Equipment manufacturers are predicting a switch away from natural gas to coal fired generation. This may address security of supply issues, but seems at odds with environmental goals.
The share of equipment for coal fired power plants in orders for new power plants is to rise significantly in the next ten years, according to Philippe Joubert, president of Alstom Power. Coal’s share in the generating mix will therefore rise – particularly in North America and Europe – bringing it to levels not seen since before the US ‘gas bubble’ earlier this decade.
Speaking in an interview with PEi, Joubert said that the share of coal plant in new plant orders will rise from 20-25 per cent in 2002 to 38-40 per cent in the next decade. The shift will occur at the expense of gas fired power plants, whose share in new orders was around 60 per cent at the height of the gas bubble. “The share of gas fired power plants in new plant orders will fall to 30-33 per cent,” said Joubert.
The shift towards coal and away from gas is already being reflected in the order books, says Joubert, although this is partly due to strong demand from China and the rest of Asia. Asia will continue to dominate the order books for the next ten years, accounting for 50-60 per cent of new capacity additions.
“But in the next two to three years we will see an increase in demand [for coal fired power plants] from Germany, Eastern Europe and southeast Europe, and to a certain extent Latin America,” says Joubert. “In addition, there will be a rise in demand for components for coal fired plants in the USA.”
This trend has also been forecast by other equipment manufacturers, including GE Energy and Siemens, according to the Financial Times.
In the USA, the share of natural gas in electricity generation increased from just nine per cent in 1988 to 18 per cent in 2004, while that of coal fell from 57 per cent in 1988 to 50 per cent in 2004. A similar ‘dash for gas’ trend has been seen in Europe, with countries such as the UK, Spain and Italy keen to exploit the environmental benefits and rapid construction times of natural gas fired power plant.
But driven by security of supply issues, a reversal of this trend is now imminent. Natural gas prices have been affected by rising demand as well as the global politics of oil, and the recent disputes between Russia and its neighbours has highlighted the dependence of Western Europe on natural gas. In contrast, coal prices have remained non-volatile, and coal is available in abundant reserves from geographically diverse regions. Recoverable reserves exist in around 70 countries, according to the World Coal Institute, and at current production levels are estimated to last 164 years (in contrast to 41 and 67 years for oil and gas, respectively).
Total world electricity generation by fuel, 2003
“Coal is cheap and is less risky from a security point of view,” said Joubert. “Everyone has seen the problems with natural gas following the dispute between Russia and Ukraine, and is realizing that coal is probably the safest option.”
A second factor driving the return of coal are the advances made in technology over the last ten years. Coal has traditionally been thought of as a ‘dirty’ fuel because of emissions of sulphur dioxide, nitrous oxides, particulates and carbon dioxide. Much progress has been made in the last ten years, however, and “we can solve most of these issues”, said Joubert. “We can do this through clean combustion techniques … and by improving the efficiency of power plants. We are also working towards a definitive solution for carbon capture.”
Of the three large equipment manufacturers, Alstom is likely to gain most from the return of coal, as it currently gains a larger proportion of its revenues from steam turbines and boilers for coal fired plants than either GE or Siemens. GE Energy is particularly focused on gas turbine technology.
Carbon capture from power plants is possible today, says Joubert, but not yet in an economical way, and the issue of storage is not yet fully resolved. The predicted growth in coal fired power generation – and the associated gains in supply security – is therefore at odds with climate change goals. The International Energy Agency has predicted a rise in global energy demand of 50-60 per cent by 2030, and based on the predicted availability of cheap coal, it has forecast an associated rise in greenhouse gas emissions of 50 per cent.
It is the Kyoto Protocol that dominates the worldwide drive to reduce greenhouse gas emissions, yet it focuses on targets for developed nations and ignores the fact that developing countries will account for two-thirds of the IEA’s energy demand forecasts.
At the recent inaugural meeting of the Asia-Pacific Partnership on Clean Development and Climate (AP6) in Sydney, Australia, the six founding members acknowledged the antagonistic link between climate change, energy security and economic growth and development. The six members – USA, Australia, Japan, China, India and South Korea – are all large consumers and/or producers of coal, and clearly have a vested interest in making sure that coal remains an important source of energy.
The AP6 partners, who account for half of the world’s emissions, believe that technology development is the most effective means of addressing climate change. To this end, they have pledged to invest heavily in the acceleration of technology, especially low emissions technology.
On the face of it, energy security and environmental goals seem incompatible, and a solution is clearly required. For its price stability and abundance, coal cannot be ignored, but further development of clean coal technology is needed, and this can surely only be achieved through investment, innovation and collaboration of the type planned by the AP6.