Witmer Standard can be met, clean coal isn't without its
risks. For one, the technology is still relatively unproven and, while the
power authority recognizes costs will fall 90 per cent as the design becomes
more widespread, being a first mover comes at a significant financial
penalty. This includes the kind of construction delays and cost overruns
typically associated with nuclear.
Also, the appeal of a clean-coal facility is based on the assumption that
coal will remain cheap and natural gas prices will continue to rise. But the
cost of coal has more than doubled over the past two years, and while still
much cheaper than natural gas and oil, some wonder whether the migration to
clean coal will push prices much higher over the next decade.
What to do with all the CO2 that's captured poses another problem. In
Saskatchewan and Alberta, it's generally thought that CO2 could be pumped
via a pipeline into old oil fields for long-term storage, a process known as
sequestration. This method also enhances oil recovery by forcing
hard-to-reach reserves up to the surface.
EnCana Corp., for example, is using CO2 pumped in from North Dakota to
retrieve an estimated 130 million barrels of oil over two decades from a
50-year-old oil field in Weyburn, Sask. It's a win-win arrangement, but one
that won't work everywhere.
"Ontario's geography has less opportunity for CO2 sequestration," says Bob
Stobbs, a spokesperson for the Canadian Clean Power Coalition, which is
likely to base its planned clean-coal demonstration plant near an aging oil
field in Western Canada.
Stobbs says the CO2 could be stored in deep aquifers in Ontario, but that is
less proven and doesn't provide the opportunity for enhanced oil recovery
that would justify the cost of CO2 capture at a clean-coal plant.
There are other experimental technologies the province could consider,
including converting CO2 to marketable baking soda or selling it to the
carbonated beverage industry. The greenhouse gas could even be used to feed
huge farms of algae, which can be harvested and processed into biodiesel and
ethanol.
But Ontario's appetite for experimentation is limited. The power authority
advised the Ministry of Energy in December to spend $40 billion between now
and 2025 on nuclear power to help fill the gap left by coal shutdowns.
Nuclear is something Ontario knows. Clean coal and algae farms are foreign
concepts, filled with too much uncertainty. Indeed, the authority's 20-year
plan includes little mention of clean-coal development, other than a
recommendation to closely follow developments in the United States.
Tom Adams, executive director of think-tank Energy Probe, says
next-generation nuclear technology being proposed by Atomic Energy Canada
Ltd. is untested, unproven and carries the same cost-overrun risks as clean
coal. The only difference, he points out, is that the poor track record of
nuclear in this province is already known.
On the other hand, he says, Shell and General Electric Co. seem prepared to
offer comprehensive guarantees on their clean-coal "gasification"
technologies, something the province appears unwilling to recognize.
"The McGuinty government talks about how there's all this risk, but they're
not prepared to take the same risk by going to cleaner coal," he says. "That
just shows they don't know what they're talking about."
Toronto Star