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The Enduring Importance of Coal

Three Top Executives Discuss the Role of Coal-Fired Generation in the U.S. Energy Portfolio

Three Top Executives Discuss the Role of Coal-Fired Generation in the U.S. Energy Portfolio

By Tim Miser, Associate Editor

Coal-fired power generation doesn’t command many exciting headlines these days. Coal-fired plants don’t have the appeal of newer renewable technologies, which often rely on cutting-edge innovations to generate power. And coal-fired plants aren’t always as clean or efficient as modern combined-cycle natural gas-fired plants. It’s probably fair to say that coal facilities have borne a greater burden than other forms of fossil generation in the never-ending race to comply with environmental regulations. But coal-fired generation continues to comprise a huge percentage of the United States’ generation portfolio, and it seems likely to remain important to the country’s power needs for many years to come.

Dan Lee
Ken Buttery
Vic Svec

With this in mind, Power Engineering (PE) magazine sat down with three executives in coal-fired power to discuss the industry’s wins and losses, strengths and weaknesses, and the challenges coal is likely to face in the coming years. Dan Lee is Senior Vice President of Fossil & Hydro Generation at American Electric Power (AEP). Ken Buttery is Regional Executive of Sales at GE’s Steam Power Systems. And Vic Svec is Senior Vice President of Global Investor and Corporate Relations at Peabody Energy.

PE: Let’s dive right in. What is the future of coal-fired power generation in the United States?

Dan Lee: Coal should remain part of our country’s balanced energy mix. It is still necessary for reliability to provide 24/7 dispatchable generation, and it’s also affordable generation that provides value for customers. It is challenging in certain areas because market prices are depressed and it is hard to sustain the budgets needed for maintenance and refurbishment of a coal plant when market prices are so constrained. An example is what we see in Texas, where coal generators are really challenged because market prices are so low. There is a discrepancy between the amount of revenue a coal plant needs to operate and what the market is delivering in unregulated areas. We also see low reserve margins in ERCOT because it’s a really difficult environment for coal plants, which is a concern.

Ken Buttery: Even today, coal power remains a significant contributor to the overall power generation mix in the United States. Increasing regulations over the past decade have, rightly, pushed existing units to lower their impact on the environment and reduce their non-greenhouse gases emissions, which has led to a significant demand for more sophisticated environmental controls solutions. A few U.S. utilities have invested in some degree of modernization of their coal-fired stations rather than retire them in favor of other fuel sources, and we are seeing a growing demand for digital solutions that can help plants run with higher efficiency, additional flexibility, and increased reliability over the remainder of a plant’s lifetime. On the other hand, the coal power generation installed base is aging in the U.S. and the average efficiency of 33 percent today is much lower than the latest generation plants which have been installed and commissioned in other parts of the world. Very few plants in the US operate at Ultra Supercritical conditions and the few newest units commissioned in the late 2000s operate with lower parameters and efficiency than the latest generation of plants recently put in operation in some other countries.

Vic Svec: While the factors affecting the coal industry in recent years have been unprecedented, coal remains an essential part of the energy mix. Coal keeps energy affordable and reliable and was responsible for more than one-third of the electricity generated in the United States last year. EPA’s estimates show coal generation continuing at a 675 to 750 million ton-per-year annual demand rate for decades to come-about the same path that we are on in 2016-and that’s under a Clean Power Plan (CPP) that has been stayed by the courts.

PE: What are the biggest technical challenges for the coal-fired power industry?

Dan Lee: There isn’t anywhere near enough funding and support to make progress on low-carbon technologies for fossil-fired generation, which will be critical for the future of coal generation. There needs to be more investment in research, and we are looking to the Department of Energy and others to lead that effort. Currently, the R&D in this area is not very robust.

Ken Buttery: Improving the efficiency of coal-fired plants in a competitive way has been one of the toughest challenges in the coal-fired power industry. Over the last decade, the industry in general, and GE in particular, have spent significant resources on developing the supercritical and ultra-supercritical steam cycle technologies, developing the right materials to operate at higher pressures and temperatures, and mastering their industrialization to make these solutions economically competitive. One of our latest plants has been in successful operation for over a year in Germany with an efficiency rate in excess of 47 percent-significantly higher than the global average of 33 percent, with amazing availability and flexibility.

Vic Svec: Emissions progress for coal begins with deployment of high efficiency, low emissions (HELE) power stations using technology that is available today. Our view is that longer-term investments in next-generation carbon capture, use, and storage (CCUS) technologies are needed to enable commercial deployment and transition to the ultimate goal of near-zero emissions from coal-fueled power.

Coal-fired generation continues to comprise a huge percentage of the United States’ generation portfolio, and it seems likely to remain important to the country’s power needs for many years to come.

HELE power plants and advanced emission controls are available off-the-shelf, broadly used today in the United States and around the world, and deliver major environmental improvements right now. HELE technologies, for instance, drive up to a 90 percent reduction of particulates, sulfur dioxide, and nitrogen oxides versus standard generation. Greater use of these technologies are important for coal, natural gas, and industrial applications and help advance society’s goal for low-carbon energy systems.

PE: What are the biggest business challenges for the coal-fired power industry?

Dan Lee: Current market prices are inadequate to sustain the capacity needs of the grid, and the future of coal and nuclear plants is at risk because of it. A future of all 24/7 capacity being provided by natural gas generation brings a number of potential vulnerabilities to the grid.

Ken Buttery: From a business perspective, our customers are looking for technology that will allow them to achieve better performance, greater reliability, and lower operating cost. Higher efficiency, lower emissions, better economics-that’s what our customers care about.

Vic Svec: Our business approaches sustainability around maximizing the three Es-Economy, Energy, and Environmental-and the same is true for generators. Fuel choices matter and policies matter over time for both generators and their customers. The challenge for generators is choosing an energy mix that meets environmental goals, provides low-cost electricity for customers, and offers proper returns over time. Peabody believes that coal producers should give strong attention to key standards in the areas of sustainable mining, energy access, and clean coal solutions. This includes a commitment to safe workplaces and coal land restoration, engagement with government, academia and other stakeholders to address major energy challenges, and support toward greater deployment of advanced coal and near-zero emissions technologies.

PE: What are the biggest legal/regulatory challenges for the coal-fired power industry?

Dan Lee: The uncertainty around what future regulations, including the CPP or its replacement, will require is probably the biggest challenge. We don’t know what the rules may look like or whether their compliance timelines will be reasonable. The timeline that was originally proposed in the CPP was unworkable, but the EPA improved it in the final rule. It is hard to say what the outcome of the legal review process might be, but that doesn’t change our focus on diversifying our fuel mix and delivering electricity to meet the needs and expectations of our customers.

Ken Buttery: The ability of nations to meet emissions goals set out in the Paris COP21 agreement, while meeting growing demand for electricity, will depend on the ability of fossil fuel-powered plants such as coal to deliver power more flexibly, responsively, and cleanly. With the CPP in the United States, we are particularly focused on addressing CO2 emissions and water effluent regulations.

Vic Svec: Peabody believes greater public support is needed to bring CCUS technologies to commercial scale, and CCUS has been identified globally as absolutely essential to meeting the world’s carbon goals in a cost-effective manner. Since the 1990s, we have widely advocated a technology approach to reduce carbon and other emissions, invested hundreds of millions of dollars in clean coal projects and partnerships, and taken positions on issues such as those in our Statement on Energy and Climate Change. In 2015, Peabody’s President and Chief Executive Officer chaired a National Coal Council report that called for enabling carbon capture to achieve policy parity with other low-carbon options, such as solar and wind. The report was done at the request of the U.S. Secretary of Energy, who has recently articulated strong support for development of carbon capture with coal remaining a major part of our energy future. The report outlined what is needed to propel progress for CCUS technologies, which ultimately would lead to near-zero emissions from coal, and is recognized by global leaders as essential to our carbon goals. Key recommendations included a first-of-its-kind regulatory blueprint to remove barriers to construction and development of CCUS projects, as well as a call for communication and collaboration among global policymakers.

PE: How does the coal-fired power industry comply with emissions regulations while still remaining efficient and profitable?

Dan Lee: Historically, we’ve been able to find ways to comply with regulations because there have been technologies available to help us comply. That’s one of the concerns going forward with carbon regulations, because the technologies are not sufficiently demonstrated. Also, regulations ultimately have a trickle-down effect on our customers’ bills, so we are always mindful of that impact and work toward the most cost-effective, yet environmentally responsible, solutions.

Ken Buttery: In a post-COP21 world, the coal power industry can remain efficient and profitable by combining high-efficiency cycles (ultra-supercritical technology) with digital capabilities and environmental control solutions, what we refer to as smarter, cleaner steam power. For example, our new ultra-supercritical cycle, when used in double reheat technology, can deliver an additional 1.5 percentage points of efficiency compared to the best plants in operation today. This can add up to $80 million additional net present value (NPV) for a 1000-MW plant. Then you add in digital capabilities. GE’s Digital Power Plant for Steam can increase efficiency by up to 1.5 percentage points, reduces CO2 emissions by 3 percent, and allows for 5 percent less unplanned downtime over the life of a plant. We are getting closer and closer to a 50 percent efficiency target and for each percentage point of incremental efficiency, we bring CO2 emissions 2 percent lower. So for a customer with a large fleet, this provides significant incremental gains and cost savings, as well as a much better CO2 footprint.

Vic Svec: Greater regulatory certainty has been an imperative for the utility industry for quite some time. This is a multi-part equation, though, that goes not only with continuous improvement in emissions but also the market-based cost of alternatives. Over time, coal has proven to have significant advantages in reliability and costs. When other fuels struggled during the polar vortex a few years ago, coal provided the majority of incremental power. The same was true in multiple regions this year during the recent heavy cooling degree season.

PE: What specific emissions regulations are most challenging to the coal-fired power industry?

Dan Lee: While we’ve been able to achieve compliance with the Mercury and Air Toxics Standards rule that went into effect in 2015, maintaining compliance continues to be a challenge. At some of our plants, we are using air pollution control systems to reduce SO2 and NOx as well as mercury. We are still learning how to best balance the control systems to achieve targets for all three pollutants.

Ken Buttery: Environmental control solutions are available today to address all the sources of non-greenhouse gas emissions, NOx, SOx, particulate matter, mercury and other hazardous air pollutants from any industrial plant to meet and exceed the world’s strictest regulations. For example, dry desulfurization systems have been used for SOx control and as multi-pollutant control devices for several decades. Selective catalytic reduction technology controls NOx formed in combustion processes. And together with our GE Water business, we have developed spray dryer evaporator technology for wastewater treatment to support all needs up to zero liquid discharge applications.

Vic Svec: There’s no question that the CPP would prove challenging for the entire nation. A NERA Economic Consulting study concludes that the CPP will increase energy sector expenditures $220 billion to $292 billion from 2022 -2033. It would also increase the average U.S. retail electricity rate up to 14 percent each year over the same time period according to the study. That’s why scores of industry participants, attorneys general, states, and industry and citizen organizations are opposing the plan as poor law and poor policy for America’s electricity consumers.

PE: Will gas-fired or renewable power generation entirely replace coal-fired power in the foreseeable future?

Dan Lee: Gas-fired generation could potentially replace coal-fired generation, but it is too risky to depend upon natural gas as the only fuel for 24/7 generation. It’s in our nation’s best interest to maintain a diverse and balanced energy mix that includes coal, gas, nuclear and renewables. There will always be a need for 24/7, baseload generation to ensure the integrity of the grid. Renewables can replace energy, but they can’t replace capacity in the same way gas or coal can.

Ken Buttery: All analysis done on the subject shows that coal power will continue to be a vital part of the global energy mix. In GE, we see that a good energy mix of the various fuels, when combined with environmental protection measures and digital capabilities, will produce the best results. In most countries, a mix that includes renewables, gas, and state-of-the-art efficiency coal power generation will meet the competing objectives for reliable, affordable power in favor of the competitiveness of the economy while fulfilling the environmental targets. Power sources should be independent from global fluctuations as much as possible, affordable for their citizens as well as economic development, stable no matter what the season or weather conditions, and respectful of the environment. With 2660 GW of installed capacity and nearly 900 billion tons of reserves, coal remains a self-sufficient and affordable means to produce power, provide energy security and stabilize the grid.

Vic Svec: Entirely replacing coal-fired power is neither likely nor desirable. When it comes to creating a sustainable energy future, each fuel has inherent strengths and challenges, and all forms of energy are needed. Coal’s advantages include a track record of reliability, scalability, affordability, and security of supply. It fuels 40 percent of global electricity. In addition, thermal coal is expected to continue to fuel thousands of existing coal generating plants as well as scores more that are under construction across the globe.

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