Monday, October 30, 2006

The Future of Coal

These comments are based partly on Vinod Khosla's presentation at the Solar Power 2006 conference in San Jose, California, Oct 2006, (as well as other sources).

Almost 150 new coal fired power are planned for the US. Some feel that much of this is driven by the utility sector's desire to build plants before carbon trading becomes law. Remember, coal meets about 70% of Wisconsin's and the USA's electricity needs.

Here is the definition from the Wikipeda:
"Emissions trading (or cap and trade) is an administrativie approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. In such a plan, a central authority sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant are given credits or allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances. This transfer is referred to as a trade. In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. The more firms that need to buy credits, the higher the price of credits becomes -- which makes reducing emissions cost-effective in comparison."

Carbon trading is already happening in Europe and legislation has passed in seven North East States and California. Trading on the east coast market will start in 2009 and in the Californian market trading will be fully implemented in 2012.

In Europe carbon dioxide has been trading for about $20 per ton. Every ton of coal fired releases about three tons of carbon dioxide (C becomes CO2). Any new coal generation above the carbon emission "cap" would have to pay about $60 for every ton of coal fired (today).

In the US coal currently costs about $30 per ton at the mine mouth (which is commonly located in the powder river basin of Montana). Here in, Wisconsin it costs about $60 per ton of coal - once all the other costs are added (mostly transportation (70% of the US's rail traffic is coal)). So the cost of the carbon emissions would about double the cost of coal in states like Wisconsin (today). Khosla says carbon trading will increase coal generated power prices by three to six times!

We often hear that the US has a 200-year supply of coal. What we do not hear is that the first coal to be mined is the easy cheap coal. We also do not hear that the 200 years is based on current consumption.

The U.S. Geological survey, according to Vinod Khosla, reported that only 17% of the US coal resource could be mined without significant increases in production cost. With all the new coal power plants that coal would last ten years. After that the cost of coal mining will increase quickly.

Coal is dirty fuel and a serious source of carbon doixide. If we think that global climate change has even a small chance of occuring than the world must reduce coal firing (the Chinese are very busy building coal fired power plants as well).

In Wisconsin, people purchase a home insurance policy primarily to cover major events, such as the home burning down. These major events have a probability of less than one in a hundred of occurring. Is the likelihood of global climate change greater than one in a hundred?

In Britian a report on global climate change was released today. Two quotes: "failure to tackle climate change could push world temperatures up by 5 degrees Celsius (9 Fahrenheit) over the next century, causing severe floods and harsh droughts and uprooting as many as 200 million people" and "Failure to act could plunge the world into an economic crisis on a par with the 1930s Depression..."

Vinod Khosla recommends (that like farmers) we pay coal miner not to mine coal. It may be one of the cheapest ways available to society to "sequester" fossil carbon.

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