What Could Diminish the Dominance of Coal?
"Coal use has never stopped increasing and the forecasts indicate that, unless a dramatic policy action occurs, this trend will continue in the future. If this happens, then the IEA believes greater efforts are needed by governments and industry to embrace cleaner and more efficient technologies to ensure that coal becomes a much cleaner source of energy in the decades to come."1
This International Energy Agency (IEA) quote tends to say it all, namely, that the dominance of coal is here for some time to come, at least in non-OECD countries. It also raises the legitimate question as to what, if anything, could change the role coal plays in power generation, currently at 41% worldwide.2 There are strong views supporting the ongoing dominance of coal, e.g., from the former Chairman of the World Coal Association3, but equally a balancing voice from the Chief Economist of the IEA in the first issue of Cornerstone to suggest that, ultimately, “Government decisions…are crucial to the future demand for coal.” Government is a key part of the “license to operate.”4
I suggest there are two key drivers that must be satisfied if coal is to remain dominant for decades:
- Relentless innovation to stay competitive
- Maintain the public license to operate
The points above will be explored in two separate articles; this is the first installment, focused on innovation, of the two-part series. The public license to operate is not just about the legitimacy of coal in general (i.e., mining, sustainability, emission profile, safety profile), but also covers technology, particularly new technologies.
|This Coal Sorter Is an Example of the Type of
Cutting Edge Innovation that Will Be Necessary
for the Coal Industry to Maintain Competitiveness
Relentless Innovation to Stay Competitive
Step-change innovations are relatively rare in any mining or process industry. They do occur, of course, but are limited by development times and high capital costs, which diminish the appetite for risk and the time necessary to move from laboratory scale to full scale. Significant examples for coal-related step-change innovation have been the introduction of open pit mining and longwall mining. Smaller incremental changes via continuous improvement are far more common, e.g., improved flotation cells for coal cleaning, optimization of drag lines, on-belt measurement of ash and moisture. The list is long and helps to explain why, averaged over a few years, commodity prices can fall in real terms forever. Figure 1 is a composite of many commodities, including coal, and shows a steady fall in real prices over a 200-year period. This is extraordinary in that, while demand for the commodities in this index has been increasing, on the supply side we have seen costs heading in the opposite direction.
|Figure 1. Over a Long Time Period Commodity Prices Fall in Real Terms 5|
Although the price of coal spiked in recent years6, along with other commodities it has now fallen well back. This reminds us that when coal loses its cost competitiveness, substitutes can move in quite rapidly.
Overall, there can be only one answer as to why prices fall in real terms when demand is rising and extraction is becoming more difficult: Innovation is occurring. It is all too easy to overlook the relentless march of innovation. The Club of Rome in 1972 got it right when they suggested that the future of the world would be very dependent on energy.7 They got it wrong, however, in predicting the end of oil in 1992 and gas in 1994. We still have to wait on their 2083 coal prediction. What has happened, of course, is that as demand has risen and easy-to- win resources have been depleted, we have simply moved down the resource pyramid to lower rank or more difficult- to-win materials and relied on innovation to lower costs in real terms.
This race, now documented for over 200 years, is driven by innovation, but has two intertwined goals. The first target of innovation is individual competitive advantage against other companies. This is relentless and inevitably drives companies toward lowering costs. A company that fails to innovate loses its margins as its competitors reduce their costs through innovation.
Second, as any particular innovation spreads through the industry (and spread it will, it is only a matter of time), the net effect is to keep coal competitive against other sources of energy. That said, other energy producers also have their own innovation race: We only have to look at the reduction in price of photovoltaics over the last 20 years to acknowledge that no one escapes the innovation race—no individual company and no particular industry. Without innovation, coal dies.
Winning the Innovation Race
Understanding how innovation happens is well documented8; the real question is when the benefits are so clear, why is the risk appetite for innovation so low? In Australia, surveys indicate that less than 40% of firms innovate.9 One of the prime reasons is that the time required to bring new technologies into everyday use in the coal industry is long. Capital-intensive industries involve long time scales for new technologies, as experience from BHP-Billiton indicates10 (see Figure 2). Whether a major innovation such as CCUS (carbon capture, utilization, and storage) or a somewhat smaller one such as Jameson flotation cells, the time scales are in years, not months.
|Figure 2. BHP-B Experience of Implementation Time for New Technologies|
There are many other reasons why firms choose not to innovate but, to look on the positive side, my own experience in the process industries suggests that risks are minimized when large-scale implementation is supported by ongoing R&D. This is counterintuitive to many who see that R&D stops once large-scale implementation starts. One could cite many examples, including cases where billions of dollars have been lost through missing this point. For this underlying, but critical, R&D, companies have many options, including direct support and proven channels for collaboration.A The industry levy model has worked well over many years.B
Thermal Efficiency: The Elephant in the Room
China’s success related to energy efficiency gains is a lesson to the world in coal utilization. Emissions per capita decreased by 15% between 2005 and 2011.11 This is an extraordinary result and stems from a focused approach of installing new capacity at the leading edge of thermal efficiency. It is well established that a 1% improvement in thermal efficiency results in a 2–3% reduction in emissions.12 Thermal efficiency is “the elephant in the room” in terms of potential to reduce emissions. As pointed out by the IEA, the world average on thermal efficiency is only 30%.13 Movement to the European average would see global efficiency at 38%, to state-of-the-art technology would see efficiency at 45%, and even 50% could be possible.14 If coal-fired power plants worldwide operated at 700°C, a 40% reduction in emissions would result. Throw in CCUS on top of this and the reductions would be 90% compared to present levels.
At this point, it should be acknowledged that major innovation in coal use, e.g., in power stations, involves even higher capital intensities than in coal production. As such, incentives such as a price on carbon emissions will have to be quite high to induce change in existing plants. Present levels in OECD countries are inadequate.
Many possibilities exist in the upstream part of coal production where significant improvements can be made. Targeting grade improvement in processing is powerful in that it allows more recovery in mining and not just lower costs in processing.
Advances in grade improvement are coming fast in key areas, for example:
- SortingC, where tonnages to 400 tonnes/h are possible and where dual energy X-ray transmission easily sorts coal from wastes or marginal torbanite
- Flotation15, where new equipment is showing possibilities of coarse particle flotation to millimeter size and fine particle flotation to micron size
- Micronizing16, where flotation can be used to separate ash components and give a product of very low ash, suitable for direct injection into engines17
Ultra-fine coal dewatering and low-rank coal dewatering have been on the agenda for over 100 years. The U.S. Department of Energy has funded significant work in recent years in the use of dewatering aids, hyperbaric centrifugal filters, and the dewatering by displacement process.18 Upgrading of low-rank coals has long been possible technically; to date the challenge has been related to the economics and the engineering detail. As well, many of the products from these processes have suffered from self-heating or dusting problems. One (of many) that looks particularly promising is the mild hydrothermal upgrading recently demonstrated by the Exergen company with results at tonnage scales. A range of low-rank coals have been upgraded from moisture contents around 60–70% to product at 20–25%.19 Hydrothermal dewatered coal slurry appears to be an ideal fuel for high-efficiency direct injection coal engines.
Perhaps the most fruitful area for the mining side of the coal industry is to move even further into automation. This is happening worldwide at an increasing pace with remote control centers now being commonplace and thousands of kilometers distant. Thus far, the mineral industry leads the world with autonomous drills, trucks, and trains in use. One company alone will have 150 autonomous trucks operating in the Pilbara (Western Australia) region within the next three years, hauling 20 million tonnes/d.20 The coal industry has done well in particular areas (e.g., drag line automation), but has yet to fully embrace and benefit from the advances now seen in the mining of minerals.
Is the Coal Industry Winning the Innovation Race?
Overall, there are encouraging signs that innovation is taken seriously in the coal industry, but I would suggest that much more could and should be done, particularly in targeting efficiency improvements from the resource in the ground through to final products such as power in the grid. Regarding the necessary innovation in these areas, there is still a long way to go.
The content included here is based on the opinion of the authors, and does not necessarily reflect the views of PennEnergy, The World Coal Association or its members.