Where Obama Is Wrong on Coal

Update! While Environmental Organizations are outraged, the recent Budget Bill in Congress rescinded the Obama Administration's banning of the Export-Import Bank to finance any coal power plants.

Coal Use in Developing Countries: As part of it's policy initiatives to reduce global carbon emissions, the U.S. is ending support for new coal-fired plants around the world. Except in "rare" situations of poverty (whatever that means), the U.S. will no longer contribute to coal projects financed by the World Bank and other international development banks.

Like other top-down attempts by governments to control carbon emissions (taxes, treaties), this U.S. "no new coal" policy uses an incorrect paradigm, and will not result in meaningful and needed global reductions.

A correct approach must always balance present humanitarian and economic needs with long-term climate science objectives -- utilizing a bottom-up model, tailored to provide multiple pathways to develop and sustain individual economies with needed lower carbon standards.

The Other Inconvenient Truth: While the below facts are on India (EIA data), these harsh realities are found throughout the developing world where poverty is common, not rare (e.g., India, Asia, Indonesia, Africa).

India suffers from severe shortages of electricity, where only 60% of rural households have access to electricity. Rural areas rely on traditional biomass for cooking, heating, and lighting because they lack access to other energy supplies. The biomass used in "open burning" is 62.5% from firewood, 12.3% from agricultural wastes, and 12.3% from animal dung.

Nearly one-fifth of today’s global population – 1.2 billion people – lives without access to electricity. Two-fifths of the population – 2.8 billion people – still relies on solid fuel such as wood, charcoal, cow dung, and coal in low-tech cooking and heating.

Often, it seems as though Industrialized Nations and Environmental Organizations become so overwhelmed by the specifics of Climate Change science (e.g., CO² PPM) that they lose focus on people -- where 35% of the Earth's population (2.5 billion people) don’t even have access to a basic human need of having a toilet.

A correct paradigm recognizes that reducing global carbon emissions is intrinsically linked to reducing world poverty. Addressing this just isn't about industrialized countries providing direct financial aid, but includes issues such as international trade and technology transfers to developing countries.

Size of World If Scaled by Poverty: (43% of the world population lives on $2 a day or less.)

World Coal Use: In writing this blog, the issue of "tone" is always important. Criticism of the U.S. No-Coal Policy is not saying that world coal use isn't a major concern (where 43% of current CO² emissions from fuel combustion are from coal). The problem is the rigidity of a "One Size Fits All" Policy for every developing economy.

A chart from the latest U.S. Department of Energy's (EIA) International Energy Outlook to 2040 illustrates this point. The future global Climate Change problem with coal use is overwhelmingly from China, not "all" developing countries.

For example, while coal use in India and the U.S. is projected to be approximately equal, India has 4 times the U.S. population (~1.2 billion versus ~300 million people) -- resulting in much lower emissions per-capita (per person).

Carbon Emissions Per Capita: The disparity in carbon emissions per-capita between industrialized countries versus developing economies has and will continue to be a major stumbling block in achieving any consensus on needed global actions. In the U.S., carbon emissions are currently over 19 tons per person -- a consumption rate over 17 times that of India (~1 ton per person).

Can International Treaties Ever Work?: At the latest U.N. sponsored conference on Climate Change in Warsaw, three events continue to raise "red flags" on the potential effectiveness of making international treaties the "centerpiece" in efforts to reduce global carbon emissions.

(1) The Double Standard Argument: There is increasing skepticism whether "any" meaningful agreement between industrialized and developing countries can ever be reached. Brazil's recent proposal (supported by 130 developing countries) would use carbon emission levels dating back to the industrial revolution to set limits on future emissions. Not surprisingly, the U.S. and EU rejected this proposal.

(Nations Scaled By Cumulative Emissions)

Developing countries argue that because Western industrialized nations have been emitting tremendous volumes of greenhouse gases for over 200 years, they must bear the most responsibility to rein in greenhouse gas emissions.

(2) Can Treaties Really Ever Be Binding?: Japan (the world's fifth largest greenhouse gas emitter) announced a scale-back in its plans to reduce carbon emissions from 25% to just 3.8% (which is actually a ~3% increase from 1990 levels). While Japan's action is certainly understandable resulting from the 2011 tsunami and earthquakes -- this raises a question whether any international treaty could ever be truly binding. Exceptions, ranging from natural disasters (as again recently demonstrated in the Philippines with typhoon Haiyan) to economic hardships will always be present.

(3) Money, Money, Money: As in prior Climate Change conferences, the critical issue of "who pays for necessary actions" was again never seriously addressed (with political reality). The general number tossed around is needed financial support (direct aid, loan guarantees) from industrialized to developing countries of $100 (€73) billion per year.

When Rigid Ideologies Drive Policy: While most environmental groups are applauding this U.S. "no new coal" policy, both they and the Obama Administration are wrong in the paradigm they have created. This policy action is yet another example of the rigid ideological polarization that divides America on so many things today -- where issues are routinely defined (and demonized) in terms of a black-or-white (either/or) paradigm with no gray area that could lead to positive and productive compromise.

The U.S. "no new coal" policy exemplifies this polarization of black/white ideology in solving complex problems. While coal use is clearly a problem, it isn't "the only major" problem. Not only is this U.S. Policy position laden with hypocrisy (coal use per capita in the U.S. economy), it defies the reality that coal will continue to be a major energy resource in the developing world.

Size of World if Scaled by Coal Use: A constructive approach is how to make coal use more efficient, where a multitude of technology options exist. Especially in manufacturing, production efficiency gains can be much more than marginal improvements.

(No unilateral U.S. action will achieve major global reductions in coal use.)	(A "My Way or the Highway" approach isn't pragmatic or productive.)

The Case For Different Pathways: Perhaps the best illustration of providing flexibility through "multiple pathways" to lower carbon emissions is Germany, which is:
-- Dramatically transitioning their energy sector to renewable energy.
-- Investing heavily in energy efficiency ("Smart Grid" infrastructure).
-- Achieving high economic growth.
-- Sizeably reducing carbon emissions
-- Also bringing new coal-fired generation on-line.

Germany's share of electricity produced from renewables has increased from 6.3% to over 25% since 2000. Relative to 1990, Germany has also reduced its carbon emissions by 25%.

However, contradictory to the U.S. "no new coal policy", Germany is currently implementing its biggest new-build program for coal stations in over a decade -- increasing its coal-fired generation capacity by 33%.

Is this a picture of a vase or two people looking at each other, or both?

The Need For A Mental Reboot: Just because a view doesn't "fit" or "appears" contradictory to a established paradigm/model doesn't necessarily mean its wrong. There's usually always more than just one way in viewing and solving complex problems. The goal is to achieve a productive "end-result" -- not ideologically pure ways (e.g., no new coal) of how to get there.

Moving Forward: To achieve meaningful and sustainable reductions in global carbon emissions a major "paradigm shift" is needed -- moving away from rigid black/white ideologies (which the U.S. no coal policy represents) to a lower carbon standard (LCS) model (a comprehensive approach as being used in Germany).

As stated in previous blogs, it is strongly believed that international trade should be the centerpiece of this new paradigm. A good starting point is to create the equivalent of "Enterprise Zones" within developing countries (especially free markets economies of India and Indonesia) providing: (1) significant and unprecedented new trade incentives into U.S. and European markets for manufactured products using a "Low Carbon Standard" (LCS); (2) Significant transfers (including financial assistance and less restrictive patent protection) of advanced energy and manufacturing technology into these Enterprise Zones.

Sometimes the pathway in developing countries may look like what has been accomplished in Western Industrialized Economies -- sometimes it may not. Most often, a LCS pathway in developing economies will require a "bridge approach" (with definitive benchmarks that must be achieved to keep new trade incentives) in transforming to the LCS objective.

An example of needing a "bridge approach" is the argument that scaling up renewable energy technologies (intermittent wind, solar) have been demonstrated to be competitive with base load fossil fuel generation. What this argument fails to mention is that this competitiveness is highly dependent on having an advanced large (national, regional) transmission "Smart Grid" (which does not yet exist in developing countries).

Liberal versus Conservative?: Only by using bedrock conservative principles of de-centralization and free markets will the prize of sustainable reductions in carbon emissions be attained.

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Additional Stories:
In War on Coal, Coal is Winning (C.S. Monitor)
Kenya postpones Wind and Solar Energy Projects because of high costs.
Geothermal energy crippled in Philippines from Typhoon Haiyan.
World Coal Consumption To Surpass Oil By 2020
NY Times Op/Ed: Coal use in developing countries
More opinions on poverty and coal use in developing countries
Trade/Climate Change Policy: U.S. Liquid Natural Gas Exports?
U.S. Hypocrisy to Undermine EU LCS Standards on Tar Sands Exports
Public Opinion Polls: Views on Global Warming -- U.S. Versus World
Germany set records in coal use.
Wall St. Investment Firm Backs Away From Major Coal Export Project
Solar and Wind Vs. Coal in South Africa
U.S. Regulators Struggle on Writing New Coal Regulations
Climate Change Can't Be Solved on Backs of the World's Poor.

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Biomass Co-Firing in Coal Power Plants

Renewable Energy World has a current article on the benefits of biomass co-firing. While we agree that co-firing makes economic and environmental sense -- In our opinion any significant use of co-firing will not happen because of institutional barriers that exist within Federal and State government and regulation of the electric utility industry.

Problem 1: The Section 45 Tax Credit allows for a tax credit of 1.5¢ per kWh for the generation of electricity from a qualified biomass fuel. But the U.S. Treasury has a guideline called the 80/20 Rule which effectively eliminates qualifying for the Tax Credit under biomass co-firing. For example, if a current coal power plant had a book value of $1 billion, biomass co-firing capital expenditures of $4 billion would be necessary to qualify the retrofitted power plant under the 80/20 Rule.

Problem 2: Currently, there is no economic cost associated with carbon emissions. Why should an electric utility incur capital costs to address an environmental issue which has no economic cost associated with it?

Problem 3: Biomass co-firing is simply fuel switching and does not involve new generation. Electric utilities make money by including capital investments (like new nuclear power plants) in their rate base earning a return.

Problem 4: Electric utilities are allowed to recover fuel costs (such as the cost of high priced oil) through a "fuel clause recovery" component of customer billing.

Problem 5: Coal ash is sold as an amendment for concrete. It has never been resolved that ash containing ANY percentage of biomass would be acceptable.

CO2 Benefits of Biomass Energy Vs. Solar and Wind Energy (Part 1)

In understanding the benefits of all renewable energy resource options, its important to understand the concept of the integrated resource grid. Under this concept, the renewable technology is viewed not as a stand-alone resource (i.e., a micro view) but how the resource is dispatched on the electricity grid (i.e., a macro view).

While there are some differences throughout the U.S., typically on the integrated grids of all resources (coal, nuclear, natural gas, oil, and renewables), biomass and geothermal units are often dispatched as base load and displace coal fired generation. Wind and solar units are generally dispatched as peaking units and displace natural gas.

The Electric Power Research Institute has an excellent technical paper explaining why CO2 emissions associated with coal-fired generation are significantly higher than the use of natural gas. EPRI's comparison basis is called the "carbon intensity" ratio and reflects:

The higher carbon content of coal versus natural gas and oil, and

The lower energy efficiency of existing coal power plants versus generation technologies that use natural gas (e.g., combined cycle).

Fuel Effect on Fossil Carbon Intensity

Technology Effect on Fossil Carbon Intensity

The efficiency of power plant technology is measured by the unit's heat rate (i.e., the amount of Btu's required to produce 1 kWh of electricity). For example, the higher a unit's heat rate, the lower its efficiency will be. Conversely, the lower a unit's heat rate, the higher its efficiency (thus using less fossil fuel and producing less air emissions of CO2, NOx, and SO2 to generate 1 kWh of electricity).

As the above EPRI data reflects, when biomass energy displaces coal use (e.g., such as in biomass co-firing at an existing coal unit, or in a State like Kentucky where 87% of electricity generation is from coal) the CO2 reduction benefits can be almost twice as great than with a solar or wind unit that displaces a natural gas generating unit's dispatch on the grid.

For more information on this topic, you can go to our Quick Facts on Biomass Energy.

Why Biomass Energy is Important (Part 2) -- CO2 Emissions from Coal Use in Generating Electricity

The Electric Power Research Institute (EPRI) has an excellent technical paper explaining why CO2 emissions associated with coal-fired generation are significantly higher than the use of natural gas.

EPRI's comparison basis is called the "carbon intensity" ratio and reflects:

The higher carbon content of coal versus natural gas and oil, and

The lower energy efficiency of existing coal power plants versus generation technologies that use natural gas (e.g., combined cycle).

Fossil Carbon Intensity(lb. Carbon/MBTU)
Many Environmentalists (and apparently Policymakers also) believe that in reducing greenhouse gas emissions that the key is just to develop more solar and wind energy generation resources -- and its just that simple.

The problem is that in the "Real World", there is more to the story -- based on something called the integrated resource dispatch grid.

Generally, wind and solar power generating resources are considered either peaking or intermediate units and on the "dispatch grid" will displace natural gas generation resources.

Generation options such as nuclear, geothermal, and biomass energy resources are typically classified as "base load units" and most often will displace coal units.

Why Biomass Energy is Important (Part 1) -- CO2 Emissions from Coal Use in Generating Electricity

My Grandfather used to tell me -- "Don't strain at gnats when elephants are running through your garden". The simple message is to focus on the big things first in dealing with a problem.

We spend a lot of time talking about coal use in the U.S. to generate electricity, and we don't do this with any intent to bash the coal industry or electric utilities. We present coal data to explain to Policymakers and Environmentalists where the problem is (the "Elephant") in greenhouse gas emissions from electricity generation.

The below graph from U.S. Department of Energy 2007 data shows that coal fired resources represent ~51% of all electricity generation -- and that ~82% of all CO2 emissions from electricity generation come from these coal fired units.



Understanding this above point is key in understanding why biomass energy technologies are so important.

First, through biomass co-firing at an existing coal power plant the existing fuel mix is changed from 100% coal to approximately 90% coal and 10% biomass -- directly reducing coal consumption and its resulting CO2 emissions.

Second, biomass electricity generation units (as well as geothermal) are typically base load facilities which will directly displace base load coal fired generation. Conversely, wind and solar power are typically peaking or intermediate generation resources and will displace natural gas units (not coal base load units).

Sources:
Electricity generation by fuel sources in the U.S.
CO2 Emissions from electricity generation by fuel source in the U.S.
Biomass Energy Quick Facts