Energy experts serve up dish of creamed coal

Kansas City

Kansas City is largely powered by a nearby natural gas plant, unlike nearby Kansas towns and cities powered by coal plants. Economic analysts largely agree that coal faces a declining market as governments around the U.S. is turning to different sources to curb carbon emissions. (Andy Beal/Flickr — click to enlarge)

By Geoff O’Gara

For the scientists and engineers out there who think journalists are incapable of reporting the complexities of energy industry forecasting and decision-making, here’s something to chew on from the University of Wyoming’s School of Energy Resources (SER) conference on “Power Generation and the Environment”:

Creamed Coal

(click to enlarge)

For the rest of you, let me just quote Adele Morris, policy director for the Climate and Energy Economics Project at the Brookings Institute, and one of the presenters at last week’s conference in Jackson:

“Coal gets creamed.”

It was not a good couple of days for fossil fuels, particularly not coal, as the SER gathered a team primarily of economists and engineers to talk about a world – the real world in Europe, and the world they see coming in the United States – where carbon has a price on its head. Whether that price is $10 or $35 or $100 per pound of carbon greenhouse gases, it may be too expensive to keep King Coal as the world’s dominant source of electricity.

This message was muffled at times by the foot-long formulas (and the accents) of the pedagogues, but it was unmistakably there: in a ravenous world where every form of energy is invited to the table, coal is now the unkempt, unwelcome old uncle.

What most of the papers accepted without argument was a “carbon future” in which greenhouse gases would have to be eliminated or greatly reduced by government edict. And, despite new technology which can render coal burning as clean as natural gas, it’s just too expensive; the low-carbon, low-cost natural gas “kills coal power plants for a long time,” said Dr. Howard Herzog, of the Massachusetts Institute of Technology. “A couple of decades at least.”

Coal ash cleanup takes place near the Kingston Fossil Plant in Kingston, Tennessee

Coal ash cleanup takes place near the Kingston Fossil Plant in Kingston, Tennessee. Analysts say coal’s cloudy future is not helped by the prospect of “clean” coal, as the current production technology is too expensive to be cost-effective. (Appalachian Voices/Flickr — click to enlarge)

Such predictions have, admittedly, been confounded before in the energy field, usually by technological innovation that tapped new resources (harnessing the atom, seismic exploration, fracking, for example). But there was little optimism at the conference held in the LEED-certified “green” Terra Hotel in Jackson. The research and development that might lead to “clean” coal is moving WAY too slow, said the presenters, in part because there is no national energy policy to drive research and development. “We need a direction in this country,” said retired Basin Electric CEO Ron Harper, who worked for years on a carbon-stripping synfuels project only to see it die because of potential costs to rate-payers.

Marion Loomis, the Executive Director of the Wyoming Mining Association, adopts a professional optimism about coal’s future, but he admits the next couple of years are grim. He and the other coal industry reps in the room felt their BTUs rising throughout the presentations; they asked a few polite but disputatious questions, and probably wondered dazedly whether the conference room was rented with some of the generous dollars the fossil fuel industry has given to SER over the years. In an interview, Loomis noted that the presenters were mostly “academics, not all that connected to reality.” He pointed out that even if the United States sours on coal, there are huge markets developing overseas, not just in China and India but in Africa and other parts of the Third World.

Yet he acknowledged that some tough years lie ahead for the Wyoming coal industry, and predicted a 20 percent drop in production this year, and another 20 percent next year.

There are many reasons for the decline in U.S. coal production, but a carbon tax – or for that matter, a cap-and-trade system where industries can barter carbon pollution reductions – is not one of them. Other developed countries, particularly in Europe, have passed laws and set rules to reduce carbon emissions, and even China – where coal-burning power plants are proliferating – has set tough goals for carbon reduction in its latest Five Year Plan. But politicians in the United States, in an election year, aren’t even talking about it – some are still debating whether global warming is man-caused.

Top five countries per coal consumption

A graph showing the top five countries by coal consumption in 2011. (Source: U.S. Energy Information Administration — click to enlarge)

That makes it all the more interesting that a collection of engineers and economists gathered in a major coal-producing state spent most of their time talking about how the energy industry will adjust to a carbon-constrained economy. They didn’t discuss the pros and cons of global warming, or the debate over EPA-proposed carbon emission limits on power plants, or the political odds of some sort of carbon tax in the U.S.’s near future. They were hard at work – in some cases, had been for years – on questions like “the Competitiveness impacts of Climate Change Policies” (Harvard’s Joseph Aldy) or the “rebound effect” of increased consumption when you force efficiencies and reduce power costs (Joshua Linn of Resources for the Future) or incentivizing retrofits to capture carbon in existing power plants (Dalia Patino-Echeverri, Duke University) – all premised on the notion that tough limits on carbon dioxide emissions were inevitable.

That’s academia for you, untethered from reality, as Loomis noted. But one speaker had real experience with carbon controls – Samuel Fankhauser, from the London School of Economics, in a country where the 2008 Climate Change Act targets an 80 percent reduction in carbon emissions by 2050. The British Independent Committee on Climate Change sets binding budgets for carbon five years ahead, and so far, “we’re very much on track, emissions are down.” The ICC is a little like “a carbon fed” (regulating pollution the way the Federal Reserve manipulates money supply), said Frankhauser, using tools like efficiency standards, investment in renewables like wind energy, carbon removal and sequestration, and so on. And when you look at the vectors of greenhouse gas pollution in England – not the forecasts, but the actual results of the last five years – it appears those tools, and the national commitment, are working.

But we’ll have to check back in 2030. Frankhauser admitted that the biggest factor enabling England to meet its carbon reduction goals so far was, in fact, it’s awful economy. People, and industry, are just consuming less energy. It looks thus far that the first 10 years of the plan are achievable, he said, but the next the 10 years – which envision steeper drops in carbon emissions – are going to be much tougher.

Smokestack in China

A coal-fire plant under construction outside of Kunming, China. The country is world’s largest consumer of coal, but analysts say the country is planning to curb emissions in the coming years. (Daniel Liu/Flickr — click to enlarge)

Nevertheless, the legally binding targets have got bureaucrats, industry people, and researchers hard at work.

It was a reminder of what all the energy experts at the Jackson conference, urgently pushing for research and development in cutting carbon emissions from fossil fuels, decried about energy policy in the United States: There really isn’t any.

Toward the end of the long first day of the conference, after a series of papers under the rubric “Regulation Analysis Themes,” someone in the audience worried that the analyses and formulas for this impending future of costly carbon constraints were beyond the reach of “Joe Public.” “The guy who opens the utility bill,” said the questioner. “How do you educate them to the need to get where we need to go, before they open their bill and have rate shock?”

Don Fullerton, who had delivered a paper calculating economic “leakage” if carbon taxes were imposed unilaterally (sorry, Joe Public, I’ll explain later), responded: “Why are we doing this? Well, here are the benefits: We can avoid some of the worst damages of climate change… All kinds of bad stuff can happen if we don’t. That’s the point to John Q. Public.”

It would be impossible to convey to John Q. and Joe P. all the formulas and terms of art and prognostications crammed into the conference’s 36 hours, but in support of Dr. Fullerton, here are some of the things that very likely will inform policies in the United States and elsewhere as governments and industry and consumers grapple with energy needs and climate change over the next decade:

 

    • How effective, or self-defeating, is unilateral carbon reduction? In other words, if a country spends capital to reduce its carbon footprint, is there economic “leakage” where another country, without carbon controls, gets richer at our expense on fuels made cheaper by our reduced demand? That’s a risk. But Fullerton’s analysis found there would be positive leakage too – new jobs and capital would enter the low carbon sector, leading to new technology and setting a good example for other economies to limit carbon.

 

    • Carbon capture and sequestration – a key component in keeping coal in the energy picture – is prohibitively expensive now, and still plagued by unknowns, such as how long subterranean chambers could securely hold gases. What is needed, according to MIT’s Herzog and other presenters, is a couple of large-scale demonstrations. But the private sector can’t handle the astronomical cost, and, so far, the federal government has balked, preferring smaller, more scattershot investments. “If policy makers won’t set policy that says climate is an issue,” said Herzog, “companies can’t move forward, their investors would go nuts. Our Congress is telling us climate change is not a policy to worry about.”

 

    • Creating models that extend far into the future is necessary because the investments required in energy are so large. When a projection extends out for decades, small elements in the formula are magnified, and therefore must be reality-tested. So, when economist Daniel Shawhan of Rensselaer Polytechnic Institute predicted a huge expansion of solar and wind generation spurred by the federal production tax credit, Harvard’s Joseph Aldy pointed out that “It’s a mistake when these models assume the tax credit continues,” because the projected growth of solar and wind would also balloon the tax credits’ impact on the budget deficit. Which Aldy pointed out, is “not likely in these tough fiscal times.”

 

    • The complex number-crunching extends beyond fossil fuel energy. Carbon can be stored in new forests, even with periodic harvesting, and Oregon State’s Andrew Plantinga and his team have inventoried every county in the U.S. for its potential, and cost (switching from revenue-producing cropland, e.g.), as a vegetative carbon sump. In the wind energy sector, Robert Godby, of the University of Wyoming, is creating a model to show how wind production fits into the “circuits” of electrical distribution in the Western, adjusting for its intermittency, protected sage grouse habitat, and competing energy sources. (Godby noted that he started the work in response to a request from the Wyoming governor that he calculate the impact of a wind tax, and let the politicians know in a couple of weeks. That was three years ago…)

Perhaps the pace of Godby’s research – and all of his colleagues – is an indication that Loomis is right – academics do not live in the “real” world, where regulatory decisions are sometimes made in a political minute. But these economists and engineers and scientists slip back and forth between the ivory tower and the halls of power. Harvard’s Aldy was a Special Assistant to the President on Energy and Environment in 2010; UW’s Godby was called on by Wyoming Gov. Dave Freudenthal to provide data for studying wind taxes; Adele Morris worked for the U.S. Congress and the U.S. Treasury Department as its chief resource economist; and so on.

They may be right or wrong in their projections – and right or wrong about the inevitability of carbon taxes and constraints. Because the work is so complex and the variables so minute, and the rigor to produce valid outcomes so demanding, they have to work now on studies that will affect policy years down the road.

Despite the measured pace of research, though, the urgency in the conference room in Jackson was evident; even in academia, the stakes seem to be incredibly high.

— Geoffrey O’Gara is a longtime Wyoming journalist. He was a Wyoming Public Television producer and host of the influential Capitol Outlook and Wyoming Chronicle programs. He is the author of What You See in Clear Water: Indians, Whites, and a Battle Over Water in the American West (2002) and A Long Road Home, Journeys Through America’s Present in Search of America’s Past (1989) and several other books. O’Gara served on the Fremont County District One school board for eight years. An avid cyclist, basketballer and fly fisherman, he lives in Lander.

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Published on October 9, 2012

{ 6 comments }

lousewort rodgers October 15, 2012 at 10:31 am

could it also be that the relationship between “climate change” and co2 has become
exceedingly shallow?

What is the topic where a team of experienced journalists can write a report containing great insights and surprisingly clear expositions alongside stunning simplifications, abysmal naïvetés and incredibly one-sided analyses based on a fundamental neglect of a large chunk of reality?

Dustin Bleizeffer October 11, 2012 at 2:17 pm

Benny,
Thumbing our noses at shale gas is not a smart thing, and I can’t understand why European nations seem satisfied to be reliant on Russia for natural gas. Seems dangerous, especially for Germany, which plans on ramping down its nuclear power. I don’t believe American utilities should over-weight their portfolios with natural gas given the fact that our domestic production will soon leak into the international market and possibly regain its price volatility. But a measured growth in natural gas for base power combined with gradual additions of wind and solar is just good business, not to mention the fact that it’s a pragmatic way of curbing greenhouse gas emissions. So long as we plug the GHG leaks in the production-to-burn chain. — Dustin Bleizeffer

lousewort rodgers October 11, 2012 at 2:05 pm

Environmental campaigners and green policy-makers are blocking shale developments in most European countries. As a result, Europe has failed to join the shale revolution that has swept the US. Instead of benefiting from cheap shale gas, lower CO2 emissions, new industries and hundreds of thousands of new jobs, Europe is constraining itself with self-imposed green limits to growth. As gas is displacing coal for electricity generation in the US, the shale revolution has led to a dramatic reduction in CO2 emissions – down to 1992 levels. In order to replicate the US energy revolution, Europe would need to exit coal and switch to natural gas. Yet the green lobby’s shale gas blockade together with its opposition to nuclear energy is causing the exact opposite: it has led to a renaissance of coal. — Benny Peiser

Greg Haas October 9, 2012 at 9:11 am

“Nevertheless, the legally binding targets have got bureaucrats, industry people, and researchers hard at work.”

Maybe the work wouldn’t be so “hard” if they’d started 30+ years ago when they should have. (Same thing I tell my 10yo son about his homework, just a different time frame. Heheh.)

This idea of ecomomic “leakage” is an interesting one. It reminds me of the social paradox (Marc’s, I believe) where it doesn’t necessarily make sense, on an individual level, to walk during a fire alarm, but if everyone runs, more people will likely get hurt. In that case and in the case of climate change, it may not make “sense” to do the responsible thing, but that doesn’t mean it isn’t the responsible thing to do.

Shannon Anderson October 9, 2012 at 8:53 am

Great article, Geoff. Thanks for sharing the results of the conference for those of us who couldn’t afford the time and money to make it to Jackson (a world that is quite removed from the coalfields near Gillette). There is a lot to think about here. Wyoming needs to address these challenges head on or else our economy and environment will be left behind as the rest of the world moves on.

Inky October 9, 2012 at 5:28 am

I am utterly astonished and gratified that the University of Wyoming’s School of Energy Resources would sponsor a conference which would allow presenters to utter the blasphemy that climate change is real and that the main culprit is coal and therefore coal has a dismal future.
If the UW administration tied itself into cowardly knots over a controversial art installation, how will it respond to this as the phones ring and emails pour in from angry coal executives? It almost makes me feel sorry for them.
NOT!

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