From Monsters and Critics.com
Can coal keep up?By Kristyn EcochardDec 15, 2006, 14:16 GMT
WASHINGTON, DC, United States (UPI) -- To meet projected coal demands, major investments are needed in transportation lines and clean-burning technologies, the results of a new study by Global Energy Decisions show.
The results show that while demand and projected capacity are increasing, steady decline in actual production along with increasing production costs have put the coal supply chain in a potentially weak position.
Energy Information Administration projections expect the U.S. coal supply to increase by 121 million tons over the next five years but, since 1999, production has been sluggish and the only increases in supply have come from imports.
Based on mine-level reports GED used in its study, coal production capacity in the United States only increased 2 million tons per year from 2000 to 2004. Imports have been increasing at close to 20 percent a year while domestic production has been increasing by 1 percent. U.S. productivity at basins like Appalachia and Powder River is expected to decline over the next five years. Rising operational costs reflect the slow down.
Gary Hunt, president of Global Energy Advisors, pegged underinvestment as the biggest source of the coal industry`s problems.
'With gas fired combined cycle generation, natural gas became the fuel of choice during the last building boom,' he said. 'It was cheaper and more easily available and regulatory policy was favoring it.'
Now, Hunt said, there`s too much of it and in an effort to build a more diverse mix of fuels, coal, nuclear and renewable are all competing. With increasing concerns about greenhouse gases and carbon emission regulations, the coal industry needs to clean up and do it in a way that allows it to compete economically.
Integrated Gasification Combined Cycle technology will allow for clean burning but it`s still a new technology, Hunt said. It might be used in the 46 new plants planned by 2011 and retrofits would be put in older plants, but until the technology is more widely used, the capital for a plant that uses IGCC technology can be twice the amount of a traditional plant.
GED`s prediction for demand is that by 2011 the U.S. will need 1163.2 million tons of coal, 124 million more than current demand, mostly because high gas prices and stronger load growth lend themselves to higher coal demand.
To meet those demands, the National Coal Council is backing a program that would pre-emptively raise 2025 demand to 2.43 billion tons. NCC expectations could be met only if coal production increases 4 percent per year for the next 20 years. That number is much different from the EIA estimates.
'If you look at the EIA`s Annual Energy Outlook from 2006, the tables say that the annual average percent change from 2004 to 2030 is 1.6 percent,' said Fred Freme, coal industry economist for the EIA. 'We don`t see that as a problem.'
Possible legislation and how it will affect the industry would be the biggest factor in the coal industry`s success or failure of meeting demand, Freme said, but that can`t be predicted. Using current regulations and world oil prices, among other given assumptions, the EIA model allows predictions but they do not include predictions about future legislation.
'I think everyone anticipates we will see stricter carbon emission regulations in the future. The question is how strict and how soon,' Hunt said. 'Many countries in the EU failed to meet requirements because of lack of time to develop and deploy technology that would significantly lower emissions.'
The study concludes that specific infrastructure changes and investments will be needed in order for the coal industry to catch up. Some of the changes include railroad maintenance and expansion, rolling stock, port and waterway expansion, barges and others. Those changes will depend on the basin or market and its unique problems, Hunt said.
'In western coal, specifically the Powder River Basin, the key is maintaining an adequate level of transport capability. In the eastern coals, it`s older underground mines and there it`s a question of investing in new technology in mining the coal and bringing it to the market. Overall, IGCC technology and clean-burning plants will be biggest infrastructure investment.'
Slow development of alternative fuel and power choices will keep coal in a high demand position for at least the next 20 years.
'Coal still provides about 50 percent of fuel for power generation, but it`s going to take substantial investment and new global players with deeper pockets and some ability to adapt to uncertain conditions,' Hunt said.
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