Does coal have a role in a low carbon economy?

The Pöyry report highlights the fact that despite growing climate change concerns, global demand for coal has almost doubled since the Kyoto Protocol in 1997, and argues that the future role of coal in the global energy mix must include co- firing with biomass, and a renewed focus on carbon capture and storage.

The global coal fleet makes up around one third of total global electricity generation capacity and around 40% of total electricity generation. As energy demand increases with rising living standards in developing countries and a growing world population, coal’s cheap and abundant nature means it is still an attractive source of electricity generation, in spite of global commitments to decarbonise. At present the coal fleet is spread around the world, with 45% of capacity in China, 16% in the US, 9% in India and 8% in Europe. The remainder is distributed across many countries.

Pöyry analysis has developed a retirement profile for existing global coal capacity, which shows that on the present course the majority of coal-fired generation capacity will be with us for the foreseeable future, with around 1300 GW still in operation by 2040. And that is without taking into account the several hundred GW of new coal which is under construction around the world and more that is still in planning.

Matt Brown, a VP at Pöyry Management Consulting, said, “Our research has revealed a worrying situation where we risk sleep-walking into the mid-century, having not addressed the challenges posed by coal to the environment. Without significant change, the commitment [to reach net-zero emissions by 2050] may be difficult to meet. Increasing the coal fleet’s efficiency is very important but in addition we need to co-fire coal capacity with biomass and push harder on CCS. Sadly on CCS, we are in need of urgent practical progress.”

Energy policies consider three objectives in meeting energy demand, referred to as the energy trilemma, namely security of supply, affordability and environmental protection. These objectives often compete and the order changes depending on which is perceived as the most important. For instance China and the USA have recently ratified the Paris Agreement to limit global carbon emissions, acknowledging that climate change is a growing risk that needs to be urgently addressed.

Coal is relatively secure and cheap, although dirty, and in the recent past its use has increased dramatically in absolute terms and in its share of total energy used, driven by the growing prosperity of developing countries (Figures 1 and 2). And it has value for load balancing as wind and solar increase their share of generation. But it is apparent that just at the time when our increasing understanding of climate change risks would dictate reducing coal demand, and the resulting carbon dioxide released into the atmosphere, we have increased its use.

The future

The general consensus is that energy demand will continue to increase. The global population is now 7.3 billion and projected to grow further. An expanding population, combined with higher living standards will drive increased energy demand, even when taking account of improvements in end-use efficiency. Will coal remain part of the mix?

Figure 3 shows Pöyry’s retirement profile for the existing global coal fleet. It assumes a mid-range technical lifetime of 50 years. The projection indicates that unless something changes it is likely that most of the existing coal fired capacity will be with us for the foreseeable future.

Can we square the energy trilemma?

The following options are available. Option 1 is to shut down the existing coal fleet and replace with alternatives. This may be impractical at a large scale and difficult in some locations but economic for some older assets where efficiency or usage is low. Option 2 is to improve efficiency. Efficiency of existing plants can be improved through refurbishment during normal operations.

Option 3 is to switch to a lower carbon fuel. This approach involves co-firing with or converting to another source, such as biomass. Option 4 is CCS, which allows generation with a much reduced climate change impact.

In fact all four options will be needed to reduce emissions from the global coal fleet, the mix being dictated by factors such as geographical location and the alternatives available – for example the availability of renewables, or biomass in sufficient volumes, or failing that, natural gas. And whether storage sites for carbon dioxide are available.

Shutting down the existing coal fleet will not be feasible in many places and improvements in efficiency will get us only so far. So what role can biomass and CCS play in the future?

Biomass transition

Biomass when pre-treated appropriately in the form of wood pellets can be a substitute for coal in all modern power stations. With limited investment standard pellets can be co-fired up to 10%. With further capital investment coal can be completely replaced by pellets. Co-firing has been instigated in various coal-fired power stations, mainly in Europe in the UK, Poland and the Netherlands, over the past decade.

Coal-to-biomass conversion projects offer great potential as this is a proven technology and capital expenditure can be 70-80% lower when compared to a new build biomass power station. And future developments, such as black pellets, may reduce conversion costs and allow for higher levels of co-firing.

For CO2 reduction to be realised in practice it is necessary that the biomass used is sustainably produced and sourced. This is an area of controversy and debate. Coal-to-biomass conversions also present a cost effective and quickly implementable opportunity for the ageing fleet of coal stations in the East and Northeast USA, a region which presents a substantial sustainable biomass resource potential. Similarly, coal stations in Latin America and Asia could be decarbonised, supported by sustainable fast growing forestry, such as energy crop plantations or agricultural residues like palm kernel shells (PKS).

Replacing coal with biomass will be an important part of the solution, offering the advantage of being able to provide reliable low carbon baseload energy for networks.

In addition to some form of carbon price or renewable incentive, two key enabling factors for this are the establishment of high yielding and affordable feedstock resources and the development of efficient global trade flows for biomass fuels.

CCS – what is its destiny?

CCS can be thought of as a three step process – capture, safe transport, and permanent storage. The most costly step is the first.

All of the individual processes involved in the three carbon capture technology options for power stations (pre-combustion, oxyfuel and post-combustion) are well known and have been employed many times in different settings, although until very recently never at commercial scale in power generation. Each technological approach has different pros and cons and will suit different applications. To address existing power plants though the post-combustion route is currently the most suitable.

For significant progress it will also be necessary to reduce the emissions from the steel, chemical and cement industries and the only option currently available is CCS. The synergies for so-called industrial CCS with CCS on power generation are significant, arising primarily from the shared use of CO2 transport and storage infrastructure.

The sub-surface geological storage of CO2 is recognised by the IPCC as highly likely to be a successful method. However the market for CO2 storage is still in its infancy despite individual success at sites such as Sleipner in Norway, where for the last 20 years 1Mt of CO2 pa has been extracted from a natural gas field and re-injected into a nearby geological structure for permanent storage.

Economics of CCS

Economics remains a key issue. The cost of power and industrial products created at CCS-enabled sites will be significantly greater than at sites that simply emit the carbon. This situation will remain as long as the direct or indirect cost of emitting carbon stays low.

This is well demonstrated by the situation in the United States – carbon capture and transport is an established industry in certain areas but only where CO2 has a value – in the US case for enhanced oil recovery.

The additional step to permanently store the CO2 is not the primary goal and in many places it does not take place. In a future carbon-constrained world we may see the cost of fossil fuels, such as coal, dropping as demand falls away – this will help CCS compared to other low-carbon technologies but will not be sufficient on its own without a strong carbon price signal. An alternative route is more direct financial support. While renewable energy has enjoyed widespread support, ultimately paid for by consumers, the CCS industry has struggled to gain any kind of financial support for commercial scale projects anywhere in the world, due to a fundamental issue – a lack of public and hence political support for the technology.

A failure of policy?

If CCS is to contribute to the future of coal there is an urgent need for practical progress in two areas:

• The appraisal and development of CO2 storage sites. The long lead-time and uncertainty around future CO2 volumes for any individual development (at least in the short-term) means that direct support is likely to be required;
• The development of an economic model where carbon capture enabled power stations and industrial sites can compete with their carbon-emitting counterparts.

Governments have so far failed to take the required steps despite making tentative progress, particularly in North America and China.

A role for coal

Coal is not about to disappear from our energy mix any time soon. At the same time, climate change risks are accumulating and are likely to gain more attention over the coming years. Preparing for a carbon constrained world is of increasing priority for policy makers and companies alike. If we are to keep the lights on and at the same time avoid catastrophic climate change, CO2 emissions from the coal power station fleet have to be tackled and tackled fast. Burning sustainable biomass in the existing coal fleet will be part of the solution – but CCS is necessary and development at the present time is far too slow.