Wednesday, January 25, 2006

Breaking Coal's Constraints

I just read an interesting commentary on coal over at We tend to think of coal as an essentially boundless resource in the US, limited more by its environmental impact, mine-safety concerns and capital constraints than by any physical restrictions on the resource. That may not be the case. The author suggests that factors in the rail industry, including the impact of the tremendous consolidation that's taken place in the last decade or so, are putting a cap on the amount of coal that can be shipped to power plants in the foreseeable future. Although that could have serious implications for our energy supply, this outcome seems far from certain, given the available alternatives.

For years, coal has suffered from a sharply divided image. Despite its leading role in electricity generation, providing an inexpensive domestic fuel for base-load power generation, coal's environmental profile has cast serious doubts over its future. The combination of local pollution, in the form of acid rain precursors and heavy metals, and its high greenhouse gas emissions put it at odds with the environmental trends of the last 25 years, including the widely-noted "decarbonization" of energy. The development of advanced clean coal technology, including Integrated Gasification Combined Cycle (IGCC) with its potential for sequestering carbon dioxide emissions and keeping them out of the atmosphere, has elicited surprisingly positive comments from ardent environmentalists. Wouldn't it be ironic if logistics, rather than environmental concerns, prevented coal from making its full contribution to energy security?

Fortunately, I think there are several reasonable, though not necessarily cheap, ways around this. If rail capacity can't or won't keep up, slurry pipelines might provide a good alternative. The technology to pulverize coal and create a coal-water slurry is off-the-shelf, and a lot of work has been done on additives to keep the coal in suspension while in transit. The slurry can either be burned directly, or the coal can be de-slurried and dried before use. The biggest problem with this approach is the high cost of power to run the pumps, which must move as much water as coal.

Another solution would be to treat stranded coal in the same manner contemplated for natural gas: onsite gasifiers could feed gas-to-liquids plants, producing liquid synthetic fuels that could then be shipped by product pipeline or rail tankcar. Even the latter would help alleviate rail capacity constraints, because of the higher value and higher energy density of GTL diesel vs. coal. The same train could carry many more BTUs of energy as diesel than as coal, and the value of the fuel could accommodate higher freight tariffs.

Finally, building power plants in proximity to coal supplies, rather than near their demand load--Mohammed going to the mountain, as it were--is a time-tested strategy, although new long-distance power transmission lines aren't necessarily more popular than rail expansions, and line losses put a limit on how far you can send the power economically.

Ultimately, if technology can successfully overcome the environmental and other constraints on wider use of coal, I don't see why it can't provide practical ways either to circumvent existing rail capacity limitations, or provide sufficient inducement to remove those constraints through additional rail investments. This might drive the cost of coal a bit higher, but there's little on the horizon that will make its main competitors, natural gas and oil, drastically cheaper any time soon, and, at the present stage of development, wind and solar power compete more with natural gas than with coal.

No comments: