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Prepared Witness Testimony The House Committee on Energy and Commerce
Future Options for Generation of Electricity from Coal.
Subcommittee on Energy and Air Quality
Mr. Randall Rush
Good afternoon Mr. Chairman and Members of the Committee. I am pleased to appear before you to discuss Future Options for Generation of Electricity from Coal. I am employed by the Generation and Energy Marketing arm of the Southern Company as Director of the Power Systems Development Facility (PSDF) located in Wilsonville, AL. Southern Company provides electricity to 4 million customers in the Southeastern U. S. We operate 40,000 megawatts (MW) of electric generating capacity of which over 22,000 MW is coal-fired. Southern Company's energy businesses include electric utilities in four states, a competitive generation company, an energy services business, and a competitive retail natural gas company. The PSDF is a key national asset for ensuring continued, cost-effective, environmentally acceptable coal use. Operation of the PSDF is currently sponsored by the U.S. Department of Energy's (DOE) Office of Fossil Energy / National Energy Technology Laboratory, Southern Company; the Electric Power Research Institute (EPRI); Kellogg, Brown and Root; Peabody Energy; The Burlington Northern and Santa Fe Railway Company; and Siemens Westinghouse Power Corporation. Foster Wheeler Corporation (FW) is a significant past sponsor. DOE conceived the PSDF as the world's premier advanced coal research and development (R&D) facility. Work there has fulfilled this expectation. As an example, a new, more efficient, less expensive, and potentially more reliable coal gasifier developed at the PSDF is ready for commercial deployment. In addition, the PSDF was instrumental in advancing the design of the FW advanced circulating pressurized combustion concept. As a result, of work there FW changed the concept and a proposed $400 million commercial demonstration plant was reconfigured to avoid significant problems. Proposed future testing at the PSDF includes, among other things, integration of gasification with advanced air separation technology, the use of coal-derived synthesis gas in fuel cells, and evaluation of advanced hydrogen/CO2 separation technology. A summary of major accomplishments to date and plans for testing during the next five years at the PSDF are contained in Enclosure 1. Summary of Testimony. There is a growing imbalance between the availability of the secure domestic resources that fuel electricity generation in the U. S. and the rates at which they are being used. Natural gas accounts for about 10 percent of domestic energy reserves, but is currently used to generate 17 percent of our electricity. At current use rates natural gas reserves are projected to last approximately 60 years, but usage is projected to increase and gas production in the lower 48 states has not increased in over a decade in spite of a quadrupling of exploration. On the other hand, coal accounts for 85 percent of domestic energy reserves and generates approximately 56 percent of our electricity. At current use rates domestic coal reserves are estimated at more than 250 years. Natural gas is a remarkably versatile fuel and like electricity is used extensively in residential, commercial, and industrial applications. Coal is a less flexible fuel and is rarely used in residential and commercial applications. Its primary current use is in generating electricity. The continuing depletion of the natural gas resource will eventually increase both its price and the price of electricity. The result will be a reduction in U. S. competitiveness in the world and in the Nation's economic well being. Current DOE coal research, development, and demonstration (RD&D) programs, if adequately funded, will assure that a wide range of electric generation technology options continue to be available for future needs. Further, the continued use of coal in an environmentally acceptable manner will contribute to continued economic prosperity by ensuring that both electricity and natural gas prices remain low. Prior DOE clean coal research has already provided the basis for $100 billion in consumer benefits at a cost of less than $4 billion (Enclosure 2). Funding the advanced Clean Coal Technology Roadmap that industry and DOE have jointly developed can lead to additional consumer benefits of between $360 billion and $1.38 trillion (Enclosure 3). There are enormous competing needs for Federal funding, but few things go more directly to the root of economic prosperity than secure, affordable, clean energy. The U. S. has always been the world leader in energy research, but if the current funding trend for advanced coal-based energy system RD&D is not reversed the U. S. will take the wrong turn at the crossroad we face. Down that road lies increased energy prices, increased dependence upon overseas energy supplies, and decreased economic prosperity. The alternative is to reverse the trend in RD&D spending for advanced coal technology and take the more rational road toward a more secure, prosperous energy future. Electricity is at the Core of the U. S. Economy. In fact, electricity drives the U. S. economy. Figure 1 shows the strong relationship over the last 30 years between the U. S. Gross Domestic Product (GDP) and electricity use.
Figure 1 - Relationship among Total U. S. Energy Consumption, Electricity Generation and GDP Electricity has been referred to by some as the currency of the information age. It is used extensively in residential, commercial, and industrial applications and sales nationwide are over $230 billion/year. Consequently, the price of electricity directly affects the competitiveness of U.S. manufactured goods in the world market, and the Nation's economic well being. Using Abundant Low Cost Coal for Electricity Generation Instead of the Diminishing Supply of High Cost Natural Gas. Coal is used to generate approximately 56 percent of the electricity in the U.S. and accounts for 85 percent of known U. S. fossil energy resources. Coal reserves are estimated at over 250 years at today's usage rates. With the repeal of the Fuel Use Act in 1987 an ever increasing amount of our electricity has been generated from natural gas. Natural gas currently generates 17 percent of the Nation's electricity, but it accounts for only 10 percent of known U. S. fossil energy resources. Natural gas usage is projected to increase, but at current use rates reserves are estimated at only around 60 years. Natural gas is a remarkably versatile fuel and like electricity is used extensively in residential, commercial, and industrial applications. Coal is a less flexible fuel and is rarely used in residential and commercial applications. Its most valuable characteristics are its domestic abundance, its ready availability, and its low cost as a fuel source for affordable electricity. Current indications are that supplies of natural gas in the lower 48 States are not increasing to meet the increased demand. Figure 2 shows that in the decade since 1992 production has remained constant despite a quadrupling of drilling rigs.
Figure 2 - Natural Gas Production and Gas Rigs in the Field in the Lower 48 States As shown in Figure 3, two consequences of this flat production have been significant short-term increases in natural gas prices (reaching to near $10.00/MBtu) combined with a substantial increase in its long-term price trend. These trends are expected to continue. Coal's price has remained steady during the same period that natural gas prices have been volatile and coal's long-term price is projected to remain below $1.50/MBtu well into the future. This increasing imbalance between the Nation's usage rates and available resource levels of natural gas and coal has major long-term consequences. Because natural gas has become a significant fuel for electricity generation the continuing depletion of the natural gas resource will eventually increase its price directly and the price of electricity indirectly.
Figure 3 - Average Delivered Fossil Fuel Prices at Steam Electric Power Plants Coal is Wrongly Perceived as a Dirty Fuel. Figure 4 shows that although coal use for power generation has tripled since 1970, overall emissions from power plants have decreased by over 30 percent. Further reductions are expected within the next 5 to 10 years as additional technology required under the 1990 Clean Air Act is brought into service. These improvements are a direct result of the RD&D investment made in clean coal technologies over the last 30 years by private industry and the Federal government. The coal used in electricity production is a major source of the carbon dioxide (CO2) emissions that are seen as a significant contributor to global warming. Currently available coal-based technology cannot simultaneous fulfill the objectives of providing low cost electricity and achieving near zero-emissions (including carbon dioxide). However, our secure supplies of domestic coal can continue to be the engine that fuels the U. S. economy, if as a Nation, we will make the RD&D investments needed to ensure the timely development of acceptable coal-based technology. Coal is an abundant fuel throughout the world. It fuels more than one-third of global electricity production, and growth in energy demand is particularly strong in coal-dependent areas such as China and India. The increase in coal use expected in the U.S. in the next few decades is dwarfed by the increase in coal use expected in other countries. Over the next 30 years, China and India alone are expected to account for two-thirds of the increase in total world coal demand, principally for electricity generation. Advanced technologies that allow the economic use of coal consistent with environmental expectations have the potential to be deployed not only in the U.S. but around the world as well. The opportunity to deploy these technologies internationally only heightens the need to adequately fund RD&D of advanced coal technology.
Figure 4 - Coal and Natural Gas Use and Emissions from U. S. Electricity Production For Coal to Remain a Viable Alternative for Electricity Generation a Long-Term Commitment to RD&D is Needed. The Coal Utilization Research Council (CURC), EPRI, and DOE recently completed extensive discussions that led to the creation of a common "Clean Coal Technology Roadmap" that lays out specific pathways and achievable goals for improvements in the efficiency, cost, and emissions of coal-based energy by 2020. There are specific targets for emissions of sulfur dioxide, nitrogen oxides, particulate matter and mercury, carbon dioxide management, by-product use, water use and discharge, efficiency, reliability, and cost (capital and production) that advanced clean coal technologies can achieve over the next 20 years if RD&D is adequately funded. The Roadmap seeks to identify the critical technologies that must be successfully developed, as well as the timelines for when that development must take place, if our Nation is to have highly efficient, near-zero emission, coal-base energy production facilities available for commercial deployment by 2020. If the Roadmap is followed, by 2015 designs for high-efficiency, near-zero emission power plants can be ready for application and by 2020 the first of these advanced plants can be commercially introduced. The Roadmap also identifies the RD&D cost to achieve these goals. From now until 2010 $6.5 billion is needed with approximately $3.5 billion needed over the following decade. Further, it is estimated that an additional $4 billion will be required by 2020 for extensive carbon sequestration research- for a total of around $14 billion. The share between industry and government will vary among projects and phases of development, but based on historical precedence about half of these funds will come from industry and half from the Federal government. The ongoing industry cost sharing in DOE research programs, numerous projects executed under the Clean Coal Technology (CCT) program, and the recent large response to the Clean Coal Power Initiative (CCPI) affirm industry's willingness to fund its share of advanced energy RD&D. The Roadmap includes both advanced combustion-based systems and advanced coal gasification. Both technologies need substantial improvement before becoming a significant part of the Nation's electricity generation capability. Take coal gasification as an example. Gasification will be the core technology of the FutureGen project announced recently by President Bush. Of the available technologies for converting energy from coal into electricity, gasification is currently seen as being the most economic if CO2 capture and sequestration are required - sequestration is the long-term disposal of CO2 in deep underground repositories. Even so, CO2 capture and sequestration are estimated to increase the cost of electricity from coal gasification by 30 to 40 percent. And, gasification is currently 5 to 10 percent more expensive than pulverized coal technology for electricity generation. By comparison the goal in the Roadmap is for only a 10 percent increase in the cost of electricity while capturing and sequestering CO2. As described in the FutureGen announcements, gasification is also projected to be the most economically viable technology for advancing the U.S. towards the hydrogen economy, where coal-based hydrogen fuel reduces transportation-based carbon dioxide emissions and lowers our national dependency on foreign oil. In order to realize practical hydrogen production from coal and meet the 10 percent electricity cost increase goal, the capital and operating cost of gasification must be reduced substantially and its reliability must be increased. Specifically, the reliability of equipment in the power generation train must increase to the near 100 percent levels typical of current power generation technology. This will require improved materials of construction and temperature measurement instrumentation, improved fuel rate monitoring technology and increased fuel injector life. In addition, less expensive gas cleaning technology (including CO2 and hydrogen separation systems) that can handle multiple contaminates must be developed. The cost of air separation technology must be lowered by at least 25 percent. Coal preparation and feed systems for high pressure environments must be substantially improved. And, because the current commercial gasification technology does not perform well on the high moisture, high ash, low rank coals that make up 50 percent of the U. S. and world coal reserves, further gasifier development and new gasifier designs are needed. The world's scientists and engineers have only recently turned to solving these problems. With increased attention in the technical community these goals can be met. But, it takes time and money and without sufficient funding it will take even more time. Southern Company estimates that past DOE research related to large-scale, coal-based power generation will provide over $100 billion in benefits to the U.S. economy through 2020 at a Federal cost of less than $4 billion - a benefit cost ratio of 25 to 1 (Enclosure 2). EPRI recently used the modern financial technique called "Real Options" to estimate the value of advanced coal RD&D . The major conclusion is that the value to U. S. consumers of further coal RD&D for the period 2007-2050 is at least $360 billion and could reach $1.38 trillion (Enclosure 3). However, the long-term nature of the necessary RD&D program and high risk associated with it means that industry cannot afford to make this investment alone. The Real Options analysis also showed that industry as a whole cannot justify investing more than $5-6 billion on advanced coal-based energy technology development. The cost and time scales are simply too large for individual companies or even individual industries to make significant progress alone. Moreover, the major beneficiaries of improved coal-based energy systems are consumers. The Real Options analysis makes it clear that major public investment designed to supplement private investment in advanced clean coal technology can provide significant economic benefits to consumers, but the Federal government must take the initiative. However, the trend in Federal RD&D funding is disappointing. In real dollars, the amount the Federal government currently spends on advanced coal research is only a third of that spent in 1976. As an example, the Roadmap calls for $500 million in annual Federal funding for RD&D of coal-based energy systems. Actual annual appropriations fall short of this figure by more than $200 million. There are enormous competing needs for Federal funding, but few things go more directly to the root of economic prosperity than secure, affordable, clean energy. If current funding trends for advanced coal-based energy systems are not reversed the U. S. will take the wrong turn at the crossroad we face. Down that road lies increased energy prices, increased dependence upon overseas energy supplies, and decreased economic prosperity. The alternative is to reverse the trend in Federal RD&D spending for advanced coal technology and take the more rational road toward a secure, prosperous energy future.
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