Urbanization, City Growth, and the New United Nations Development

SUMMER 2015 CORNERSTONE

VOLUME 3 ISSUE 2 THE OFFICIAL JOURNAL OF THE WORLD COAL INDUSTRY

Urbanization, City Growth, and the New United Nations Development Agenda Barney Cohen Chief of Branch, Population Division, Department of Economic THE OFFICIAL JOURNAL OF WORLD COAL INDUSTRY and Social Affairs, United Nations

SUMMER 2015 • VOLUME 3, ISSUE 2

The High Cost of Divestment Urbanization, Steel Demand, Cogeneration Plants Close and Raw Materials to Town Get the Most Out of Coal in Germany Our mission is to defend and grow markets for coal based on its contribution to a higher quality of life globally, and to demonstrate and gain acceptance that coal plays a fundamental role in achieving the least cost path to a sustainable Benjamin Sporton low carbon and secure energy future. Acting Chief Executive World Coal Association

The World Coal Association has been influencing policy at the highest level for 30 years. No other organisation works on a global basis on behalf of the coal industry.

Our membership comprises the world’s major international coal producers and stakeholders. WCA membership is open to organisations with a stake in the future of coal from anywhere in the world. www.worldcoal.org www.worldcoal.org/extract It is an exciting time for the WCA and for the global coal industry. If you twitter.com/worldcoal have an interest in the future of the coal industry, contact us to see how www.youtube.com/worldcoal you can get involved: [email protected] facebook.com/WorldCoalAssociation

WCA Members Alpha Natural Resources Inc Caterpillar Global Mining Peabody Energy Anglo American China National Coal Group Rio Tinto Energy Arch Coal Inc Glencore Shenhua Group Aurizon Joy Global LLC Vostsibugol Banpu Karakan Invest. Whitehaven Coal Limited BHP Billiton Mitsubishi Development Pty Ltd Xcoal Energy & Resources Bowie Resource Partners LLC Orica Ltd

WCA Associate Members Asociación Nacional De Empresarios De Coal Association of New Zealand Minerals Council of Australia Colombia CoalImp - Association of UK Coal Importers Mongolian Coal Association ASSOCARBONI Fossil Fuel Foundation National Mining Association Associação Brasileira do Carvão Mineral German Coal Association Queensland Resources Council Association of British Mining Equipment Indonesian Coal Mining Association Shaanxi Institute of Geological Survey Companies Iranian Mines & Mining Industries Development Svenska Kolinstitutet China National Coal Association & Renovation Organization UCG Association Coal Association of Canada Japan Coal Energy Center

WCA_advert_h273 x w206mm 8 may 2015.indd 1 08/05/2015 14:53 FROM THE EDITOR Urban Centers as Vehicles for Societal Development

round the world, people are moving to urban centers in unprecedented numbers. As pointed out in this issue’s cover story, over the next 15 years Athe global population is expected to increase by 1.1 billion with nearly all of this growth concentrated in cities. The United Nations (UN) projects that over 6.3 billion people will live in urban centers by 2050. While the challenges experienced by many fast-growing cities should not be understated, people are moving to cities in droves because of the chance to improve their quality of life—economically, socially, and environmentally. Urbanites have much better access to basic services such as electricity, clean water, hospitals, and waste disposal. These benefits, as well as increased employment opportunities and access to better schools, make it abundantly clear why the world is on the move to cities.

There are several pillars under which coal supports urbanization. The most important is providing baseload electricity, which explains increasing coal use in rapidly urbanizing areas such as India and the Association of Southeast Asian Nations (ASEAN). Population concentration offers an opportunity to deploy large-scale, low- cost power plants that can support not only urbanization and modernization, but also job-driving industrialization.

Electricity is not the only link between coal utilization and urbanization. Steel and Holly Krutka cement are two vital building blocks for urban centers, and the production of both Executive Editor, Cornerstone at scale requires large coal inputs. In fact, the steel industry consumed about 1.2 billion tonnes of coal in 2013. Coal is also the fuel of choice for cement production, which currently uses 350–400 million tonnes each year.

Providing improved quality of life for those choosing to move to cities is a key objective for most governments, but there is also strong case to balance this goal with environmental protection. Urban centers, in fact, can offer major environmental benefits. For example, the unsustainable harvesting of biomass for cooking fuel and heating largely observed in rural areas, and associated with dangerous indoor air pollution, is much less prevalent in urban centers.

Although energy use in cities is higher, it can also be much more efficient with proper urban planning. One of the best opportunities for getting the most out of energy sources is combined heat and power generation. As profiled by an article in this issue, Germany has been applying this technology in large and small cities for decades. In addition, other high-efficiency, low-emissions technologies can be applied to the large coal-fired plants powering cities. While there are certainly challenges associated with widespread urbanization, they are vastly outnumbered by the opportunities.

This issue of Cornerstone offers several articles that explore the many areas in which coal is linked to urbanization. On behalf of the editorial team, I hope you enjoy it.

www.cornerstonemag.net 1 contents

FROM THE EDITOR Urban Centers as Vehicles for Societal Development 1 Holly Krutka, Cornerstone

VOICES The High Cost of Divestment 8 Benjamin Sporton, World Coal Association

ENERGY POLICY 12 South Africa’s Road to Growth Is Paved With Coal 12 Nikki Fisher, Anglo American Coal

Driving India’s Next Wave of Urbanization 17 T.G. Sitharam, Jaya Dhindaw, Indian Institute of Science

STRATEGIC ANALYSIS Transitioning Urbanization, Energy, 22 and Economic Growth in China Lei Qiang, Ning Chenghao Shenhua Science and Technology Research Institute 17 ASEAN Urbanization and the Growing Role of Coal 27 Jude Clemente, JTC Energy Research Associates, LLC

Urbanization, Steel Demand, and Raw Materials 33 Mike Elliott, Ernst & Young

The Rise and Potential Peak of 37 Cement Demand in the Urbanized World Peter Edwards, Global Cement Magazine

4 Cover Story Urbanization, City Growth, and the New United Nations Development Agenda Barney Cohen, United Nations Urbanization is a global trend and the world’s cities will absorb nearly all population growth in the near future. Cities will be an important consid- eration in planning the new UN development goals, and if urban centers can rise to the challenge, they offer an opportunity to improve living conditions for billions while balancing protection of the natural world.

2 TECHNOLOGY FRONTIERS Cogeneration Plants Close to Town Get the Most Out of Coal in Germany 42 Stefan Schroeter, Cornerstone

Shenhua Guohua’s Application of Near-Zero Emissions Technologies for Coal-Fired Power Plants 46 Wang Shumin, Shenhua Guohua Power Company 42 Ashworth Gasifier-Combustor for Emissions Control From Coal-Fired Power Plants 52 Robert Ashworth, Mark Becker, ClearStack Power, LLC

Underground Coal Gasification: An Overview of an Emerging Coal Conversion Technology 56 Cliff Mallett Underground Coal Gasification Association, Carbon Energy Limited

Carbon Energy Delivers Innovations in Underground Coal Gasification 61 46 Morné Engelbrecht, Carbon Energy Limited

GLOBAL NEWS Covering global business changes, publications, and meetings 65

LETTERS Letters to the Editor 67

Chief Editor Copyright © 2015 World Coal Association Gu Dazhao, Katie Warrick Editorial Office Executive Editor Shenhua Science and Technology Research Holly Krutka, Liu Baowen Institute Co., Ltd 006 mailbox Official Journal of World Coal Industry Shenhua Science and Technology Park, Responsible Editor Future Science & Technology City, Chi Dongxun, Li Jingfeng Changping District Beijing 102211, China Copy Editor Li Xing, Chen Junqi, Zhang Fan Phone: +86 10 57336026 Sponsored by Shenhua Group Corporation Limited Fax: +86 10 57336014 Production and Layout John Wiley & Sons, Inc. Email: [email protected] (Chinese) Email: [email protected] (English) CORNERSTONE (print ISSN 2327-1043, Website: www.cornerstonemag.net online ISSN 2327-1051) is published four times a Published by John Wiley & Sons, Inc. year on behalf of the World Coal Association by The content in Cornerstone does not necessarily Wiley Periodicals Inc., a Wiley Company reflect the views of the World Coal Association or 111 River Street, Hoboken, NJ 07030-5774. its members.

www.cornerstonemag.net 3 COVER STORY

Urbanization, City Growth, By Barney Cohen Chief of Branch, Population Division, “Cities are currently home to just Department of Economic over half of the world’s population and Social Affairs, and virtually all of the 1.1 billion United Nations increase in global population projected over the next 15 years is expected to occur in urban areas.”

n September 2015, member states of the United Nations environmental sustainability, and strengthening global part- (UN) will meet in New York to finalize a new global develop- nerships for development, by the target date of 2015. The Iment agenda that will guide the international community’s world has made notable progress in reducing extreme poverty efforts to eradicate poverty, reverse global trends toward over those years, in large part because of the remarkable eco- unsustainable patterns of consumption and production, and nomic growth that China has achieved. Some countries look protect and manage the environment over the next 15 years. set to attain all or most of the MDGs prior to the 2015 dead- For the past 15 years, the international community’s efforts line. Overall, however, progress has been uneven both within have been guided by the UN’s Millennium Development Goals and between countries and regions.1 At the same time, signs (MDGs), the eight-point agenda adopted by member states of global climate change and environmental degradation have in 2000 that focused on eradicating extreme poverty and become increasingly visible and the international community hunger, achieving universal primary education, promoting has come to recognize that global goals and targets for sus- gender equality and empowering women, reducing child and tainable development need to be reprioritized in order to give maternal mortality, halting the spread of HIV/AIDS, ensuring environmental objectives a somewhat higher profile.

4 and the New United Nations Development Agenda

WHY MANAGING CITIES HAS has led to urban sprawl, pollution, environmental degradation, BECOME A TOP PRIORITY and, in some cases, heightened exposure to the risk of natural hazards (e.g., floods and landslides). Future urban expansion In designing the new global development agenda, it will be needs to be undertaken in a more sustainable and inclusive important for policymakers to understand and account for the manner, and needs to be accompanied by a reduction in the nature and extent of the major demographic changes likely to number of slum dwellers, an expansion of infrastructure to unfold over the next 15 years and how such changes can be ensure greater access to basic services for the urban poor, and expected to contribute to or hinder the achievement of the the implementation of policies that preserve the natural assets new sustainable development goals. Much will depend, for within cities and surrounding areas, protect biodiversity, and example, on how well countries manage their cities. Cities have minimize tropical deforestation and changes in land use. always been focal points for economic activity, innovation, and employment. Historically, most cities developed because of TRENDS IN URBANIZATION AND CITY GROWTH some natural advantage that they possessed in location related to ease of fortification or transportation, access to markets, or access to raw materials. Today, cities play a central role in Cities are currently home to just over half of the world’s popula- creating national wealth, enhancing social and economic devel- tion and nearly all of the 1.1 billion increase in global population opment, attracting direct foreign investment and manpower, projected over the next 15 years is expected to occur in urban and harnessing both human and physical resources in order to achieve gains in productivity and competitiveness. Cities also offer other advantages that are important for achieving sustainable development. Higher population density associated with urbanization provides an opportunity for governments to deliver basic services such as water and sanitation more cost- effectively to greater numbers of people. Higher population density may also be good for minimizing the effect of humans on local ecosystems. Despite the high rates of urban poverty found in many cities in low-income countries, urban residents, on average, enjoy better access to education and health care, as well as other basic public services such as electricity, water, and sanitation, than people in rural areas. For example, it has been estimated that 94% of urbanites have access to electricity compared with only 68% of rural residents.2

The challenge, of course, is that as cities become ever larger, managing them inherently becomes increasingly complex. A basic determinant of the world’s ability to achieve the post- 2015 development agenda will be the quality of governance at all levels. In this context, it is important to note that the structure and organization of urban governance has itself undergone significant changes over the recent past, resulting in solutions to urban problems increasingly being sought at the local rather than the state or national level. This has created an urgent need to strengthen the capacity of local governments charged with solving new and persistent environmental and social service challenges that accompany rapid urban growth so that the benefits of urban living are shared equitably. In many The latest official UN estimates were provided in the 2014 cities, unplanned or inadequately managed urban expansion World Urbanization Prospects.

www.cornerstonemag.net 5 COVER STORY

areas. For that reason, the United Nations Population Division TABLE 1. Urban population by major area, 2015 and 20303 has published a new resource, World Urbanization Prospects: 2014 Revision [Highlights]. The report contains the latest official Urban Urban UN estimates and projections of urban and rural populations for population population Ratio of Region major areas, regions, and countries of the world from 1950 to 2015 2030 2030/2015 2050 and estimates and projections to 2030 of all urban agglom- (millions) (millions) erations with 300,000 or more inhabitants in 2014. As such, it was created to provide important insights into the size and World 3957.3 5058.2 1.28 3 characteristics of future urban challenges and opportunities. Africa 471.6 770.1 1.63

As the report makes clear, urbanization has proceeded rapidly Asia 2113.1 2752.5 1.30 over the past 60 years. In 1950, more than two-thirds of people Europe 547.1 567.0 1.04 worldwide lived in rural areas and slightly less than one-third Latin America resided in urban areas. In 2014, 54% of the world’s population 502.8 595.1 1.18 and the Caribbean lived in urban areas, and the coming decades will not only see continued global population growth but also continued urban- Northern America 294.8 339.8 1.15 ization so that all of the growth in global population over the next Oceania 27.9 33.7 1.21 15 years is projected to occur in urban areas. Furthermore, those projections show that urbanization, combined with the overall growth of the world population, could result in the addition of The new UN report differs from previous versions because, for another 2.5 billion people to the global urban population by the first time, estimates and projections from 1950 to 2030 are 2050, at which time the world is expected to be one-third rural provided for all urban agglomerations with populations cur- and two-thirds urban—almost the exact opposite of the situation rently over 300,000. Previously, data were reported only for observed in the mid-20th century (see Figure 1). cities with over 750,000 residents. Although there is obviously much uncertainty about the future course of urbanization Just over the brief span of the next 15 years, the timeframe and city growth, and, in particular, the exact trajectory of any for the implementation of the new UN development agenda, given city or urban area, the broad trends across regions and the world’s urban population is projected to expand 28%. across city sizes over a 15-year time horizon can be expected All regions, with the exception of Europe, are projected to to be reasonably robust and are very clear: The world’s fastest increase the size of their urban population by at least 15%— growing cities are located in Africa and Asia and tend to be with Africa and Asia projected to have the largest increases medium-sized cities of between one and five million residents. of 63% and 30%, respectively (see Table 3 1). Perhaps not surprisingly, given the size of their populations, the greatest Given the projected increase in the global urban population, it urban growth is expected to occur in India, China, and Nigeria. is not surprising that the world is projected to experience not Taken together, these three countries are projected to account only an increase in the absolute number of large cities, but for 37% of the total growth of the world’s urban population that the largest cities are projected to reach unprecedented between 2014 and 2050. By 2050, India is projected to have sizes. “Mega-cities”, conventionally defined to be large urban added an additional 404 million urban residents, China an agglomerations of 10 million or more, have become both additional 292 million, and Nigeria an additional 212 million. more numerous and considerably larger in size. In 1990, there were 10 such mega-cities, containing 153 million people. By 2014, the number of mega-cities had nearly tripled to 28, 7 Urban and the population that they contain had grown to 453 mil- 6 lion inhabitants, accounting for roughly 12% of the world’s Rural urban dwellers. While Tokyo, currently the world’s largest 5 urban agglomeration with 38 million inhabitants, has grown 4 at an annual rate of roughly 0.6% over the last five years, other megacities such as Delhi (with 25 million residents) and

on (billions) ti on 3 Shanghai (with 23 million) have been growing at more than 2 3% per annum over recent years. Such rapid growth is creating Popula significant challenges for local authorities charged with deliv- 1 ering essential services. Rounding out the list of the top 10 0 largest urban agglomerations are Mexico City, Mumbai, and 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Sao Paulo, each with around 21 million, Osaka with just over FIGURE 1. Estimated and projected populations in urban and 20 million, Beijing with slightly under 20 million, and New York- rural settings, 1950–20503 Newark and Cairo, each with around 18.5 million inhabitants.

6 SMALL CITIES, BIG AGENDA

While there is no doubt that large cities will play a significant role in absorbing future anticipated growth, the new report also makes clear that at least for the foreseeable future the majority of the world’s urban residents will continue to live in far smaller urban settlements.3 In 2014, close to one-half of the world’s urban population lived in settlements with fewer than 500,000 inhabitants whereas only around one in eight lived in the 28 mega-cities with 10 million inhabitants or more. Although the percentage of the urban population living in relatively smaller urban settlements is projected to shrink over time, even in 2030, the anticipated final year for the implementation of the soon-to-be-adopted new UN development agenda, small cities and towns will still be home to around Urbanites have better access to basic services, such as water, 45% of the population. Typically, residents of small cities in trash removal, and electricity. developing countries suffer a marked disadvantage in the provision of basic services, including provision of piped water, benefits of urbanization and city growth in ways that lessen the sanitation, and electricity, compared to residents of medium obvious potential negatives. The realization by the international or large cities. Furthermore, researchers have found that in community that, alongside poverty reduction, environmental developing countries, rates of poverty are typically higher in objectives must feature more prominently in any new list of smaller cities than in medium or larger cities, and that infant global goals and targets suggests that attention to issues of and child mortality are negatively proportional to city size.4 energy use and energy efficiency5 are likely to attract much Given the role that will be played by small cities in accommo- more attention than ever before. Continued urban population dating future population growth, improving the provision of growth combined with rising standards of living suggests that basic services in such cities must remain a priority. energy use and greenhouse gas emissions will be much higher in the future, unless there is concerted action to reduce them. FROM MILLENNIUM DEVELOPMENT GOALS Therefore, one essential element of the new sustainable devel- TO SUSTAINABLE DEVELOPMENT GOALS opment agenda will be to encourage local authorities to invest in new cleaner energy infrastructure relying on high-efficiency, It has long been recognized that the size, composition, and low-emissions fossil-fuel technologies and utilize new technol- spatial distribution of human populations can substantially ogies that take advantage of alternative energy sources. affect the likelihood of achieving sustainable development goals. Over 20 years ago, in 1994, the International Conference DISCLAIMER on Population and Development’s Programme of Action pointed out that unsustainable consumption and produc- The views expressed in this article are those of the author and tion patterns were contributing to the unsustainable use of do not necessarily reflect those of the United Nations. natural resources and environmental degradation as well as to the reinforcement of social inequities and poverty. In design- REFERENCES ing the new post-2015 development agenda, member states of the UN need to ensure that efforts to improve the quality 1. United Nations. (2014). The millennium development goals re- of life of the present generation are far-reaching, broad, and port: 2014. New York: United Nations, www.un.org/millennium- inclusive, but do not compromise the ability of future genera- goals/2014%20MDG%20report/MDG%202014%20English%20 tions to meet their own needs. Accomplishing these ambitious web.pdf 2. InternationalEnergy Agency (IEA). (2011) World Energy Outlook goals will depend on identifying strategies to expand access to 2011. Paris: IEA. www.worldenergyoutlook.org/resources/ener- resources for growing numbers of people, eradicate poverty, gydevelopment/accesstoelectricity/ increase standards of living, reduce unsustainable patterns of 3. United Nations. (2014). World urbanization prospects: The 2014 consumption and production, and safeguard the environment. revision [Highlights]. New York: United Nations), esa.un.org/ unpd/wup/ Cities have become the principal venue for attempting to 4. National Research Council. (2003). Cities transformed: Demo- graphic change and its implications in the developing world. achieve the goals and targets of the new development agenda. Washington, DC: National Academies Press. Consequently, one of the central challenges over the next 15 5. International Energy Agency (IEA). (2014). Capturing the mul- years is finding means to take full advantage of the potential tiple benefits of energy efficiency. Paris: IEA.

www.cornerstonemag.net 7 VOICES

The High Cost of Divestment

By Benjamin Sporton the potential impacts of climate change, governments must Acting Chief Executive, World Coal Association adopt policies consistent with limiting global average surface temperature increases to 2°C above pre-industrial levels. This scenario would require deep structural changes to the business model of conventional energy companies. In effect, they ince 2012, when 350.org launched its “Fossil Free” cam- argue, it would render large volumes of coal and hydrocarbon paign, there has been an increasing global campaign to reserves “unburnable”. The concept continues that stock mar- divest fossil fuel assets, particularly coal. The approach S ket valuations of fossil fuels are overvalued creating a “carbon has been supported by some institutions that have divested, bubble”. Under these circumstances, campaigners have begun while rejected by others. For instance, in February 2015, to pressure governments and institutions to divest their finan- despite an expert panel supporting continued investment, cial holdings from companies that explore, produce, market, NBIM, the manager of Norway’s sovereign wealth fund, and/or exploit fossil fuels. announced it had divested a number of fossil fuel companies from its portfolio. However, with deeper analysis, it is clear that the movement is built on unsubstantiated claims and flawed logic. In contrast, a number of other high-profile organizations have resisted calls for divestment. Harvard University, Brown University, the University of Oxford, and the Wellcome Trust, among others, have released statements questioning the “As demonstrated by the rationale of the campaign. Indeed, the President of Harvard, Drew Faust, who controls the university’s $32 billion endow- projected growth of coal, stepping ment, stated:1 away from the fossil fuel industry Divestment is likely to have negligible financial impact on the affected companies. And such a strategy would does not mean that the demand diminish the influence or voice we might have with this industry. Divestment pits concerned citizens and institu- for fossil fuels goes away.” tions against companies that have enormous capacity and responsibility to promote progress toward a more sustainable future. COAL: FUELING THE FUTURE As the divestment campaign has grown in exposure, propo- nents have begun to suggest that the financial valuations of Calling for divestment from coal does not recognize the real- energy companies may be damaged by strict international ity of growing energy demand, the continuing role of coal, and the importance of technology in enabling coal use to climate policies. Campaigners suggest that in order to avoid be compatible with global efforts to reduce emissions. Coal has accounted for nearly half of the increase in global energy

) use over the past decade. In terms of energy, the 21st century 1400 lent has been built on coal. In the early part of this century, coal’s va 1200 global contribution alone has been comparable to the contri-

1000 bution of nuclear, renewables, oil, and natural gas combined (see Figure 1).2 800 Mtoe 600 The latest figures from the BP “Statistical Review of World 400 Energy” show that coal’s share of global primary energy consumption in 2013 reached 30.1%—the highest since 1970.3 200

(million tonnes of oil equi 0 Gas Oil Renewables Nuclear Total Coal There are 1.3 billion people in the world today who live with- non-coal out access to electricity; 2.6 billion people rely on traditional FIGURE 1. Incremental world primary energy demand by fuels, such as dung and wood, for cooking. No doubt that is fuel, 2000–2010 why, according to the World Resources Institute, 1199 coal

8 50% Oil There are risks for every business and future demand condi- Coal 40% tions may result in losses given current business models and Gas business strategies. The fossil fuel industry is not unique in 30% Biomass and waste this. However, divestment campaigns seem to be based on Nuclear 20% Hydro the argument that investors are somehow oblivious to the Other renewables risks. Investors have known about climate change since at 10% least 1992, when the United Nations Framework Convention 0% on Climate Change (UNFCCC) was negotiated. 1980 1990 2000 2010 2020 2030 2035 FIGURE 2. Historical and predicted energy makeup under the 2 In fact, a University of California study has refuted claims IEA’s New Policies Scenario that the so-called “carbon bubble” will soon burst.6 The study found that rational investor expectations of future cash flows plants (representing 1,401,278 MW) are anticipated across derived from fossil fuel assets have already adjusted for the 59 countries, many of them in the developing world.4 This is likelihood of global action to reduce CO emissions. because coal is the most affordable, easily accessible, and reli- 2 able source of power. Investors may not value the risks to the level that divestment campaigners would like, but it is an unsubstantiated claim that Alongside its vital role in electricity generation, coal is also an markets ignore these risks. An appropriate response to any indispensable ingredient for building modern infrastructure, risk is a well-diversified portfolio. such as transport systems, equipment, and high-rise buildings, to support urbanization and economic development. The materials used in these projects—steel, cement, glass, and aluminum— CHALLENGE TO ENVIRONMENTALLY are highly energy intensive. Coal’s social value was highlighted by CONSCIOUS INVESTMENTS Christina Paxson of Brown University in her response to calls for divestment when she said, “A cessation of the production and Divestment campaigns pressure investors to divest fossil use of coal would itself create significant economic and social fuel stocks irrespective of whether they have good or bad harm to countless communities across the globe.”5 Corporate Social Responsibility (CSR) indicators. All fossil fuel companies are grouped together—no benefit is given to companies with a good CSR performance. FORECASTING FUTURE DEMAND However, environmentally conscious investors are able to At the core of divestment campaigns are forecasts about the ensure responsible corporate behavior through the adoption future demand for fossil fuels. Investors and policymakers rely of CSR programs that enhance environmental outcomes. For on energy projections from a variety of independent sources instance, investment has led to developments in cleaner coal and these shape investment decisions. Leading energy fore- technologies, such as high-efficiency, low-emissions (HELE) casters, such as the IEA, all suggest that coal will have a central coal-fired power plants and carbon capture, use, and storage role to play in energy generation and in industries, such as steel production, for decades to come. Even under the IEA’s New Policy Scenario (see Figure 2), which assumes all government promises on funding renewables and building nuclear power plants are implemented, coal consumption increases by around 17% through to 2035 and there is little change in the global energy mix.2 Coal continues to make up 25% or more of primary energy demand—as it was in 1980, and as it has been for most of the past 30 years. This will also be 25% of an energy pie that IEA projects to grow by 40% over the next quarter century.

THE FLAWED LOGIC OF DIVESTMENT

Divestment campaigns assume investors do not understand the risks associated with the investments they undertake and, as Coal is projected to continue to make up 25% of primary such, they are incapable of pricing the risk within their portfolios. energy demand.

www.cornerstonemag.net 9 VOICES

(CCUS), which have made a significant contribution to reduce global CO2 emissions. The potential of CCUS is evidenced by the Boundary Dam coal-fired power station in Canada. This pioneering project will reduce greenhouse gas (GHG) emissions by one million tonnes of CO2 annually, the equivalent to taking more than 250,000 cars off the road each year.

Stepping away from the fossil fuel industry does not mean that the demand for fossil fuels will go away, it just means that environmentally conscious investors lose any influence they have over the operation of those companies.

By definition, divestment requires a change in ownership of assets: Institutes and individuals may sell their shares but can only do this if other institutes and individuals buy these same Processing and execution costs, as well as reduced return on shares. In other words, divestment does nothing to affect the investment, mean that divestment could be expensive. demand for or use of fossil fuels. DIVESTMENT IS LIKELY TO HARM FINANCIAL GOALS THE ROLE OF TECHNOLOGY Funds subscribing to the objectives of the divestment cam- The large mitigation potential of cleaner coal technologies, paign will incur three types of costs: trading, diversification, including HELE coal plants and CCUS, invalidates the central and compliance. argument of divestment campaigns. Coal can be, and in many cases already is, used in a sustainable way through the use of Trading costs refer to the outlays involved in selling fossil modern technologies. Investing in cleaner coal technologies is fuel securities and purchasing new compliant stocks. In addi- often criticized as a means for the coal industry to “smuggle” tion, many exchanges are also liable for exchange fees and its products into a low-emissions future. The reality is that taxes. A recent study titled “Fossil Fuel Divestment: A Costly cleaner coal technologies are needed because coal demand and Ineffective Investment Strategy” by Professor Daniel R. will continue and, thus, coal is part of our energy future. Fischel suggests that these processing and execution costs are 10 Raising the global average efficiency of coal plants from 34% approximately $0.18 per $100. Professor Fischel suggests that U.S. universities would incur costs of $40.2 million for to 40% with today’s off-the-shelf technology would save two processing and execution. gigatonnes (Gt) of CO2 each year. This is more than the total annual CO emissions of India—the third largest CO emitter 2 2 Investment risk is best mitigated by a diverse asset port- in the world. folio. Restricting or eliminating fossil fuels from investments will likely reduce the average return. Again, Fischel’s study In addition to the significant benefits from reducing CO emis- 2 provides compelling evidence to support this argument. The sions, modern HELE plants can almost eliminate emissions study assessed a portfolio containing energy stock against a of nitrogen oxides (NOx), sulfur dioxide (SO2), and particulate portfolio with no energy stock from 1965 to 2014. In addition matter (PM). Real solutions to climate change will come largely to a reduced return of 0.7% per year, the assessment found through technological change and action on all low-carbon that the portfolio that did not have energy assets was more options. CCUS will be a key technology to reduce CO2 emis- susceptible to volatility. sions, not only from coal, but also gas and industrial sources. The IEA has estimated that CCUS could deliver 14% of cumu- Finally, divestment compliance is a complex process that is lative GHG emissions cuts through to 2050 and that climate highly sophisticated and demanding. Thus, it comes with change action will cost an additional US$4.7 trillion without commensurate resource and cost burdens. More than simply CCUS.7,8 However, in comparison to other low-carbon tech- divesting from fossil fuel companies, policy may demand that nologies, CCUS is underfunded. The Global Subsidies Initiative investments are withdrawn from index and commingled funds has reported that renewable energy projects (excluding hydro- and moved to actively managed funds. Assessments suggest electricity) receive US$27 billion in public funds every year.9 this would cause management fees to double. To address In comparison, in the decade since 2005, only US$12.2 billion these compliance concerns, portfolio managers are begin- has been available to fund CCUS demonstration—in total. ning to offer funds with “green” objectives. Industry reviews,

10 however, indicate that mutual funds with an environmental the deployment of CCUS technologies. As shown by the focus come with higher management fees. Intergovernmental Panel on Climate Change, this is a vital development if global temperature increases are to be kept Independently the various costs associated with divestment below 2°C.12 are substantial. Cumulative costs, however, are significant and may impair the objectives or even function of endowments REFERENCES and pension funds. Divestment by tertiary organizations is especially counterintuitive, given their role in providing solu- 1. Harvard University, Office of the President. (2013, 13 October). tions to energy and climate issues through research and grants. Fossil fuel divestment statement, www.harvard.edu/president/ fossil-fuels CONCLUSION 2. InternationalEnergy Agency (IEA). (2011). World energy outlook 2011, www.worldenergyoutlook.org/publications/weo-2011/ The direct impacts of fossil fuel divestment are unlikely to be 3. BP. (2014). Statistical review of world energy 2014, www. significant; this view is grounded in financial logic. In contrast, bp.com/en/global/corporate/about-bp/energy-economics.html however, the indirect impacts of campaigners should not be 4. World Resources Institute. (2012, November). Global coal risk discounted. assessment, www.wri.org/publication/global-coal-risk-assessment 5. Brown University, Office of the President. (2013). Coal divestment Perhaps most significantly, divestment would lead to respon- update, brown.edu/about/administration/president/2013-10- sible investors leaving the energy industry. As demonstrated 27-coal-divestment-update by the projected growth of coal, stepping away from the fossil 6. Dominguez-Faus, R., Griffin, P., Myers Jaffe, A., & Lont, D. (2014, June). Science and the stock market: Investors’ recognition fuel industry does not mean that the demand for fossil fuels of unburnable carbon. Presented at the 37th International goes away. Instead, a more likely scenario is that environmen- Association for Energy Economics Conference on Energy and the tally conscious investors will lose any influence they had over Economy, New York, NY, dx.doi.org/10.2139/ssrn.2362154 the operation of those companies. Indeed, this outcome was 7. IEA. (2013). Technology roadmap carbon capture and storage, highlighted by Jeremy Farrar, Director of the Wellcome Trust, www.iea.org/publications/freepublications/publication/ who responded to the recent Guardian divestment campaign technology-roadmap-carbon-capture-and-storage-2013.html 11 by stating: 8. IEA. (2010). Energy technology perspectives 2010: Scenarios & strategies to 2050, www.iea.org/publications/freepublications/ We use our access to boards to encourage them to publication/etp2010.pdf adopt more transparent and sustainable policies that 9. International Institute for Sustainable Development. (2011). support transition towards a low-carbon economy. Subsidies and external costs in electric power generation: And we adopt the same position with companies that A comparative review of estimates, www.iisd.org/gsi/sites/ consume fossil fuels as we do with the companies that default/files/power_gen_subsidies.pdf supply them. Carbon emissions are driven by both sup- 10. Fischel, D. (2015). Fossil fuel divestment: A costly and ineffective ply and demand: it makes no sense to devote attention investment strategy, divestmentfacts.com (accessed March purely to one side of this equation. This maximises our 2015) influence as investors. 11. Farrar, J. (2015, 25 March). Fossil fuels divestment is not the way to reduce carbon emissions. The Guardian, www.theguardian. The divestment campaign threatens the coal industry’s invest- com/commentisfree/2015/mar/25/wellcome-trust-fossil-fuel- ments to improve environmental performance, starting with divestment-not-way-reduce-carbon-emissions 12. Intergovernmental Panel on Climate Change. (2005). Carbon the potential to reduce 2 Gt of CO2 emissions each year with off-the-shelf efficiency increases. This is why the World Coal dioxide capture and storage, www.ipcc.ch/pdf/special-reports/ Association has recently published a concept paper on launch- srccs/srccs_wholereport.pdf ing a global Platform for Accelerating Coal Efficiency (PACE) to support the deployment of HELE technologies. Moreover, A copy of the WCA’s PACE concept paper can be downloaded deployment of HELE is a critical step on the pathway to from the WCA website: www.worldcoal.org

www.cornerstonemag.net 11 ENERGY POLICY

South Africa’s Road to Growth Is Paved With Coal

By Nikki Fisher All options are being explored as different energy sources Coal Stewardship Manager, Anglo American Coal will be called upon to make progress on increasing electricity generation while meeting the country’s climate goals. Thus, the South African Coal Roadmap (SACRM) was prepared to explore the activities and interventions needed for the coal outh Africa is already largely urbanized. Today, nearly two industry to maximize its contribution to the country in the face thirds of South Africans live in urban centers. Although of an uncertain future. Sthe rate of urbanization is slower in South Africa than some other emerging economies, it is projected that 77% of the country’s population will reside in urban areas by 2050.1 Energy from coal is intertwined with urbanization in South “South Africa’s electricity sector Africa in two important ways. First, in urban centers, baseload coal-fired power plants provide electricity to support much- is facing considerable challenges— needed industrial growth and the employment opportunities created. Second, coal-fired power plants have directly sup- including a lack of sufficient, ported the development of several urban centers, especially in the Mpumalanga region. reliable baseload power—that Since 1990, the percentage of South Africans living in urban could impact urbanization and centers has increased from 52% to 65%. The demand for electricity, and the coal that makes up 93% of South Africa’s overall economic growth.” electricity generation, has grown at similar rates during this period (see Figure 1). Urbanites consume more electricity than their rural counterparts due to higher levels of access and more money to pay for services. The disparity is consider- A NATION CONSTRAINED able: On average, urban households in South Africa consume 4800 kWh each year while rural households consume about South Africa is currently facing an electricity crisis deemed 800 kWh.2 to be one of the country’s greatest challenges over the last 20 years. Rolling blackouts began in November 2014 and the Today, South Africa’s electricity sector is facing considerable power supply system will continue to be under extreme pres- challenges—including a lack of sufficient, reliable baseload sure, with an imminent risk of load-shedding of up to 2000 power—that could impact urbanization and overall economic MW at any time for at least the next two to three years. growth. South Africa has also made climate commitments. This is not the first time that the country has experienced roll-

160 ing blackouts. In 2007/2008, several months of load-shedding Urbanization occurred, which motivated the recommissioning of three 150 Electricity demand previously moth-balled power stations and a strong demand- Coal demand 140 side energy efficiency drive. Coupled with the global financial crisis and subsequent in-country economic downturn, the 130 result was decreased electricity demand and temporary relief

120 of pressure on the grid. Even so, ensuing grid constraints have resulted in slower economic development estimated at Growth since 1990 Growth (Index = 100 = 100 1990) in(Index 110 roughly R300 billion (~US$25 billion) or 10% of the potential 5 100 economic growth.

1990 1995 2000 2005 2010 2015 Economists’ estimates about the economic impact of the con- FIGURE 1. Growth in urbanization, electricity demand, and trolled blackouts on the country vary between R6 billion6 and coal demand in South Africa since 19903,4 R20 billion per month7 (US$0.5 billion and US$1.65 billion,

12 respectively) for Stage 1 load shedding (i.e., 1000 MW load online in 2012. However, both projects have been plagued shed). These estimates are based on the day-to-day impact on by construction delays and budget overruns. The first unit of business of running generators, changing shifts, and lost work Medupi was synchronized onto the grid on 2 March 2015 and time; the less conservative estimates include the long-term is expected to deliver roughly 780 MW onto the grid by June costs of job losses, stunted economic growth, and less invest- 2015. Neither plant will be running at full capacity before 2020. ment in the country. As a consequence of these delays, Eskom has been running The inability of the country to meet electricity demand has many of the existing, aging power stations beyond their led to downward revisions of the economic growth forecast by expected lifetimes and delaying scheduled maintenance to the South African Reserve Bank from 2.5% to 2.2% for 2015. keep the lights on; this has led to breakdowns, unplanned Several ratings agencies have also downgraded the country’s maintenance, and a severely constrained system. Almost credit rating, which has had a negative impact on investor con- one third of Eskom’s 45 GW of installed capacity is presently fidence in the economy.7 offline due to planned and unplanned maintenance.7 Despite the new capacity that has come online, including an increase in non-Eskom power production by 8.5% from 2013 to 2014, 9 “Despite South Africa’s energy overall production has decreased by 1%. The large build program, primarily funded through tariffs, challenges, the country is working to resulted in the electricity price in South Africa increasing 78% between 2008 and 2011, and it will continue to rise in real terms balance its development and climate for several more years. The National Energy Regulator of South priorities.” Africa (NERSA) approved a 12.7% increase in the electricity price for Eskom for the 2015/2016 financial year.10 This has significant impacts on affordability and continued access to electricity for many households and on energy-intensive businesses. THE ROLE OF COAL SOUTH AFRICA’S ENERGY CHALLENGES In 1994, the majority of South Africans did not have access to WILL REQUIRE CONTINUED COAL USE electricity. Since then an ambitious electrification program has increased the proportion of electricity users in the total popu- The SACRM was developed and published in 2013 as a means 8 lation from 36% to 84%. This electrification program would to explore the activities and interventions that the coal not have been as widespread without low-cost electricity, industry should undertake to maximize its contribution to which, in turn, could not have been achieved without coal as a the country in the face of an uncertain future. Despite South fuel source. It is because coal is abundant, accessible, secure, Africa’s energy challenges, the country is working to balance reliable, and affordable that it is the cornerstone of energy its development and climate priorities. in South Africa—today coal is used to produce 93% of electricity and 30% of liquid fuels. In excess of 60 billion tons of The SACRM is the only place that comprehensive information coal resources and reserves remain in South Africa. about the coal value chain has been compiled into a single document. Four scenarios, shown in Figure 2, were developed. These The nation benefits from the coal industry in several ways scenarios were based on the local and international response apart from its contribution to affordable electricity. It is the to climate change as a framework for developing the roadmap. mining industry’s top revenue earner, ahead of platinum and gold. At a time when the current account deficit is precarious, According to the Roadmap, the country will need a total the country can ill afford to lose revenue from coal exports. of between 85 and 125 GW of installed capacity by 2040, Moreover, the coal industry as a whole employs 83,000 people depending on the level of renewable energy in the mix, up in a country with a 25% unemployment rate, with employees from 42 GW in 2010.11 earning a combined $1.6 billion in salaries and wages.

With the majority (i.e., 72% in 2014) of South Africa’s primary THE FUTURE OF COAL IN SOUTH AFRICA energy coming from coal and given its demonstrated benefits to the economy, new coal-fired power plants were planned. The To encourage economic growth and build a thriving soci- greatly anticipated new 4800-MW coal-fired power stations, ety, energy security is a priority. Under all of the scenarios Medupi and Kusile, were originally anticipated to start coming modeled in the SACRM, including the “Low-Carbon World”,

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High global response to climate change

Lags Behind Low-Carbon World The world decarbonizes, but coal remains a significant energy source The world decarbonizes and moves towards use of nuclear and in South Africa and other developing countries. Coal-based power renewables for electricity supply. Funding is available for South Africa generation still dominates local electricity supply, but with amove to follow suit, and no new coal-fired power stations are built beyond towards clean coal technologies, such as ultra-supercritical power Medupi and Kusile. stations, carbon capture and storage, and underground coal gas- Low local ification as they become available. High local response response to climate to climate change More of the Same At the Forefront change Coal use continues globally and locally. Coal-based power generation Coal use continues globally, but South Africa aims to diversify its using existing supercritical technologies dominates the power mix energy mix to include renewables and more nuclear generation. New and the life of existing power stations is extended. coal-fired power plants after Medupi and Kusile use ultra-supercritical technology, with smaller power stations (including fluidized bed combustion stations) also being built.

Low global response to climate change FIGURE 2. The four scenarios used as a framework for the South African Coal Roadmap

South Africa cannot afford early retirement of existing power transport distances. In all scenarios in the SACRM, the price of stations. In line with this, the lives of many of the existing coal to Eskom will increase. Agreement must be reached on a coal-fired power stations have been extended and are now coal price mechanism and a fair rate of return on investment scheduled for closure between 2030 and 2040. New power being sought by mining companies to encourage investment in stations will be required to replace this capacity and, to meet new mines. The most viable model for a domestic supply coal demand growth, clarity is required on technology options that mine is for it to be a multi-product mine that benefits from will be used. The SACRM makes some recommendations for the higher returns possible on the export market. Figure 3 actions necessary to keep the lights on. shows the disparity between export and domestic tonnages and prices for 2012.7 Coal Roadmap Recommendations Open new coal fields. Traditionally, the coal supply has come Secure contracts for continued coal supply to existing power from the Central Basin, where the majority of the coal-fired stations and invest in new mines. Impending coal shortfalls power stations are located. All scenarios in the SACRM show for the existing power stations are a serious risk to energy that high-grade utility coal from the Central Basin will be security. Dubbed the “coal supply cliff”, a massive shortage (in very constrained from the mid-2020s onward and essentially excess of 60 million tons) in coal supply is anticipated from depleted by 2040. During this time, just one mine switching 2018. The reasons for this are several. When the current fleet from domestic to low-grade export supply could create an of power stations was commissioned, long-term supply con- immediate domestic coal shortfall. To reduce this risk, itis tracts were signed for the life of the power station (usually prudent to open alternate sources of coal, of which the largest 40 years). The lives of many of these power stations have since been extended, and most power stations have been run Sales volume Revenue at loads higher than originally expected when the coal sup- Local Export Local Export ply contracts were signed. In addition, some of the resources have not been as extensive as originally assumed. The recommissioning of the three moth-balled power stations in 2008 29% also created additional and unexpected demand for coal. The majority of the new coal resources that could potentially fill 46% the supply gap require extensive exploration and feasibility 54% studies before mines can be opened and supply contracts signed. 71%

The cost of mining is increasing, due to coal being sourced from lower-quality deposits with higher operating costs asso- FIGURE 3. Domestic versus export tonnages by sales volume ciated with increased processing requirements and longer and revenue

14 and most likely resource is the Waterberg coalfields. As rail, as a strategic resource, which may limit coal exports and impact transmission, and water infrastructure from this area to the negatively on investment; carbon tax or other carbon pricing power stations in the Central Basin is lacking, and given the mechanisms; Broad-Based Black Economic Empowerment long lead times required for construction of such infrastruc- requirements and interventions to prevent hoarding of rights ture, the SACRM recommends that access to the Waterberg and situations where a resource may be urgently needed for be enabled without delay. Eskom supply, but is not a priority for the mining company that holds the rights. Resolve coal transport challenges to Central Basin power stations. In 2010, roughly 22% of the coal supplied to Eskom was The mining “majors” (Anglo American, BHP Billiton, Glencore, delivered via road. The externalities associated with road Exxaro, and Sasol) account for 85% of coal production in South transport include damage to roads, increased road accidents Africa and 90% of the supply to Eskom. The remaining sup- and fatalities, and increased air pollution leading to human ply is from smaller players.12 Eskom now requires that 55% health impacts. To address this, Eskom is undertaking a road- of their supply be sourced from black-owned businesses.13 to-rail migration together with Transnet Freight Rail. A shift The capacity of these smaller businesses to fund and develop from road to rail will impact the trucking companies and asso- mines may be limited, which indicates that there is a strong ciated jobs and these impacts must be carefully considered need for cooperative business partnerships between either and minimized. Eskom or the existing majors and the smaller players.

Align policy and licensing procedures. Investment in new Provide clarity on new electricity build. The future of electricity mines requires a supportive and enabling regulatory environ- in South Africa is governed by the Integrated Resource Plan ment. The current regulatory situation relating to complex for Electricity 2010–2030 (IRP).14 The IRP included 9 GW of environmental permitting requirements under multiple laws nuclear power by 2023; however, the program for investment (and consequently multiple government departments) cre- and development of nuclear power is far behind the sched- ates extensive delays and affects the timely delivery of mining ule required to have it online by 2023. A revision of the IRP is investments. Alignment and certainty of regulatory and per- due for publication in the near future, and clarity is needed on mitting procedures for new mines is critical. new and replacement baseload generation as well as who is to take responsibility for the new build. The Renewable Energy Other policies where certainty is needed include statements Independent Power Producer Programme has been success- made by the Department of Mineral Resources regarding coal ful, bringing 1700 MW capacity on to the grid, and expedition

It is recommended that transition plans are in place for communities that have developed around power plants now slated for closure.

www.cornerstonemag.net 15 ENERGY POLICY

of the baseload Independent Power Producer Programme South Africa is on the precipice of a crisis. Careful planning (IPP), for both coal and gas, will help to ensure energy security and prompt action are essential for a future where electricity if favorable market conditions are created for the IPPs. demand can be met, economic growth takes place, and a just transition to a lower-carbon economy is possible. Investment in electricity infrastructure ranges from R930 billion in the “More of the Same” scenario to R2060 billion in REFERENCES the “Low-Carbon World” scenario because of the higher capital cost of renewable technologies, which may decrease over 1. United Nations. (2014). World urbanization prospects, esa. time, and because of the additional installed capacity required un.org/unpd/wup/Highlights/WUP2014-Highlights.pdf due to the lower load factors of renewables. The higher capi- 2. Castello, A., Kendall, A., Nikomarov, M. & Swemmer, T. (2015, February). Brighter Africa: The growth potential of the sub- tal costs are offset by lower operating costs, a diversified Saharan electricity sector. McKinsey & Company, www.icafrica. investment mix, and a more resilient grid. However, increased org/fileadmin/documents/Knowledge/Energy/McKensey- nuclear and renewables in South Africa’s energy mix is likely Brighter_Africa_The_growth_potential_of_the_sub-Saharan_ to result in higher electricity prices which may put additional electricity_sector.pdf strain on an emerging economy. 3. U.S. Energy Information Admininstration. (2015). International energy statistics, www.eia.gov/cfapps/ipdbproject/iedindex3.cf m?tid=2&pid=2&aid=2&cid=SF,&syid=1990&eyid=2012&unit= Mitigate impacts and the transition to a low-carbon economy. BKWH In the longer term, the role of coal in the electricity mix will 4. World Bank. (2015). Data: Urban population (% of total), data. be dependent on the ability to mitigate the environmental worldbank.org/indicator/SP.URB.TOTL.IN.ZS impacts of coal-fired power generation. 5. George, D. (2015). DA alternative budget 2015/16: Increasing job opportunities and growth, not tax, www.da.org.za/2015/02/ Transition to a diversified grid will help to mitigate emissions, da-alternative-budget-201516-increasing-job-opportunities- growth-tax/ as can the improvement of power station efficiency, which will 6. Du Plessis, H., & Legg, K. (2015, 10 February). Tripped switch significantly reduce emissions per unit of power compared at Koeberg “cost SA billions”. Business Report, www.iol. to the existing fleet. The demonstration of technologies such co.za/business/news/tripped-switch-at-koeberg-cost-sa- as underground coal gasification and high-efficiency combus- billions-1.1815851#.VPgFCu8cT5o tion is also important. Carbon capture and storage (CCS) may 7. Chamber of Mines (CoM). (2013) Facts and figures available also help to reduce emissions, but CCS in South Africa is in its online at www.bullion.org.za infancy and any mitigation potential would only be realized in 8. South Africa Census. (2011). www.statssa.gov.za/Census2011/ default.asp the long term. 9. StatisticsSouth Africa. (2014). Electricity generated and available for distribution (preliminary), beta2.statssa.gov.za/publications/ Plan for closure. At least six power stations will close in the P4141/P4141December2014.pdf Mpumalanga region before 2040. The resulting job losses 10. NERSA. (2014, 3 October). NERSA decision on the implementation could ultimately lead to the decline of the existing urban plan of Eskom’s MYPD2 regulatory clearing account, www. centers that have developed around the coal-mining and nersa.org.za/Admin/Document/Editor/file/News%20and%20 Publications/Media%20Releases%20Statements/Media%20 power-generating region. It will be important to create diver- Statement%20-%20Energy%20Regulator%20Decision%20 sified industries in this area and to undertake capacity building on%20implementation%20of%20MYPD2%20RCA.pdf as well as skills development for the people in those areas to 11. The South African Coal Roadmap. (2013). www.sanedi.org.za/ help to mitigate these impacts. archived/wp-content/uploads/2013/08/sacrm%20roadmap.pdf 12. Burton, J., & Winkler, H. (2014). South Africa’s planned coal infrastructure expansion: Drivers, dynamics and impacts on PLANNING FOR ACTION greenhouse gas emissions, www.erc.uct.ac.za/Research/ publications/14-Burton-Winkler-Coal_expansion.pdf South Africa is currently best represented by the “At the fore- 13. McKay, D. (2015, 20 February). Eskom softens coal crisis stance. Miningmx, www.miningmx.com/page/news/energy/1649806- front” scenario, where ambitious (albeit conditional) climate Eskom-softens-coal-crisis-stance change commitments have been made. Continuing on this 14. South Africa Department of Energy. (2011). Integrated resource trajectory could have serious implications for global com- plan for electricity 2010–2030, www.energy.gov.za/IRP/irp%20 petitiveness, employment opportunities, and energy security. files/IRP2010_2030_Final_Report_20110325.pdf The outcome of COP21 and the country’s Intended Nationally Determined Contributions committed to at COP21 will play a The author can be reached at Nikki.fisher@angloamerican. large role in determining our energy future. com

16 Driving India’s Next Wave of Urbanization

By T.G. Sitharam the exception of China, India is much larger than these other Professor, Department of Civil Engineering and Former Chair, emerging economies, thus the actual number of people in Center for Infrastructure Sustainable Transportation and Urban urban areas in India is already large and growing. Planning (CiSTUP), Indian Institute of Science

Jaya Dhindaw Senior Urban Planner, CiSTUP, Indian Institute of Science “Rather than as an insurmountable challenge, India should view

he phenomenon of “urbanization”, or population shift urbanization as an opportunity from rural to urban areas, is occurring at an unprece- Tdented rate in India. According to the 1901 census, the to save energy, reduce emissions, population residing in urban areas in India was 11.4%. This number steadily increased post-independence and by 2011 and improve the quality of life had reached 31.2%, with continued urbanization on the horizon.1,2 Based on the growth rates observed between 2001 of its people.” and 2011, by the end of 2015 the population of Mumbai is projected to stand at 25 million, Delhi and Kolkata at 16 million each, while Chennai, Bengaluru, and Hyderabad will each Urbanization and economic growth are often intertwined—in have 10 million residents.3 According to a 2007 United Nations India, urbanization has kept pace with economic growth. From “State of World Population” report, 40.8% of India’s popula- 2001 to 2011, the country’s GDP grew at a rate of about 8% per tion is expected to reside in urban areas by 2030.3 In absolute year, comparing favorably with the rate of 5.5% observed over terms, this means that the country’s urban population will the previous two decades.4 Recently, India’s Finance Ministry increase from 340 million to nearly 600 million over the next estimated that the country’s economic growth could increase 15 years. to as much as 8.5% in the coming fiscal year, which could make it the world’s fastest-growing large economy. About 75% of To put these numbers into perspective, while quickly growing, India’s GDP is concentrated in its cities. India’s share of urban population is lower than that of some other emerging market countries, including China (48%), Urbanization has occurred rapidly in India and has offered Mexico (78%), South Korea (83%), and Brazil (87%).4 With improved quality of life and more opportunities. However,

Mumbai—the physical manifestation of Indian urbanization

www.cornerstonemag.net 17 ENERGY POLICY

this has been accompanied by challenges that include insuf- The opportunities afforded by urbanization are most readily ficient energy, lack of urban infrastructure, and poor delivery realized when careful urban planning is in place. If urban infra- of basic services, resulting in undesirable environmental structure and planning are unable to keep up with the rate of impacts, congestion, and urban sprawl. Reportedly about urbanization, the consequences can be considerable. The rapid half of all manufacturers in India lose power for five hours a rise in urban population in India has had several unforeseen or week—slowing the momentum of some of the country’s most unplanned consequences such as the increase in slums, poor important employers.5 standard of living for some, air quality issues, urban sprawl, traffic, and environmental degradation (see Figure 1). There are also the classic problems arising from an unmanaged and URBANIZATION DRIVERS AND CHALLENGES unintended rapid population increase, including unemployment, changes in family and social structures, and increasing Research and analysis reveals that the principal underlying crime rates. India’s urbanization has indeed placed tremen- causes of urbanization in India are socially, economically, dous demand on the country’s resources. and politically driven. Industrialization results in employment opportunities and the ability to have greater specialization Thus, proper planning is needed to address the challenges within the workforce. Access to the technology, education, associated with urbanization and realize the full potential of and better infrastructure, as well as growth of the private sec- the benefits of urbanization occurring in the country. Urban tor, available in an urban environment can lead to an improved planning is critically important in many areas, like providing standard of living and greater opportunity for increasing one’s reliable access to energy with lower environmental impact income. Indian urbanization has occurred since the partition and clean transportation fuels with adequate transportation of the country and has accelerated due to an increase in birth planning. rates. As the government has worked to expand infrastructure and basic services there has been a corresponding expansion ENERGY TO SUPPORT URBANIZATION in urbanization. In addition, the 11th Five-Year Plan (2007– 2012) specifically promoted urbanization. As India attempts to Today, energy consumption in India is the fourth largest after achieve faster and more efficient growth, cities will inevitably China, the U.S., and Russia.6 Increasing industrialization and continue to play an important role as the principal engines of urbanization will require much more energy for an already- economic growth. underserved country.

FIGURE 1. Challenges presented by urbanization in India

18 A major benefit to urban centers, and thus perhaps a strong 2011 2030 driver for urbanization in India, is access to electricity. In its “World Energy Outlook 2011”, the International Energy Renewable Renewable 12% Agency reported that the electrification rate in India’s urban 14% Hydro areas was about 94%, whereas it was only 67% in rural areas Hydro 10% (2009 data).7 Without access to electricity and modern cook- 19% Coal Nuclear Coal ing fuels, over 80% of the nearly 900 million people living in 57% 8% 62% rural India rely on traditional biomass for cooking. Thus, India Nuclear Gas Gas has become the largest consumer of fuel-wood in the world, 2% 10% 6% as a result of which an estimated 41% of India’s forest cover has been degraded over the last decade. This rate of consump- FIGURE 2. Past and projected future energy mix for power tion is about five times higher than what can be sustainably generation in India10 removed. Moreover, biomass or dung burned indoors releases dangerous particulate emissions that are considered a major India’s coal-fired power plants must become more reliable, health risk. coal mining practices must be improved to be safer and reduce their environmental impact, and coal utilization must have Even though most residents of cities have electricity access, much lower emissions, water usage, etc. We believe invest- much more capacity is needed to serve the growing urban ments in clean coal should be encouraged in addition to clean populations, provide access to all, and support continued and renewable energy sources such as solar, wind, hydro, and industrialization. Thus, it is worth considering how different nuclear. energy sources will contribute to India’s future power mix and how best to ensure that the environmental impact from energy production and utilization is minimized. ADDRESSING CHALLENGES IN URBAN TRANSPORTATION India’s electricity mix in 2011 and as projected in 2030 is shown in Figure 2. While efforts to increase capacity will likely focus Although economic development is anchored by both urban- on increasing energy from all sources, the push for renewables ization and industrialization, urbanization itself is amajor has been particularly strong of late. The government has set determinant of energy use, including energy use related to a target of 175 GW of renewable energy capacity by 2022 to transportation. In urban areas, activities which traditionally help India increase electricity capacity while decreasing car- relied on manual labor shift to relying on energy-intensive bon intensity. India has a tremendous locational advantage to modern transportation technologies. Personal transportation develop solar energy and is doing so through investment in remains the largest area of change in energy use and produces large solar projects, solar parks, micro grids, and rooftop solar. 40% of total national CO2 emissions. Similarly, wind power capacity is increasing and now contributes nearly 2% of the national power needs.7 High capital Vehicle ownership, vehicle use, modal split (i.e., percentage costs and land-intensive installations are some of the barriers of travelers using a form of transportation), and fuel economy to this option. Although economically viable in India, hydro are the major determinants of road-transportation energy power has not been fully exploited to its potential of about use.13 As workforce specialization and employment opportu- 150 GW,9 primarily because of ecological concerns (e.g., flora nities increase during urbanization, the movement of goods, and fauna displacement) apart from the unreliability of this food, and people increases accordingly. Thus, urbanization energy source in case of droughts and other potential external increases not only the quantity of passengers and goods, but influences. also the distances over which they are carried.

In terms of resources, India has the world’s fourth-largest As wealth increases, people migrate to personal modes of coal reserves. Figure 2 reveals coal’s continuing fundamental transport thus tilting the scales in favor of fuel-powered role in power production. It also contributes over 50% of the options in cities. Careful planning of city transport needs is country’s primary energy and is used for cement and steel particularly important as urbanization gathers momentum production in substantial quantities.11 and cities must address rising internal transport needs. These needs must be met in a manner that economizes energy and Given that about 35% of India’s population still lives with- also avoids congestion and pollution (see Figure 3). Thus, out access to electricity, the approach to addressing energy transport-sector energy consumption can be reduced by pro- demand must be multi-pronged.12 Coal, which is the mainstay moting safe, low-cost mass transportation systems over both source, needs to be explored as a clean, domestic technology. rail and road. This approach requires close cooperation among

www.cornerstonemag.net 19 ENERGY POLICY

FIGURE 3. Insufficient infrastructure and high-volume traffic present urban transportation challenges. different government departments and the use of carefully sustainability. It is becoming increasingly important to study designed systems of taxes and cross subsidies to encourage the feasibility of substitution of crude oil/petroleum with alter- optimal transport development. native options, which are available or can be produced locally on a substantial scale for commercial utilization. Although sev- Automobiles can also be run with reduced emissions and eral alternatively derived fuels have potential, the relative high lower environmental impact. The ever increasing number of cost in comparison to petroleum presents a major obstacle in vehicles and rising fuel requirements have, in recent decades, their widespread use. Thus, these options need to be further compelled research on alternative sources of transportation explored and production technologies must be improved to fuels. This has led to the emergence of many potential alterna- meet both quality and feasibility requirements. tives, such as biodiesel, methanol, ethanol, butanol, dimethyl ether, diethylether, bio-ethanol, coal-derived synthetic natu- POLICY SUGGESTIONS FOR RATIONALIZED ral gas (SNG), Fischer–Tropsch diesels, hydrogen, straight ENERGY USE IN THE URBANIZATION OF INDIA vegetable oils (SVO), and hydro-treated vegetable oil (HVO).14 In addition to alternative fuels, electricity-based transporta- Rather than as an insurmountable challenge, India should tion is also an option. The retail prices of petrol and diesel are view urbanization as an opportunity to save energy, reduce relatively high in India, making electric cars more economical. emissions, and improve the quality of life of its people. To However, these are economical alternatives to diesel only meet these goals, the following policies should be adopted: when there is an escalation in international crude oil prices. Under such a scenario, SNG could have tremendous scope • Frame preferential policies and provide more financial sub- to meet the transport-sector requirements utilizing the coal sidies to develop unconventional and renewable energy available in India. sources. For example, to ensure environmental protection, the government should promote the innovation, research, Over time, many techniques and methods have been devel- and development of decentralized wind power and hydro- oped and continue to be improved in terms of yield, costs, and power by exploiting local resources.

20 • Existing major energy resources, such as coal, should be REFERENCES developed with high-efficiency, low-emissions technologies. More than lip-service funding also must be provided. 1. Roy, B. (2012, 15 June). Victims of urbanisation: India, • To accelerate the extensive application of highly resource- Indonesia and China, www.rediff.com/business/slide-show/ efficient and environmentally sound technologies in urban slide-show-1-column-victims-of-urbanization-india-indonesia- china/20120615.htm areas, the government should promote technological 2. Datta, . P (2006). Urbanization in India. Regional and sub- innovation and capital flow through policy incentives and regional population dynamic population process in urban financial support, such as designing intelligent transpor- areas, European Population Conference, www.infostat.sk/vdc/ tation systems, promoting energy-efficient vehicles for epc2006/papers/epc2006s60134.pdf mass transport, improving road conditions, and develop- 3. United Nations Population Fund. (2007). State of world ing proper road management systems. In addition, the population 2007: Unleashing the potential of urban growth, government should encourage implementing financial www.unfpa.org/sites/default/files/pub-pdf/695_filename_ sowp2007_eng.pdf subsidies and preferential tax policies, such as a consumer- 4. Alhuwalia, I. (2014, 14 July). Tackling the challenges of savings-based model for mass-transit. urbanization in India, www.devex.com/news/tackling-the- • Rail transport should be overhauled and technologies challenges-of-urbanization-in-india-83871 should be developed to optimally utilize existing resources 5. The Economist. (2015, 21 February). A chance to fly, www. in developing advanced, efficient rail systems. economist.com/news/leaders/21644145-india-has-rare- • Recognizing that industrialization will continue to play a big opportunity-become-worlds-most-dynamic-big-economy- chance-fly role in urbanization, the government should fund and support 6. US Debt Clock.org (2014). World energy consumption clock, energy-conserving production technologies. Also, the - gov www.usdebtclock.org/energy.html ernment should introduce energy-efficiency indicators and 7. InternationalEnergy Agency (IEA). (2011). World energy outlook: regulations to enforce and commercial energy consumption. Access to electricity, www.worldenergyoutlook.org/resources/ • Sustainable urbanization should become a focus through energydevelopment/accesstoelectricity/ devolution of power to local government so as to enable 8. Government of India Ministry of New and Renewable Energy. better environmental legislation that is enforceable. For (2015). Physical progress (achievements), www.mnre.gov.in/ mission-and-vision-2/achievements/ example, any policy aiming to curb the impact of urban- 9. Kumar, U., Singh, P., & Tiwari, A. (2014). A critical study and analysis ization on energy demand must address the associated of various aspects of micro hydro power generation with screw/ externalities of urban sprawl and automobile dependency. Archimedean turbine in India. VSRD International Journal of • Energy research results in major public benefits—such as Mechanical, Civil, Automobile and Production Engineering. 4(10), economic competitiveness, national security, and envi- www.academia.edu/10587881/A_CRITICAL_STUDY_MICRO ronmental protection—that are not necessarily strong _HYDRO_POWER_ARCHIME motivations for the private sector. Thus, the government 10. Indian National ademyAc of Engineering. (2015). INAE 2007: Vision, mission, and values, inae.in/wp-content/themes/inae- of India should support energy research to advance devel- theme/pdf/INAEVisionmissionandvalues.pdf report 2015 opment of near-zero emissions from its energy sector 11. World Coal Association. (2014). Coal & steel statistics, www. including solar, wind, carbon capture and storage, and low- worldcoal.org/resources/coal-statistics/coal-steel-statistics/ energy nuclear reactions. 12. IEA. (2014). Energy access database, www.worldenergyoutlook. org/resources/energydevelopment/energyaccessdatabase/ Higher quality of life can be realized in tandem with appropri- 13. PBL Netherlands Environmental Assesment Agency. (2013). ate policies. As aptly put by Isher Judge Ahluwalia (Chair, Indian Trends in global CO2 emissions: 2013 report. edgar.jrc.ec.europa. 4 eu/news_docs/pbl-2013-trends-in-global-co2-emissions-2013- Council for Research on International Economic Relations): report-1148.pdf 14. Salvi, B., Subramanian, K., & Panwar, N. (2013). Alternative fuels Deficiencies in urban planning and management have for transportation vehicles: A technical review. Renewable and to be overcome if India’s urban environment is to meet Sustainable Energy Reviews, 25, 404–419. the rising expectations of an expanding urban population and provide an urban environment consistent with The authors can be reached at [email protected] and rapid, inclusive, and sustainable growth. [email protected]

www.cornerstonemag.net 21 STRATEGIC ANALYSIS

Transitioning Urbanization, Energy, and Economic Growth in China

Lei Qiang 2007 was about 62% of that of the U.S. By 2010, however, Manager, Strategic Research Institute, China had overtaken the U.S. to be the world’s largest indus- Shenhua Science and Technology Research Institute trial producer and by 2012 China’s industrial output was about 126% of that of the U.S.2 From 2007 to 2011, as China’s cities Ning Chenghao grew, the country’s per capita primary energy consumption Deputy Director, Strategic Research Institute, rose from 1551 to 2029 kgoe (kg oil equivalent).3 This energy Shenhua Science and Technology Research Institute was, and continues to be, largely based on China’s massive indigenous coal resources—67.5% of China’s primary energy came from coal in 2013.4 hroughout history, instances of societal paradigm shifts have occurred as widespread urbanization and industri- Talization have rapidly taken hold. Such transitions have “The annual average energy demanded a shift in energy sources, the amount of energy consumed, and the way in which energy is used. Perhaps the most consumption of the urban population well-known historical example took place in late 18th–early 19th century England as cities grew rapidly and the regional in China is about three to four times society shifted from one founded on agriculture to one based on industry. Higher density energy sources, primarily coal, that of the rural population.” displaced biomass and the Industrial Revolution was born.1

In modern times, the most prominent example of a rapid societal shift through urbanization is undoubtedly China—a country that has grown to be an economic powerhouse in only a few short CHINA’S CURRENT STATE OF URBANIZATION decades. Urbanization, industrialization, and increased energy consumption have underpinned this growth. The increase in As China has industrialized, its cities have grown as workers industrial production in China has been astounding. According have moved from rural areas to urban centers looking for a to the United Nations, China’s total industrial production in chance at improved employment and life prospects. The

Since its reform and opening-up, China has urbanized rapidly, reaching an urbanization rate of 53% in 2014.

22 100 800 and more income to spend on energy has in turn driven up 90 700 energy consumption. From 1995 to 2013 a clear correlation 80 600 70 can be observed between urbanization and energy use: As the 60 Urban population 500 urbanization rate nearly doubled the per capita energy con- on (millions) on on (%) on Urban population (%) ti ti 50 400 sumption also doubled. According to estimates, the annual Rural population (%) 40 300 average energy consumption of the urban population in China 30 10 Popula 200 is about three to four times that of the rural population. 20 10 100 Therefore, as urbanization is an ongoing trend, energy con-

0 0 popula Urban sumption can also be expected to grow. 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 FIGURE 1. China’s changing urban and rural populations7 While the most rapid growth has occurred recently, urbanization, industrialization, and energy consumption in China have number of Chinese urbanites recently surpassed those living been linked for the last half century (see Figures 1 and 2). In in rural areas, which is a considerable milestone in a country terms of the energy consumed by primary (i.e., agricultural), of 1.35 billion people. secondary (i.e., heavy industries, manufacturing, and construction), and tertiary (i.e., service-based) industries, China’s The urbanization rate in China continues to increase (see secondary industries consume about 70% of the country’s Figure 1). It grew about fivefold from 10.6% in 1949 to about energy (this statistic includes residential use) and contribute 53% in 2013. During this time the number of cities also about 50% to the gross domestic product (GDP).11 increased from 193 in 1978, the beginning of China’s reform and opening-up, to about 660 in 2012.5,6 During the recent phase of rapid urbanization in China (1995– 2013), correlation coefficients between the urbanization rate As shown in Figure 1, much of the increase in China’s urbanization and economic growth, industrialization and economic growth, has occurred over the last two decades.7 In the particularly rapid and energy demand and economic growth were calculated to period of growth since 1995, the urban population has nearly be 0.92, 0.99, and 0.97, respectively. Urban areas contributed doubled.8 Despite a recent slowdown in the country’s economic about 70% of the country’s total economic growth—about growth, with 46% of the population still living in rural areas there two times that contributed by rural areas (see Figure 3).12 is reason to believe that urbanization will continue in China. The vast majority of China’s wealth is held within cities. From 1995 to 2013, the total fixed asset investment in China THE TIE BETWEEN URBANIZATION, grew by a factor of nearly 21 (see Figure 4).9 This was espe- INDUSTRIALIZATION, AND ENERGY cially true for the proportion of urban fixed asset investment, which approached 98% of the total fixed asset investment.9 Many of China’s new urbanites have found employment in The scale of investment grew by a factor of about 26 over this various industries, such as the country’s large manufacturing time frame, while GDP grew about tenfold—largely supported sector, as a result of which the percentage of employment by the country’s urban centers (see Figure 5).9 outside agriculture increased from 47.8% to 68.6% over the last two decades.9 Industrialization, better access to energy, 80 72 1979—1990 70 69 67.9 1991—2003 2004—2012 100 4000 60 56.2 1979—2012 Total energy consumption, mtsce (%) 95 Industrial added value, 10 billion yuan 3500 50 90 Non-agricultural industries 43.8 3000 85 40 2500 31 32.1 80 30 28 75 2000 20 70 1500 65 10 1000 7.3 7.2 6.7 5.1 60 4 2.8 3.2 3.2 0 55 500 Contribution (%) Economic stimulation Contribution (%) Economic stimulation

Non-agricultural industries 50 0 margin (%) margin (%) Total energy consumption (mtsce) 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 Industrial added value (10 billion yuan) City Rural area FIGURE 2. Energy consumption, non-agricultural industries, FIGURE 3. Stimulation of national economic growth by urban and industrial added value7 centers12

www.cornerstonemag.net 23 STRATEGIC ANALYSIS

5000 100 Total investment in ﬁxed There should be considerable opportunity to implement such 4500 assets, 10 billion yuan 95 changes in existing and new cities. While some may believe 4000 Total energy consumption, that urbanization and the associated increase in energy con- 3500 million tce 90 3000 Proportion of urban ﬁxed sumption may be leveling off in China, this seems unlikely 2500 asset investment, %, right axis 85 considering the sheer size of the population that is not yet 2000 urbanized. In addition, there are plans in the pipeline to build 1500 80 out urban centers. For example, the Chinese government has 1000 75 recently announced that it is looking to urbanize large areas 500 along the Yangtze River,13 and looks to designate about 317,000

0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 70 square kilometers for the proposed project. This proposed development is an example of the government’s desire to bring FIGURE 4. Energy consumption and investment in fixed assets larger urban centers and the associated opportunities to the middle of the country, which to date have mostly been enjoyed CHINA’S NEW URBAN REALITY by coastal China. This new project could be an ideal opportunity to implement new urbanization and new industrialization. Although further urbanization and energy consumption are on the horizon, clearly China will not follow its recent growth and energy consumption trajectories indefinitely. Like many other “Although further urbanization large urban areas, especially those in emerging economies, China’s cities face challenges, including problems with air quality, and energy consumption are on traffic and congestion, and overcrowding. In fact, a transition has already begun in China. The country now looks to make its indus- the horizon, clearly China will tries and cities smarter through increased informatization, while focusing on new forms of industrialization and urbanization that not follow its recent growth can help address the major challenges faced by its cities. and energy consumption The term “new industrialization” refers to the widespread trajectories indefinitely.” use of information to promote and improve high-tech industrialization. It is believed that transitioning to higher tech manufacturing can result in increased economic returns, reduced resource consumption (including improved energy RECOMMENDATIONS FOR CHINA’S NEXT efficiency), minimized environmental degradation, and opti- GENERATION OF URBANIZATION ANDENERGY USE mized employment. Similarly, “new urbanization” refers to improving the quality of urbanization by focusing on urban China has made progress toward a new paradigm of improved environments that are people-oriented, including better walk- urbanization and energy consumption, but much remains to ability, access to public transportation, and more green space. be done. In this new phase of development, the fundamental transition from an economy driven by secondary industries to one driven by tertiary industries will accelerate. As the country 6000 GDP, 10 billion yuan moves toward growing the service sector there will be effi- 5000 Total investment in ﬁxed ciency improvements and changes in China’s energy mix—a assets, 10 billion yuan mild decoupling of GDP and energy consumption could occur 4000 as has been observed in other countries. The energy industry, which is founded on the country’s coal resources, is facing 3000 multiple new challenges and must also adapt.

2000 The most important challenge to China’s energy sector is

1000 to minimize the environmental impact associated with its growth. Thus, the 12th Five-Year Plan made recommendations 0

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 to optimize urbanization, industrialization, and sustainable economic growth in China—the 13th Five-Year Plan is expected to include similar recommendations. With the development FIGURE 5. GDP and investment in fixed assets of new urbanization and new industrialization as well as

24 China looks to increase the proportion of alternative energy sources in its coal-dominated energy mix. industrial restructuring and upgrading, the Plans suggest that For example, there is a concerted effort to actively develop the conventional, extensive, and inefficient use of fossil fuels hydropower, nuclear power in a safe and effective manner, and should be phased out and replaced with high-efficiency, low- wind energy; accelerate the diversified use of solar; actively emissions (HELE) technologies. develop shale gas and shale oil; advance other forms of alternative energy (e.g., biomass and geothermal); and promote According to research by Shenhua Science and Technology the application of a distributed energy system. In the future, Research Institute, coal is expected to account for about 55% alternative energy and renewables will play a more prominent of the primary energy mix in China in 2035, and thus there are role in supporting the national economy as well as new indus- no foreseen fundamental changes expected in the energy mix. trialization and new urbanization. Therefore, the country’s investment in upgrading its coal-fired fleet of power plants to improve efficiency and reduce emis- TECHNOLOGY OPPORTUNITIES sions makes sense. Industrialization and urbanization are common threads woven Other technologies now exist that could also reduce the throughout historical and modern societal development and are environmental footprint of coal utilization. In China, and else- largely dependent on sufficient access to high-density energy. where, coal is primarily utilized through combustion. However, For this reason, and because coal is widely distributed geo- there is much value in coal conversion strategies, such as graphically, dramatic increases in coal production and utilization gasification and direct coal conversion, which focus on the are often associated with major societal transitions, such as the functional nature of coal as not only a source of fuel but also rapid urbanization and industrialization experienced in China. as a raw material (i.e., making full use of the elemental C and H in coal for heat generation and chemical synthesis).14 Such The described societal shift has helped China to lift hundreds of an approach can expand on China’s production of coal-to-gas, millions of people out of poverty and provide energy access coal-to-oil, coal-based olefins, and coal-based ethylene glycol, to nearly all of its people in just a few decades. The country is while meeting demand for electricity and thermal energy. almost certainly the world’s most successful example of successful poverty alleviation. Coal has been the principal fuel In addition to improving coal utilization, the Chinese gov- behind this shift. However, China’s coal fleet grew quickly and ernment has committed to strongly back development of is not fully equipped with modern emissions control tech- alternative energy and renewables, as was highlighted in the nologies. Thus, the country is working to improve the efficiency 12th Five-Year Plan and is expected in the 13th Five-Year Plan. and reduce emissions from its vast coal-fired power fleet.

www.cornerstonemag.net 25 STRATEGIC ANALYSIS

Through supporting the development of energy, especially that from coal-fired power plants, China has fulfilled the growing demand for power during the process of urbanization.

Looking to China’s example, other countries and regions review-of-world-energy/statistical-review-downloads.html around the world are also urbanizing and industrializing. 5. World Bank. (2015). Data: Urban population (% of total), data. Many of these countries are also quickly growing their coal- worldbank.org/indicator/SP.URB.TOTL.IN.ZS 6. Qiao, X. (2014). The transition process of “human urbanization” fired power fleets. Today, with a suite of HELE technologies and “urbanization of things”: 1978–2011. Regional Economy, 4, available, there is a real opportunity to ensure that these 88–99. plants will use the best possible technology options. With 7. Government of the People’s Republic of China. (2014). National greater international support, it is likely that the use of such Bureau of Statistics of PRC, wind info. 8. World Bank. (2015). Data: Urban population, data.worldbank. technologies will increase and thus reduce the environmental org/indicator/SP.URB.TOTL impact of coal in countries that desperately need more energy. 9. Government of the People’s Republic of China. (2014). National Therefore, some of the challenges associated with urbaniza- data, data.stats.gov.cn/ tion, industrialization, and increased energy use that have 10. World Bank. (2008). Urbanization in China on an unprecedented been observed in the past could be avoided in the future. scale, econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRES EARCH/0,,contentMDK:21812803~pagePK:64165401~piPK:641 65026~theSitePK:469382,00.html REFERENCES 11. Government of the People’s Republic of China. (2014). China statistical yearbook—2014, China Statistics Press. 1. Lei, Q., & Ning, C. (2014). On the relationship between energy, 12. Zheng, X. (2014). The contribution of urbanization to China’s urbanization, and industrialization—From the perspective of economic growth and its realization. Chinese Rural Economy, energy evolution. Development Research, 11, 60–66. 4–15. 2. Ross, J. (2013). China’s new industrial revolution. China.org.cn, 13. Reuters. (2015, 5 April). China to step up urbanization along www.china.org.cn/opinion/2013-08/27/content_29838533. Yangtze River, www.reuters.com/article/2015/04/05/us-china- htm yangtze-idUSKBN0MW0FB20150405 3. World Bank. (2015). Data: Energy use (kg oil equivalent per capita), 14. Zhang, Y. (2013). Clean coal conversion: Road to clean and data.worldbank.org/indicator/EG.USE.PCAP.KG.OE/countries efficient utilization of coal resources in China. Cornerstone, 4. BP. (2014). Statistical review 2014 workbook, www.bp.com/ 1(3), 4–10, cornerstonemag.net/clean-coal-conversion-road-to- en/global/corporate/about-bp/energy-economics/statistical- clean-and-efficient-utilization-of-coal-resources-in-china/

26 ASEAN Urbanization and the Growing Role of Coal

By Jude Clemente ASEAN POISED TO BECOME Principal, JTC Energy Research Associates, LLC A GLOBAL ECONOMIC POWER

On 31 December 2015, the implementation of the ASEAN lthough global economic growth may have stalled Economic Community will “transform ASEAN into a single recently, a number of regions characterized by clusters market and production base, a highly competitive economic of emerging economies are poised to become drivers region, a region of equitable economic development, and a A 4 for a renewed wave of growth. One of the most prominent region fully integrated into the global economy.” Per the such areas can be found in Southeast Asia, where regional Asian Development Bank, ASEAN will emerge as a rival even cooperation and a desire to improve standards of living could to the European Union and become a “truly borderless eco- strengthen the urbanization and industrialization already in nomic community by 2030.”5 From 2014 to 2030, ASEAN’s real progress. GDP (in 2010$) is projected to more than double to US$5.2 trillion, with an average annual expansion of $180 billion per Founded in 1967, the Association of Southeast Asian Nations 6 (ASEAN) now has 10 member states: Thailand, Myanmar, Laos, year. ASEAN could even enter a high-growth phase, leading to Vietnam, Malaysia, Singapore, Indonesia, the Philippines, a tripling of per capita income by 2030, raising quality of life Cambodia, and Brunei. ASEAN is home to about 630 million to levels enjoyed today by OECD countries. With a median age people today, with a growing population expected be above of about 28, a young population gives ASEAN an advantage in 785 million by 2050.1 As it expands, the ASEAN population is terms of economic prospects and labor pool.7 increasingly concentrated in urban areas.

Urbanization brings higher productivity because it concen- trates economic activity and gives rise to massive economies “In Southeast Asia … of scale that lower costs. In Asia, for instance, urban productivity is more than 5.5 times that of rural areas.2 According to regional cooperation and a desire the UN, “No country in the industrial age has ever achieved significant economic growth without urbanization.”3 Thus, to improve standards of living could emerging ASEAN is urbanizing as its economies develop. The percentage of people living in urban areas is projected to strengthen the urbanization and increase from about 47% today to 56% in 2030 and then 67% in 2050 (see Figure 1). industrialization already occurring.”

900 This growth, and the resulting expanding middle class with more purchasing power, is contingent on much more energy

600 to support industrialization and urbanization. Urbanites con-

on (millions) on Urban sume more energy because they typically have higher incomes ti and more money to spend as well as better access to services. For example, the World Bank reports that urban residents in 300 China consume about 3.6 times more energy than those living Rural in rural areas.8 In ASEAN, this means that demand for coal, as a ASEAN Popula ASEAN principal energy source in the region, is projected to increase. 0 1990 2014 2030 2050 In addition, coal will be needed to support increased steel and FIGURE 1. ASEAN continues to urbanize.1 cement production also associated with urbanization.

www.cornerstonemag.net 27 STRATEGIC ANALYSIS

THE ROLE OF COAL IN ASEAN for Illinois, U.S.,13 with less than 13 million residents. About GROWTH AND URBANIZATION 70% of Myanmar’s 54 million people have no access to electricity whatsoever.14 Around 280 million ASEAN residents rely The role of coal in ASEAN is, and will continue to be, particu- on traditional biomass for cooking, resulting in indoor air pol- larly strong because the Asia-Pacific region is the nexus of the lution deemed to be the “deadliest environmental threat.”15 international coal market. BP reports that this region boasts Thus, lack of access to power affects all aspects of life and nearly 33% of the world’s proven coal reserves.9 Indonesia correlates to a shorter lifespan (see Figure 2). With modern is by far the largest global exporter of thermal coal used for energy access, standards of living will be higher, including electricity and nearby Australia is the largest exporter of met- improved childhood survival, nutrition, drinking water quality, allurgical coal for steel. Since 2000, as the urban population and educational opportunities. has expanded by over 120 million people, ASEAN’s coal production has leaped from about 110 million tonnes (Mt) to over The amount of electricity needed to address the enormous 575 Mt, with Indonesia and Vietnam leading the expansion.10 challenge in ASEAN will be met by increasing generation from The key coal importers in the bloc are Thailand, Malaysia, and all sources (see Figure 3). Coal consumption is growing the the Philippines. In the short term, IEA expects ASEAN coal pro- fastest due to its abundance in the region, scalability, reliabil- duction to further increase to 660 Mt in 2019, nearly all of ity, and lower costs. which is the thermal variety used for electricity.11 Today, global oversupply has driven thermal coal prices to five- Electricity for Urbanization and Industrialization year lows, even as the coal build-out in Asia continues. Some 75% of the thermal capacity, and nearly 40% of total capacity, Today, ASEAN is a developing region, characterized by con- now under construction in ASEAN is coal fired. Moreover, high siderable poverty and low levels of social development. reliability means that baseload coal supplies 31% of actual For example, access to electricity is far from universal. The generation while accounting for just 22% of total capacity. This International Energy Agency (IEA) reports that 135 million reliability is a major reason coal accounts for almost 70% of all people in ASEAN—over 20% of the population—have no electric power in developing Asia.16 As pointed out by World access to electricity. Indonesia, with 255 million people, gen- Bank President Jim Yong Kim, “There’s never been a country erates 170 TWh of electricity per year,12 compared to 203 TWh that has developed with intermittent power.”17

85 Japan Singapore

Germany 80 U.S.

Brunei 75 Philippines Malaysia Thailand Vietnam Indonesia 70

Myanmar 65

Life expectancy at birth birth (yr) at expectancy Life Laos Cambodia

60 0 2000 4000 6000 8000 10000 12000 14000 Electricity consumption (kWh/capita·yr) FIGURE 2. Electricity use and life expectancy

28 1000 Coal 800 Gas

on (TWh) on Hydro ti 600 Other

400

200

Electricity Genera Electricity 0 1990 2000 2010 2020 2030 2040 FIGURE 3. Historical and projected electricity generation in ASEAN, by source

IEA projects that coal use in ASEAN will rise from about 200 Mt today to 300 Mt in 2020 and to 535 Mt in 2035, extending Singapore is a leader in ASEAN urbanization. its share of the primary energy mix from about 16% to nearly 30%.18 The power sector accounts for 52% of the increase in yuan/kWh for new plants and 0.01–0.02 yuan/kWh for retro- primary energy demand in ASEAN. Overall, IEA estimates that, fits. Natural gas combined-cycle plants can provide electricity by 2035, 50% of all power generation for ASEAN will be coal for about 0.59–1.23 yuan/kWh in China (depending on natural fired, compared to 18% in 1990 and 31% today. gas prices).23

Relying on coal for industrialization, urbanization, and to Similarly, IEA has concluded “coal has the cheapest generating increase energy access has been common in developing Asia. costs in Southeast Asia over the range of assumptions ana- ASEAN watched China lift 650 million people out of poverty lyzed” (see Figure 4). ASEAN is cooperating on advanced coal since 1990, the most effective poverty alleviation campaign technologies with its more experienced +3 Dialogue Partners: in human history.19 From 1990 to 2011, China’s electricity use China, Japan, and South Korea. Developing Asia will be step- per capita per year increased from 511 kWh to 3300 kWh ping up its “efforts to develop cooperation programs, promote today—China’s electricity generation was about 75% fueled policies on clean coal technologies (CCT), such as high effi- 20 by coal in 2014. Similarly, India relied heavily on coal to re- ciency coal-fired power generation, the upgrading of low-rank duce the number of people without electricity by 100 million coal technologies, carbon capture and storage (CCS), cokes from 2008 to 2012.21 making, coal gasification, coal liquefaction and develop the industry in the region.”24 For example, all existing coal-fired As it builds its coal-fired power sector, ASEAN has an opportunity to deploy modern technologies and thus minimize power plants in Peninsular Malaysia now use SC technology. the environmental impact of coal-based power production. The 2100-MW Manjung power station complies with World Increasing the efficiency and plant size at existing andnew Bank standards, while the upcoming Janamanjung 5 plant will stations is at the heart of any clean-coal strategy. IEA notes utilize highly efficient USC technologies. that the average coal plant efficiency is at 34% in ASEAN, just above the global average. However, supercritical (SC) plants 100 have become the standard for large-capacity boilers and can achieve efficiencies of 40–45%. A single percentage-point 80 improvement in the efficiency of a conventional pulverized coal combustion plant results in a 2–3% reduction in emissions 60 of CO2, NOx, and SO2.

China has been focused on increasing the efficiency of its 40 coal-fired fleet, effectively demonstrating that electricity from these plants is affordable. About 25% of China’s coal fleet has 20 SC or ultra-supercritical (USC) steam parameters and about

75% of its capacity is from plants with a generation capacity (2012US$/MWh) electricity of Cost 0 above 300 MW.22 The cost of electricity from China’s coal-fired Supercritical coal Natural gas (CCGT) Nuclear Wind power plants is about 0.4 yuan/kWh and the cost for incor- FIGURE 4. Electricity generation costs in ASEAN, 2020–2035 porating ultra-low emissions technologies is about 0.005–0.01 Fuel price assumptions: $60/tonne coal; $10/MBtu gas

www.cornerstonemag.net 29 STRATEGIC ANALYSIS

Kuala Lumpur, Malaysia and other urban centers are growing as ASEAN urbanization increases.

As shown in Figure 3 (see “Other” line), the deployment of ASEAN) steel-making capacity will reach over 51 Mt this year, renewables is also beginning to ramp up in ASEAN. Thus, up nearly 75% since 2007.28 Steel consumption has increased coal-fired power plants will require the flexibility to back up from 44 Mt to around 70 Mt since 2006, and is projected to intermittent wind and solar power. Modern coal plants are further increase 8% in 2015.29 well suited to this task and can change from full load capacity to 50% in less than 15 minutes.25 A 1000-MW plant can pro- Transport infrastructure can also be a major steel consumer vide a 30–40-MW load change each minute, and this flexibility as about 55% of the weight in a car comes from steel.30 continues to improve. Aluminum, another important material for automobile production, is energy intensive, often relying on coal to provide Electricity from these new coal-fired power plants could be the electricity. Today, ASEAN’s car ownership rates are still distributed throughout the region. ASEAN’s economic growth, quite low, with tremendous demand potential (see Figure 5). increased trade, and need for more energy have sparked the All ASEAN nations except Singapore, Brunei, and Malaysia are move to a regional power interconnection. The ASEAN power grid at or below the $2500–10,000 per capita income bracket, the will connect the national grids, upgrade energy security, increase level at which the International Monetary Fund judges that car 31 supply, and lower electricity costs. By 2025, there will be up to ownership grows twice as quickly as incomes. One university 19,600 MW of cross-border power purchase and 3000 MW of 1000 energy exchange through the cross-border interconnections.26 900 850 800 Coal for Steel and Cement 700 600 ASEAN urbanization will also mean increasing demand for steel 500 450 and cement—coal is important for the production of both. In the 400 period 2014–2020 alone, the World Economic Forum estimates 300 that ASEAN has US$8 trillion in new infrastructure needs.27 200 100 75 10 15 21 25 35 Motor vehicles per 1000 people 1000 per vehicles Motor 0 Coal must be used to produce new steel, much more of Myanmar Vietnam Cambodia Laos Philippines Indonesia West U.S. which will be needed for urbanization in ASEAN. According Europe to OECD, ASEAN-6 (the six major and older nations in the FIGURE 5. ASEAN’s vehicle market

30 study projected ASEAN reaching 127 cars per every 1000 people by 2030.32

ASEAN is projected to continue to grow as a key vehicle production base for the world’s biggest car manufacturers, particularly given its proximity to the fastest-growing markets of China and India. Thus, ASEAN’s automotive industry has expanded rapidly, growing its share of global car production from 2.3% in 2002 to nearly 7% today. In 2015, ASEAN countries will produce over four million vehicles—about 7% more than last year.33 Indonesia is expected to become both the biggest producer and the biggest consumer of cars in the bloc. Jakarta is one of the world’s fastest growing cities. Thailand’s domestic market is less dynamic, but the country is exporting more cars than the rest of ASEAN combined. production of electricity, steel, and cement. As recognized by the Center for Strategic and International Studies, “the ques- Coal is also a major fuel source in cement production, taking tion is not about whether to continue using coal, but how to approximately 200 kg of coal to produce one tonne of cement; make it compatible with international and national climate about 300–400 kg of cement is needed to produce one cubic goals.”38 The commercialization and deployment of the next 34 meter of concrete. Four nations produce 85% of ASEAN generation of clean coal technologies—such as CCS, SC/USC 35 cement. Jakarta is one of the fastest growing cities, in terms advanced coal-fired power plants, and integrated gasification of construction, in the world, and Indonesia is now the larg- combined-cycle technologies—will propel ongoing environ- est cement producer in the bloc, producing over 65 Mt and mental improvement and steady progress toward the ultimate growing 9–12% per year. Thailand has seen nearly 20% yearly goal of near-zero emissions.39 cement output growth that will be bolstered by an average annual construction growth of close to 5% through36 2020. Clearly, the ASEAN region is increasing coal-fired power capac- Vietnam has been ASEAN’s largest cement producer and now ity to meet its energy needs. Lacking international support, wants to utilize more coal in production because of high local less efficient, higher-emissions plants will be built, and these availability. By 2020, Vietnam’s cement industry will have a plants will not be CCS ready. IEA explained these risks in its capacity of 130 Mt. Over 5% annual GDP growth has Malaysia 2014 “World Energy Investment Outlook”:40 consuming over 20 Mt of cement a year. Overall, ASEAN cement production growth is expected at 7–8% per year.37 If development banks withhold financing for coal-fired power plants, countries that build new capacity will be REDUCING THE ENVIRONMENTAL less inclined to select the most efficient designs because they are more expensive, consequently raising CO emis- IMPACT OF ASEAN COAL USE 2 sions and reducing the scope for the installation of CCS. Unprecedented urbanization in ASEAN and around the world Thus, as ASEAN and other regions develop and urbanize, there means coal will continue to play a fundamental role in the is an opportunity to ensure that the coal-fired power capacity being built, which will operate for decades, is equipped with the state-of-the-art high-efficiency, low-emissions technologies.

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Toward a borderless economic community, www.adbi.org/files/ energy security and the sustainable use of energy. Presentation for 2014.07.18.book.asean.2030.borderless.economic.community.pdf 2014 Policy Dialogue on Energy for Sustainable Development for Asia 6. U.S. Department of Agriculture. (2014). International macro- and the Pacific, 36–38 November, Bangkok, Thailand, www.unescap. economic data set, real GDP (2010 dollars) projections, org/sites/default/files/2_Beni_ASEAN%20Initiatives_2014%20 www.ers.usda.gov/data-products/international-macro Policy%20Dialogue,%20BKK%20(26-28%20Nov%2014)_F.pdf economic-data-set.aspx 25. Euracoal. (2012). A strategy for clean coal, www.euracoal.com/ 7. Central Intelligence Agency. (2014). The world factbook, pages/medien.php?idpage=1178 median age, www.cia.gov/Library/publications/the-world- 26. Sosani, B. (2013). ASEAN power grids interconnection projects factbook/fields/2177.html for energy efficiency and security supply, Presentation at 8. World Bank. (2008, 19 June). Urbanization in China on an Sustainable Energy Training, 25 November, Bangkok, Thailand, unprecedented scale, econ.worldbank.org/WBSITE/EXTERNAL/ www.iea.org/media/training/bangkoknov13/session_1c_ EXTDEC/EXTRESEARCH/0,,contentMDK:21812803~pagePK:641 hapua_asean_perspectives.pdf 65401~piPK:64165026~theSitePK:469382,00.html 27. World Economic Forum. (2014, 23 May). US$ 8 trillion needed 9. BP. (2014). Statistical review of world energy 2014, www.bp.com/ to bridge ASEAN’s infrastructure gap, www.weforum.org/news/ content/dam/bp/pdf/Energy-economics/statistical-review-2014/ us-8-trillion-needed-bridge-asean-s-infrastructure-gap BP-statistical-review-of-world-energy-2014-full-report.pdf 28. Organisation for Economic Co-operation and Development. 10. U.S. Energy Information Administration (EIA). (2014). (2013). Overview of the ASEAN steel market, Presentation at International energy statistics, coal production, www.eia.gov/ 74 Steel Committee Meeting, www.oecd.org/sti/ind/Item%20 cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=7&aid=1 6.%20OECD%20Steel%20Secretariat%20-%20Mr.%20Naoki%20 11. International Energy Agency (IEA). (2014). Medium-term coal Sekiguchi%20-%20July%202013.pdf market report 2014. 29. Apisitniran, L. (2015, 7 February). AISC eyes 8% steel gain. 12. EIA. (2014). International energy statistics, electricity con- Bangkok Post, www.bangkokpost.com/business/news/468560/ sumption, www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid= aisc-eyes-8-steel-gain 2&pid=2&aid=2# 30. Murdoch, J. (2008, 17 November). Cars and metal, metal and 13. EIA. (2014). Electric power monthly, February 2014, www.eia. cars. Hard Assets INVESTOR, www.hardassetsinvestor.com/ gov/electricity/monthly/current_year/february2014.pdf interviews/1289-cars-and-metal-metal-and-cars.html 14. World Bank. (2014). Electricity for a bright Myanmar. www. 31. InternationalMonetary Fund. (2005). Vehicle ownership and per worldbank.org/en/news/video/2013/10/15/electricity-for-a- capita income, www.imf.org/external/pubs/ft/weo/2005/01/ bright-myanmar chp4pdf/fig4_7.pdf 15. Lomborg, B. (2014, 21 April). The deadliest environmental threat 32. Low, M. (2012). Overview of ASEAN’s energy needs and challenges. (it’s not global warming). New York Post, nypost.com/2014/04/21/ Presentation at Asia in Ascendancy Conference, 5 June, National the-deadliest-environmental-threat-its-not-global-warming/ University of Singapore, www.slideshare.net/mel_struc/over 16. IEA. (2014). World energy outlook 2014. view-of-aseans-energy-needs-and-challenges?related=1 17. Glinski, N. (2014, 5 August). World Bank may support African coal power, 33. Bangkok Post (2015, 1 February). ASEAN to produce more than 4m Kim says. Bloomberg, www.bloomberg.com/news/articles/2014-08-05/ vehicles in 2015, www.bangkokpost.com/lite/topstories/453922/ world-bank-may-support-african-coal-power-kim-says asean-to-produce-more-than-4m-vehicles-in-2015 18. IEA. (2013). Southeast Asian energy outlook, www. 34. World Coal Association. (n.d.) Coal & cement, www.worldcoal. iea.org/publications/freepublications/publication/ org/coal/uses-of-coal/coal-cement/ southeastasiaenergyoutlook_weo2013specialreport.pdf 35. WorldCement.com. (2012). Evolution of the Southeast 19. Mackenzie, A. (2013, 8 August). Productivity boost will keep us Asian cement market, www.worldcement.com/asia-pacific- at No 1. The Australian, www.theaustralian.com.au/business/ rim/28032012/Cement_supply_and_demand_southeast_asia/ opinion/productivity-boost-will-keep-us-at-no-1/story- 36. WorldCement.com (2013). Cement: The Southeast Asia view, e6frg9if-1226693062147 www.worldcement.com/asia-pacific-rim/01022013/Cement_ 20. World Bank. (2014). 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32 Urbanization, Steel Demand, and Raw Materials

By Mike Elliott Over 70% of steel produced in 2013 was generated using Global Mining & Metals Leader, Ernst & Young direct coal input, leading to the use of 1.2 billion tonnes of coal—about 15% of total global consumption.2

rbanization and steel intensity go hand in hand. In the preliminary stages of a country’s urbanization, steel inten- “Considerable scope remains for Usity increases with the need for new infrastructure for improved connectivity, efficient use of natural resources, and growth in global steel demand in creation of sophisticated transport hubs. Increased population density means taller buildings requiring more high-quality steel. the medium to longer term.” Demand for machinery also increases as more of the population urbanizes to find employment industries that are steel-intensive. Although steel remains a large market for coal and iron ore, The steel intensity curve explains the long-term drivers for the current reality of a slowing global market is reflected in steel use (see Figure 1). The first stage of the curve during forecasts for minimal demand growth in 2015. It is therefore an emerging economy’s rapid growth is the most steel inten- likely that the raw material markets will remain oversupplied, sive, driven largely by high levels of government investment with pricing flat for at least the next two years (see market that boost construction and infrastructure demand. In many projections in Table 1). This prolonged period of low prices is rapid-growth markets, which are in Stage 1 to the left of the likely to push higher-cost suppliers out of the market. steel intensity curve, steel consumption will continue to be driven by the growth of their construction and infrastructure While there are concerns that China—as a key driver for sector. The steel intensity curve stabilizes or starts to decline growth in global steel demand—may have reached peak steel at around US$15,000–20,000 GDP per capita as a country demand far earlier than previously forecasted and now has a becomes more developed and urbanization rates begin to decline (Stages 2 and 3). lower growth outlook for the next two to three years, steel producers and raw material suppliers should not be deterred. Integrated steel-making (i.e., non-recycled steel) is primarily Considerable scope remains for growth in global steel demand based on iron ore and coking coal (i.e., metallurgical coal). For in the medium to longer term. This will come through urban- each tonne of steel that is produced, about 1400 kg of iron ore ization and industrialization in other rapidly growing markets and 800 kg of coal are required.1 Due to this, the production of as well as from other downstream sectors. Once these trends steel is the second largest use of coal after power generation. gain traction, an uptick in raw material markets is likely.

CHINA’S CHANGING DEMAND Stage 1 Stage 2 Stage 3 700 Czech Republic Over the last 10–15 years, urbanization and industrialization 600 Japan in China has been a significant driver of global steel demand. Canada 500 China The Chinese government has been investing in infrastructure,

Turkey Germany which has helped drive economic growth. The steel-intensive Italy 400 U.S. nature of infrastructure has driven the creation of vast steel Russia Malaysia production capacity within China, which in turn has fueled Thailand 300 Spain Netherlands Mexico Poland demand for coking coal and iron ore. Kazakhstan Portugal Ukraine 200 France Romania Brazil Import demand for coking coal in China has been growing rap- India Greece 100 South idly in recent years, at almost 30% in 2012 and 40% in 2013. Kenya Morocco Africa

Apparent steel consumption (kg/capita) consumption steel Apparent Bangladesh Similarly, seaborne iron ore demand from China increased by 0 10,000 20,000 30,000 40,000 50,000 60,000 10% per year in the past three years to reach about 917 Mt in GDP/capita ($) 2014.3 To meet this continued demand, iron ore and coal min- FIGURE 1. Steel intensity compared to per capita GDP ers have significantly increased supply capacity.

www.cornerstonemag.net 33 STRATEGIC ANALYSIS

In 2014, however, this trend in growing demand came to an 6% 2014 forecast (Oct. 2013) abrupt halt, with China’s coking coal imports falling by just 5% 2014 estimate (Apr. 2014) 4.9% 2014 estimate (Oct. 2014) over 17% and growth in iron ore demand moderating to 4% 2015 forecast (Oct. 2014) 3 around 3%. This is largely due to significantly lower Chinese 3.5% 3.5% 3% 3.3% 3.2% 3.4% steel demand growth in 2014. This, combined with new pro- 3.1% 3.1% 3.0% 3.0% 3.0% 2% 2.0% 2.0% duction coming online, has led to an oversupply in both the Growth Steel 1% 1.4% coking coal and iron ore markets with an ensuing drop in 1.0% 0.8% prices. Some market commentators believe that China may 0% World World BRIC China have already reached peak coal with both supply and demand excluding excluding for coal as a whole contracting by about 3% in 2014.4 With China China such a significant slowdown in demand, there are concerns FIGURE 2. Outlook for growth in steel usage that China has also reached peak steel sooner than expected.5 Chinese steel demand grew by only 1% in 2014 as compared increasing affluence, an increase in auto exports, and increas- to 6% in 2013. The World Steel Association revised its fore- ing sales as GDP increases (see Figure 4). casts to predict even slower growth in 2015 (see Figure 2).6 China plans to implement emission standards (China IV) Considering the relationship between urbanization and steel, similar to Euro IV standards. Under them, vehicles that fail to there is actually considerable scope for further steel demand meet the standards will be banned from sale. This will drive from China. The percentage of China’s urbanized population still light-weighting of vehicles, which will drive the production of lags that of developed nations (see Figure 3).7 China’s current higher-quality flat steel, such as advanced high-strength steel steel per capita consumption also shows upside when compared in China. However, it will also bring the possible threat of sub- with peak steel per capita consumption of other markets.6–9 stitution with lighter materials, such as aluminum.

EY expects, however, that there may be a period of imbalance INDIA’S URBANIZATION WILL and slower steel intensity growth, as China’s policies are likely REQUIRE MORE STEEL to focus on human-centered urbanization (i.e., in response to the demands of the people), with new urban planning mod- Ongoing rapid urbanization in India will drive steel-intensive els centered on technology and sustainability.10 China is also growth in the country. The Indian government is investing beginning to focus on sustainable growth based on consumer heavily in infrastructure and has laid plans to boost domestic demand (i.e., market forces), rather than centrally planned steel capacity to 300 Mt per annum by 2025. Indian steel com- investment that has relied on the metals and other industries panies have made investments of US$35.4 billion over the last as drivers of economic growth. seven years to increase steel capacity.13 Steel demand in India From a downstream demand perspective, this means there is also increasing, with estimated growth of 5% to 83 Mt and a is likely to be less investment in the property sector, which further 4.8% to 87 Mt in 2014 and 2015, respectively. represents a downside risk for the steel sector and raw material producers. An estimated 30% of Chinese steel production To cater to this wave of increased steel production, the coun- goes into the property market. As floor space sold in the first try must focus on augmenting its domestic coking coal sources quarter of 2015 was down 9.2% year-on-year over the same by making better use of its domestic reserves. By 2025, 63% period in 2014 and building starts are down 18%, this is also of the 300-Mt steel capacity in India is expected to be in coal- impacting steel demand.11,12 intensive blast furnaces. To meet steel production targets, 170 Mt of coking coal per year will be required. With limited However, growing consumer demand for manufactured goods coking coal resources, India is set to overtake China as the and cars shows significant growth potential for steel demand. world’s largest overall coal importer in 2015 and 2016.14 Most For example, growth drivers for China’s automotive industry of this supply will come from Australia, which supplied 85% of include low vehicle density, rising replacement demand due to coking coal imports to India in 2013.

TABLE 1. Range of broker forecasts for steel raw materials (% growth in demand)

Raw material 2015 2016 2017 2018 Coking coal –1.68 to 0% –0.3 to 10% 1.7 to 4% 1.69 to 5% Iron ore 0.7 to 1.7% 1.2 to 3.4% 1.5 to 1.9% 1 to 1.6%

34 100% 1400 1200 80% 92% 1274 85% 81% 1000 79% 75% 60% 64% 800 826 53% 600 737 40% 662 400 491 508 20% 32% 457 200 Percent urbanized Percent 0% 0 Japan Brazil U.S. France Germany South China India (kg/capita) intensity Steel UK France China Germany U.S. Japan South Korea Africa FIGURE 3. The extent of urbanization and peak steel intensity in major steel-producing regions

Unlike coking coal, India has sufficient iron ore reserves to cater Similarly, the growing size of the Indonesian and Nigerian to its domestic steel industry. In the past, India has produced urban populations indicate that the usage of steel could around 216 Mt of iron ore per year, far more than its rate of increase in coming years, particularly due to demand from the domestic consumption of around 100–105 Mt. In recent years, infrastructure and construction sectors (see Figure 5).15 however, the Indian government imposed bans on iron ore mining to combat illegal mining—this step reduced domestic Steel consumption has already picked up in Indonesia. Africa supply. The government is, however, planning to auction off as a whole represents a future growth opportunity for the iron ore assets, which will improve the domestic availability global steel sector, particularly in terms of infrastructure. of iron ore. Indian iron ore producers have the required infra- African and Indonesian steel production is currently relatively structure and logistics to ramp up production quickly to meet small. Indonesia relies on coking coal imports for domestic domestic steel sector demand in the next few years. steel production at present. Africa has only 3.7% of proved global coal reserves, the majority of which are located in 16 STEEL DEMAND GROWTH IN OTHER South Africa. Africa therefore is likely to rely on imports if RAPID-GROWTH MARKETS it builds up a domestic steel industry to support its growing infrastructure needs. Increasing urbanization in Turkey and Mexico over the last 30 years has led to high per capita steel consumption in both THE FUTURE OF STEEL AND URBANIZATION countries. The urban populations in Turkey and Mexico have increased from 52.4% and 69% in 1985 to almost 73% and With forecasts for increasing urbanization in many parts of 79%, respectively, in 2014. As a result, per capita steel con- the world, industrialization and an increasing need for infra- sumption in both Turkey (~450 kg) and Mexico (~225 kg)is structure will drive steel-intensive growth for the foreseeable higher than many other emerging economies. The two coun- future. In the short term, however, a period of slower steel tries already have steel-making facilities; however, over 70% demand is projected until China’s rate of economic growth of steel produced in both countries is through electric arc furnaces, which recycle steel and therefore rely heavily on scrap steel and energy, rather than iron ore and coking coal. Thus 70% Nigeria Indonesia the reliance of these countries on the seaborne iron ore and 63.0% coking coal markets will be limited if this trend continues. 60% 58.3% 53.0% 50% 46.9%

800 40% 826 600 697 30% 639 597 591 25.6% 26.1%

400 urbanized Percent 20% 395 200 272 81 10% 19 0

Vehicles 1000 people per Vehicles U.S. Australia Canada Germany France South Brazil China India 0% Korea 1985 2014 2030 FIGURE 4. Vehicle density by country highlights the growth FIGURE 5. An increasing proportion of the population will be potential in the automotive sector. urbanized in Indonesia and Nigeria15

www.cornerstonemag.net 35 STRATEGIC ANALYSIS

does not constitute advice, and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.

REFERENCES

1. World Steel Association. (2015). Fact sheet: Steel and raw materials, www.worldsteel.org/publications/fact-sheets/content/ 00/text_files/file0/document/fact_raw%20materials_2014.pdf 2. World Coal Association. (2015). Coal & steel statistics, www. worldcoal.org/resources/coal-statistics/coal-steel-statistics/ 3. UBS. (2015, January). Global I/O: Miners price review. 4. Puko, T., & Yap, C.W. (2015, 26 February). Falling Chinese coal consumption and output undermine global market. The Wall Street Journal Online, www.wsj.com/articles/chinas-coal- consumption-and-output-fell-last-year-1424956878 5. Sanderson, H. (2015, 17 February). Concerns raised as China steel enters ‘peak zone’. Financial Times, www.ft.com/ intl/cms/s/0/ea7af92e-b1e9-11e4-8396-00144feab7de. html#axzz3VWovuQhi 6. World Steel Association. (2014, 10 June). Worldsteel short range outlook 2014–2015, www.worldsteel.org/media-centre/press- releases/2014/worldsteel-Short-Range-Outlook-2014-to-2015. html 7. The World Bank. (2015). Data: Urban population (% of total), data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS 8. ArcelorMittal. (2010). The future of our business, corporate. arcelormittal.com/~/media/Files/A/ArcelorMittal/ investors/presentations/investor-days/2010/627-48-0-0- InvestorDay2010-Presentation-Lnmup.pdf 9. Internal EY Analysis 10. Deutsche Bank. (2014, 18 March). China: Implications of the ‘new-type’ urbanization plan. Taller buildings require substantially more steel. 11. Bromby, R. (2014, 2 October). Chinese property’s long commodity shadow. MiningNewsPremium.net, www.miningnewspremium. recovers and industrialization in other rapid-growth markets net/storyview.asp?storyID=826936090§ion=Outcrop§i onsource=s175 gains traction. 12. National Bureau of Statistics of China. (2015, 15 April). National real estate development and sales in the first three months As currently 70% of the world’s steel production relies on cok- of 2015, www.stats.gov.cn/english/PressRelease/201504/ ing coal and iron ore as raw materials, it is likely that demand t20150415_712772.html for coking coal and iron ore will continue to grow at a steady 13. Deutsche Bank. (2014, 28 May). A return to materials intensive pace in the medium term. In the longer term, it is possible that growth. 14. Els, F. (2015, 18 February). Coal price rally with legs as India increased recycling could displace some of this demand. overtakes China, Mining.com, www.mining.com/coal-price- rally-with-legs-as-india-overtakes-china-22896/ DISCLAIMER 15. United Nations. (2014). World urbanization prospects, 2014 revision, esa.un.org/unpd/wup/Highlights/WUP2014- Highlights.pdf The views expressed in this article are the views of the author, 16. BP. (2014, June). Statistical review of world energy, www. not Ernst & Young. This article provides general information, bp.com/statisticalreview

36 The Rise and Potential Peak of Cement Demand in the Urbanized World

By Peter Edwards is far smaller than China and India in terms of cement produc- Editor, Global Cement Magazine tion, they actually represent very large cement industries. The top producers in 2014 are shown in Table 1.2

Another important group of countries includes those with ement is the binder that holds together urban centers cement industries that are seeing the most rapid growth. In around the world. To make it, limestone, sand, and other this category, China and India are joined by relative minnows additives are combined in rotating kilns at temperatures C such as Sudan, Peru, Nigeria, Turkey, Colombia, and Brazil. of up to 1450°C. This process yields a granular intermediate The “fastest risers” between 2003 and 2013, most of which known as clinker, which is then ground in mills to produce are developing countries, are shown in Table 2.2,7 The speed cement powder. The final cement mix will include around 5% at which their cement industries are growing has more than gypsum and may also include other non-clinker mineral by- made up for the recent contraction in mature markets, such products like limestone, slag, and ash from coal-fired power as the EU and the U.S. Additionally, several countries listed plants. The process of making clinker, and hence cement, toward the bottom of the table have cement industries that demands around 100–350 kg of coal per tonne of clinker.A are both large and rapidly growing. Thus, the cement industry has historically been a major user of fossil fuels, especially coal.

Since 1950 the cement industry has seen massive growth as “Cement is the binder that our world has urbanized.1 From 133 million tonnes (Mt) in 1950, production has increased more than sevenfold to one holds together urban centers billion tonnes (bnt) in the 33 years to 1983 (see Figure 1), before hitting 2 bnt in 2004, 3 bnt in 2010, and 4 bnt in 2013. around the world.” In 2014 around 4.2 bnt of cement were produced.2

China topped the list of cement-producing nations in 2014 at about 2.5 bnt, which was an incredible ~60% of global CEMENT SELF-SUFFICIENCY MEANS production. The second-largest producer, albeit an order of BUSINESS FOR DEVELOPING NATIONS magnitude smaller, was India at 280 Mt. A number of other countries produce substantially less, but are similar to each It is pertinent that many of the largest and fastest-growing other in production scale. Although each country in this cluster cement industries are now in the developing world, but this should not come as a surprise. As the economy of a given 4500 55% country develops, cities become more prosperous than Cement Production 4000 surrounding rural areas, leading to inward migration and Global Urbanization Rate 50% on on (Mt) 3500 urbanization. This inexorably leads to increased demand for

3000 45% Rate on building materials, including cement. Indeed, for many devel- ti 2500 oping countries, self-reliance in cement production is a major 40% 2000 industrial target as it reduces the reliance on imports, reduces 1500 35% the cost of construction, and facilitates further development 1000 of the economy through improved infrastructure. In the case 30%

500 Global Urbaniza of some countries it is even possible to show strong posi-

ti Global Produc Cement 0 25% tive correlation between GDP and cement consumption over time.8 1940 1950 1960 1970 1980 1990 2000 2010 2020

FIGURE 1. Global cement production and percentage of With the majority of the 2.5 billion new urban inhabitants pro- global population in urban areas since 19503–6 jected to be in Africa and Asia in the period to 2050,5 it is the

www.cornerstonemag.net 37 STRATEGIC ANALYSIS

TABLE 1. Top cement-producing nations in 20142 TABLE 2. Select rapidly growing national cement industries between 2000 and 20122,7 Country Cement production (Mt) 2000 2012 Growth China 2500 Rank Country production production from 2000 India 280 (Mt) (Mt) to 2012 (%) U.S. 83 1 Sudan 0.28 3.5 1260 Iran 75 2 Peru 0.65 8.1 1250 Turkey 75 3 Nigeria 2.5 16.4 656 Brazil 72 Russia 69 4 Kazakhstan 1.175 7.6 647 Saudi Arabia 63 5 Estonia* 0.09 0.5 556 Indonesia 60 6 Bangladesh 0.98 5.1 520 Vietnam 60 7 Iraq 2 10 500 Japan 58 8 Tajikistan 0.05 0.234 468 Egypt 50 9 Qatar 1.2 5.5 458 South Korea 48 10 Vietnam 13.3 60 451 Thailand 42 11 Turkmenistan 0.45 1.9 422 Mexico 35 12 Oman 1.24 5.2 419 Pakistan 32 13 Ethiopia 0.9 3.5 389 Germany 31 China 597 2210 370 Italy 22 14 15 Latvia* 0.3 1.1 367 countries in these continents, their regulations, and popula- 16 Kenya 1.3 4.6 354 tions that will most strongly influence future cement demand, 17 Zambia 0.348 1.2 345 the efficiency of the production process, and the typesof fuels used. It is not, therefore, a great leap to conclude that 18 Cambodia 0.3 0.98 327 the global cement production curve will continue to rise in the 19 Pakistan 9.9 32 323 coming years. So the real questions are how fast will the industry develop in the future and how will its appetite for coal and 20 Colombia 3.5 11 314 other fuels change? 24 India 95 270 284 25 Saudi Arabia 18 50 276 IMPACT OF SOFTER CHINESE DEMAND 31 Egypt 24.1 46.4 191 When attempting to forecast future cement demand itis 35 Russia 32.4 61.5 190 important to realize that the past decade was anomalous. 39 Indonesia 27.8 51 183 Chinese growth, which has recently been typified by wild over-construction, is by far the largest single factor behind 43 Turkey 35.8 63.9 178 rising global cement consumption over this period. However, 44 Brazil 39.2 68.8 176 9 slowing Chinese economic growth and the fact that China is N/A Global 1600 3800 238 now actively removing older and less efficient cement plants10 mean that Chinese production is unlikely to increase at the *EU member data, for 2003 to 2012 same rate as has been observed in the recent past. It may even fall in the next few years if the central government pulls the demand and urbanization rates to maintain the gradient seen appropriate levers. from 2003 to 2014 (see “Fast” line in Figure 2 for a projection to 2050). Such an extrapolation is unadvisable as it predicts Without such rampant capacity addition in China, other coun- a more than tripling in cement production levels by 2050 to tries would have to see an incredible step-change in their around 13.5 bnt/yr. This scenario is highly unlikely.

38 16,000 Thus, in some locations wastes are being increasingly used by Historical 14,000 the cement industry. Fast (2003–2014) on on (Mt) 12,000 Slow (1983–2003) For example, there has been a significant transition away from 10,000 fossil fuels in places like the EU (from 97.6% fossil fuels in 1990 8000 to 69.2% in 2012) and the U.S. (from 95.9% in 1990 to 83.8% 6000 in 2012).12 In these regions, decades of waste management 4000 expertise can be used to sort and supply calorific waste from 2000 municipal and industrial sources. It is these same markets where

ti Global Produc Cement the cost of traditional fuels is the greatest and where minimiz- 0 ing environmental impact is a priority. In select developing 1940 1960 1980 2000 2020 2040 2060 markets, biomass wastes such as rice husks, olive kernels, and FIGURE 2. Possible global cement production scenarios to wood waste are also used to supplement traditional supplies. 2050

A more likely outcome is a gradual reduction in the rate at which new production is added in the coming years. A bet- “The cement industry uses ter growth rate “baseline” to take, might be that seen in the period between 1983 and 2003. Over this 20-year period, around 5% of the coal Chinese growth was much more in line with trends observed produced globally every year.” in other countries today—global production increased at an average of 42 Mt per year. If this growth rate is extrapolated starting at the present, a projected 5.7 bnt/yr of cement will be produced in 2050. AN ALTERNATIVE TO ALTERNATIVES

CHANGING FUELS AND THE ROLE OF COAL Despite the desire of some to move away from coal, cement facilities using alternative fuels and non-coal fossil fuels The cement-making process benefits from steady production remain a minority. While the Cement Sustainability Initiative conditions, which ensure both process efficiency and high- (CSI) stated that the use of alternative fuels saw a sevenfold increase between 1990 and 2012, the overall rate only rose quality cement. Traditionally this has meant that most plants from 2% to 14% of total fuel use.12 Notably, CSI’s research relied on coal as their fuel of choice because it burns consis- included far greater coverage of Europe than other regions, tently, has high calorific value, and is easy to handle compared meaning that the true extent of alternative fuel use is likely to to some other fuels. The cement industry uses around 5% of be much lower than their data suggested. Coal continues to the coal produced globally every year.11 While this is much less supply the vast majority of thermal energy in major markets than the steel or power industries, coal remains the largest like China and India. There was, for instance, strong bidding single component in the overall fuel mix used by the cement B from cement producers for reallocated coal blocks in India industry, using on the order of 330–350 Mt of coal per year. in February and March 2015, highlighting the high strategic Oil and gas have also been used but have traditionally been importance of the resource over a multi-decade horizon.13 limited to countries with large natural reserves. Indeed, in some regions, the trend for fuel choice is cur- Although consistency is a major requirement for the fuel rently toward coal. Previously, major oil- and gas-producing used to make cement, the fact that thermal energy repre- countries provided subsidies for those fuels. However, this is sents 30–40% of overall costs for the cement industry has increasingly not the case. The curtailment of Egyptian fuel-oil increasingly led to a search for lower-cost fuels. In the past subsidies for the cement industry in 2014 has led to a flurry 25–30 years this has led to the rise of the use of alternative of investment in coal-feeding systems. Similar moves could be fuels, a term used to describe any non-fossil fuel that has suf- seen in other countries if the oil price (and revenue) continues ficient calorific value for cement production. The drivers for to be low. the use of any alternative fuel will often include legislation that demands reduced CO2 emissions, the impact of landfill Even with the rise of alternative fuels and low oil and gas taxes and bans, and the price of alternative fuels relative to prices, coal clearly has a very large role to play in the cement conventional fuels. In some situations cement producers are industries that will help build the new cities of the 21st cen- even paid a gate-fee to take certain types of hazardous wastes. tury. Assuming 5.7 bnt per year of cement production in 2050

www.cornerstonemag.net 39 STRATEGIC ANALYSIS

and 350–400 Mt of coal at current production levels, coal con- electrical energy from process waste heat. Such installations sumption for the cement industry would be 475–540 Mt in can improve efficiency by up to one third15 and are already 2050. prevalent in China. Low returns on investment are currently preventing this technology from gaining a foothold elsewhere. FACTORS THAT COULD DAMPEN Third, the clinker factor: The percentage of clinker in the final CEMENT’S DEMAND FOR COAL cement product has been reduced over the past two decades from 83% in 1990 to around 75% in 2012, according to the It is possible that cement industry coal demand may be lower CSI.16 This means that 25% of the cement is a non-clinker min- than some projections. A number of factors could act asa eral and thus not as energy-intensive as clinker, which lowers damper. First, 35 years is a long horizon over which the use the fuel requirement. Once again, however, the fact that the of alternative fuels could grow in developing countries, which CSI data include a bias toward Europe may be placing an over have pressing waste management problems in many major emphasis on the extent of this change. cities. As inhabitants of these countries demand the same living conditions as those in developed countries, there could be more waste as well as higher levels of waste processing. This PEAK CEMENT would give rise to the opportunity to use far higher levels of waste as an alternative fuel in many markets that are currently Cement demand will only increase for an individual country unable to do so. up to a certain level of urbanization. Past this level, frequently quoted as 600 kg per capita per year,8 most countries enter Second, advances in cement kiln technology are driving higher a “repair and maintain” stage. In developed countries this efficiency as older plants are replaced (e.g., transitioning trend is reinforced by low population growth rates. To see from wet to dry process kilns and also the addition of pre- this effect, we need look no further than the EU28, the U.S., heaters/pre-calciners). This effect is particularly noticeable and Japan. The cement industry of each of these developed in India, which has one of the youngest cement industries in regions produced 12–34% less cement in 2012 than it did in the world. Despite its current low alternative fuel rates, the 2000.7 As each economy achieves the “repair and maintain” Indian cement industry has very high thermal efficiency.14 level of development, demand for cement will be reduced in For older plants, efficiency could also be increased via the an increasing number of countries, causing growth in global use of thermal energy recovery systems, which can generate cement demand to fall. After this point, it is conceivable that

Cement is a chief building block of urbanization.

40 The 2003 revision, www.un.org/esa/population/publications/ wup2003/WUP2003Report.pdf 4. UN. (2005). World urbanization prospects: The 2005 revision, www.un.org/esa/population/publications/WUP2005/2005 WUPHighlights_Final_Report.pdf 5. UN. (2014). World urbanization prospects, 2014 revision, esa. un.org/unpd/wup/Highlights/WUP2014-Highlights.pdf 6. CarbonMajors.org. (2015). carbonmajors.org/PDFs/Sums/ Cement%20Sums/IndustryData%206p.pdf 7. Saunders, A., & Edwards, P. (2014). The top 100 global cement companies & past, present, and future cement trends. Global Cement, www.globalcement.com/magazine/articles/892-the- top-100-global-cement-companies-and-past-present-and- future-global-cement-trends 8. Davidson, E. (2014). Defining the trend: Cement consumption vs GDP. Global Cement, www.globalcement.com/magazine/ articles/858-defining-the-trend-cement-consumption-vs-gdp Co-located coal-fired power plant and cement plant 9. International Business Times. (2014, 31 December). Despite slowing China, positive outlook for Asia’s economic growth global cement demand, and by extension the amount of coal it in 2015, www.ibtimes.com/despite-slowing-china-positive- requires, will peak. However, whether or not this could occur outlook-asias-economic-growth-2015-1771386 by 2050 remains to be seen. 10. Perilli, D. (2014, 3 December). Smog, politics and cement overcapacity. Global Cement, www.globalcement.com/news/ item/3123-smog-politics-and-cement-overcapacity What is certain, however, is that whatever happens to the 11. Bhatty, .I.,J MacGregor Miller, F., Kosmatka, S.H., & Bohan, R.P. cement industry over the next 35 years, coal will play a very (Eds.). (2011). Innovations in Portland cement manufacturing important role as the primary fuel source. Although other SP400, 262. Portland Cement Association. technologies and fuels may each take a small bite out of the 12. CSI. (2012). GNR Project—Reporting CO2, Parameter 3211a, www.wbcsdcement.org/GNR-2012/index.html demand for coal, the sector will continue to consume vast 13. Global Cement. (2015, 25 February). UltraTech wins coal block quantities of this vital fuel. in Madhya Pradesh, www.globalcement.com/news/item/3340- ultratech-wins-coal-block-in-madhya-pradesh; Global Cement. (2015, 20 February). UltraTech and Hindalco Industries win NOTES coal mines in India’s auction, www.globalcement.com/news/ item/3336-ultratech-and-hindalco-industries-win-coal-mines- A. Coal calorific content of 30 GJ/t,17 clinker specific energy of 3530 in-india-s-auction 15 MJ/t, and clinker factor of 80% gives coal consumption of 94 14. CSI. (2012). GNR Project—Reporting CO2, Parameter 329, www. kg/t at 100% efficiency. The process is not 100% thermally effi- wbcsdcement.org/GNR-2012/index.html cient and an estimate has been made to represent this. 15. Harder, J. (2013). Latest waste heat utilisation trends in cement B. 7.7 Mt of coal18 × 0.05 = 385 Mt. plants. Presentation at nd 2 Global CemPower Conference and Exhibition, 4–5 June, London, UK. REFERENCES 16. CSI. (2012). GNR Project—Reporting CO2, Parameter 3213, www. wbcsdcement.org/GNR-2012/index.html 1. U.S. Geological Survey (USGS). (1950–2015). Bureau of Mines 17. Biomass Energy Centre. (n.d.). Typical calorific values of fuels minerals yearbook (1933–1993), minerals.usgs.gov/minerals/ [table], www.biomassenergycentre.org.uk/portal/page?_pageid pubs/usbmmyb.html; USGS. Cement statistics and information, =75,20041&_dad=portal&_schema=PORTAL minerals.usgs.gov/minerals/pubs/commodity/cement/ 18. U.S. Energy Information Administration. (2012). Independent 2. Van Oss, H. G., USGS, & U.S. Department of the Interior (USDI). statistics & analysis—Coal, www.eia.gov/cfapps/ipdbproject/ (2015). Mineral commodity summaries 2015, minerals.usgs. IEDIndex3.cfm?tid=1&pid=1&aid=2 gov/minerals/pubs/mcs/2015/mcs2015.pdf 3. United Nations (UN). (2003). World urbanization prospects: The author can be reached at [email protected]

www.cornerstonemag.net 41 TECHNOLOGY FRONTIERS

Cogeneration Plants Close to Town Get the Most Out of Coal in Germany

By Stefan Schroeter When supplying municipalities with energy, it is clearly prefer- Contributing Author, Cornerstone able to locate CHP plants as close as possible to, or even within, city limits. Their capacity and performance can be adapted to the heating demand of the service area. Waste heat from the power plant, which might otherwise be released through the n increasingly urbanized global community affords stack or cooling devices, can instead be used to heat water. greater opportunities for the most efficient means to The combined heat and power cogeneration mode insures Aextract energy from coal and other fuels: combined heat that the fuel will be used at high overall efficiencies of up to and power (CHP) plants. CHP is not new. Some of the world’s 90%. The heated water can then be conveyed over a short dis- first power plants were CHP facilities and they continue to be tance to the urban heating network. As a result, the required deployed globally today. Plant size, electricity output, and heat investments in existing district heating connections remain provided are site specific and the electricity and heat output moderate. can vary throughout the year as more heating is needed during cooler months. Germany is an example of a country that has been relying successfully for decades on a mix of large and small CHP facilities, many of which are coal fired. “Through careful planning and

For generating electricity at the highest overall fuel usage effi- collaboration with urban centers, ciency, CHP plants are unsurpassed. While the most modern simple-combustion coal-fired power stations deliver a maxi- operating a CHP plant can result mum efficiency of 46%,A much of the energy in the fuel is not effectively utilized and thus leaves the power plant as waste in 90% of the fuel’s energy being heat. To get the most energy out of fuels, it therefore makes sense to consider the supplementary use of waste heat from productively utilized.” power generation. Through careful planning and collaboration with urban centers, operating a CHP plant can result in 90% of the fuel’s energy being productively utilized. In almost all parts of Germany, smaller CHP plants can be an effective fit for energy utilization. While large, modern coal-fired power plants provide relatively high electrical effi- Traditional System CHP System ciencies, CHP facilities of varying sizes are able to achieve high fuel use efficiencies and can be suited to meet the needs of both large and small urban areas. Power Plant ELECTRICITY In Germany, large, high-efficiency coal-fired power plants CHP are often sited in the vicinity of hard-coal and lignite surface mines or at coal ports to avoid transport costs. CHP is only a limited option for these plants as large cities are too distant Boiler HEAT to justify the cost of overland heating circuits. In addition, the immense quantities of waste heat produced by a large-scale power plant far exceed the thermal requirements of many cit- 46% + X Eﬃciency ≤90% Eﬃciency ies and industrial complexes.

Current state of the art coal-fired power plants can be up For these reasons, the fuel use efficiency of such power plants to 46% efficient. To provide heat for remote customers, is only marginally improved by municipal or industrial heat additional boilers are needed. Combined heat and power deliveries, while the electrical efficiency can slightly decrease. plants can achieve much higher efficiency if a suitable heat sink is available. Four German coal-fired CHP plants are chronicled in this Source: Oak Ridge Laboratory / Cornerstone article. These plants were selected because three of them

42 insulated underground pipeline. Under this arrangement, the municipal utility is able to cover half the district heating requirements in the city of 550,000 inhabitants. A significantly lesser 1.6% of the heated water is routed from Lippendorf to the nearby municipalities of Böhlen and Neukieritzsch. In 2014, these supplemental district heating services raised the overall fuel use efficiency at Lippendorf to 44.07%.

NEW HARD-COAL POWER STATION BEGINS DISTRICT HEATING

An example of a newly built CHP plant is the hard-coal-fired The Lippendorf lignite power station can provide up to power station at Lünen, in North Rhine-Westphalia. This plant 330 MW of district heat, primarily to the city of Leipzig. was recently profiled by Cornerstone because it boasts one (Photo by Stefan Schroeter) of the highest electrical efficiencies of any power plant in the world.1 Construction of the plant was fully completed in 2014 represent typical facilities found throughout Germany that by Trianel GmbH. The original electricity-only configuration differ from each other in terms of their size and fuel use effi- with a generation capacity of 750 MW had already achieved ciency. The remaining plant, Chemnitz, is a rare example of an efficiency of 45.95%. Since November 2014, plant operation a municipal lignite-fired plant from the days of the German has been modified so that up to 35 MW of excess heat are being Democratic Republic that has survived to continue providing fed through a 617-m pipeline into the Stadtwerke Lünen util- heat and power today. The operating information for these ity heating network. This thermal energy from the plant covers four plants is summarized in Table 1. 93% of the district heating needs of Lünen—a medium-sized city with 85,000 inhabitants. The remaining thermal energy for LIPPENDORF LIGNITE-FIRED PLANT PROVIDES district heating comes from several small-scale biogas plants. ELECTRICITY AND DISTRICT HEAT TO LEIPZIG Through the conversion from electricity-only to CHP, the uti- Operated by the Swedish state-owned energy corporation lization efficiency of the hard coal has been improved. Using Vattenfall, the advanced-technology Lippendorf lignite-fired the 35 MW of formerly wasted heat increased the overall power plant in Saxony, Germany, has provided utility heat- fuel utilization efficiency of the power plant to 47.51%. The ing since 2000. The CHP plant configuration has an electricity associated reduction in electrical efficiency is reduced only capacity of 1782 MW, generated at an electrical efficiency of insignificantly to 44.96%, the electrical capacity to 736 MW. 41.7%. In 2014, Lippendorf provided up to 330 MW of heat, primarily to the Leipzig Stadtwerke city utility service area. In principle, the power plant steam turbine system could pro- Heated water is transported from the plant through a 15-km vide up to 160 MW of district heat. Trianel is negotiating with

TABLE 1. Characteristics of select German coal-fired CHP facilities

Electrical Heating Fuel(s) as Electrical Total fuel use Plant Commissioned capacity, capacity, delivered efficiency, % efficiency, % MW MW Lippendorf 2000 Crude lignite 1782 330 41.72 44.07 Lünen 2014 Hard coal 750 35 44.96 47.51

Crude lignite, gas, Chemnitz 1985–1998 234 475 24.30 58.80 heating oil

Pulverized lignite Bautzen 1980–1995 (gas and heating oil are 2 40 19 78 secondary fuels)

www.cornerstonemag.net 43 TECHNOLOGY FRONTIERS

The new hard-coal power station at Lünen feeds up to 35 MW of excess heat into a utility heating network. (Photo courtesy of Trianel) additional potential customers for such heating services. The Both lignite-fired units are operated in a CHP configuration. company estimates that the total fuel utilization efficiency would Unlike the plants described previously, more than half of the exceed 50% if the full 160 MW of heat were being provided. plant energy output is used for heating rather than power production. Unit C operates throughout the year to gener- Trianel has not stated what investments have been needed to ate 100 MW of electricity with a heating capacity of 140 MW. establish waste heat utilization and distribution. The company With its extraction-condensation turbine, it can provide vary- estimates a payback time well in excess of 10 years for these ing levels of power generation as required to meet fluctuating expenditures. demand. Similarly, waste heat is supplied as needed. Unit B operates exclusively in the cooler months of the year, deliver- ing 67 MW of electricity and 165 MW of heat. Similar capacities VERSATILE LIGNITE POWER AND HEAT are provided by Unit A, which is employed as a backup unit. GENERATION IN A SUBURBAN SETTING The Chemnitz CHP facility generates enough electricity for all The three lignite units comprising the CHP facility in Chemnitz, 140,000 private households in the city and provides heat for Saxony, were originally constructed from 1986 to 1990 at about one third of the households. The current operator, Eins the north end of the city. The municipal utility Stadtwerke Energie (which succeeded Stadtwerke Chemnitz), declared an Chemnitz undertook comprehensive environmental retrofits achieved electrical efficiency of 24.3% on average in 2014— between 1995 and 1998. The original lignite-fired Unit A was notably lower than the electrical efficiency of the newer and converted to run on natural gas and light heating oil. Lignite- larger plants. However, the overall fuel use efficiency was fired boilers B and C were retrofitted with desulfurization 58.8%, a figure that was reduced because Unit C generates equipment. The crude lignite is delivered by rail from an open- electricity during the warmer times of the year when there is cast mine about 70 km away. no commensurate demand for district heat.

44 40,000, this CHP facility delivers heat to the municipal utility Energie- und Wasserwerke Bautzen.

Enso has employed the pulverized lignite-based CHP successfully for the last 20 years. It functions reliably and is accepted by the local inhabitants, even though a suburban housing complex sits only 250 m from the plant site. One reason is that many Bautzen residents are involved with the local lignite industry, either directly or indirectly.

Continued development of the pulverized lignite CHP technology used in Bautzen began in the 1990s by the regional mining company, Laubag. At that time, many eastern German The CHP plant Bautzen primarily delivers heating energy at a cities were converting their older lignite-fired CHP plants to capacity of 40 MW to the municipal utility. (Photo courtesy modern natural-gas-fired facilities, leading to a significant of Enso) sales reduction for Laubag. The company had hoped that cities would prefer advanced lignite technologies as the basis Acceptance by the local community is critical for the success of electricity and heating services. However, this expectation of CHP plants sited near residential areas. In the experience has only been partially fulfilled. Laubag’s successor, Vattenfall of the operator of the Chemnitz facility, the majority of the Europe Mining, currently supplies 10 municipal CHP plants local population accepts the use of lignite and the plant. At with pulverized lignite. The most recent plant was converted one time, residents near the plant repeatedly complained to use this processed domestic fuel in 2010. about the noise level of the freight yard operations; more recently, the plant operator has worked to ensure that such EFFICIENT ENERGY THROUGH COGENERATION disturbances are minimized. Whether large or small, urban centers provide an opportunity for greater deployment of combined heat and power production. While Germany has a long history employing CHP, this technol- “Acceptance by the local community ogy also offers benefits around the world. As energy demand continues to grow, it is worth considering how best to utilize pre- is critical for the success of CHP plants cious energy resources. The flexibility and efficiency offered by sited near residential areas.” CHP plants is one option that continues to carry merit.

ACKNOWLEDGMENTS

THE SMALL, EFFICIENT BAUTZEN CHP PLANT Much of the information in this article was provided by the CHP facility operators and owners. Their contributions are Dedicated in 1980 as a heating-only facility, the CHP power gratefully acknowledged. plant in Bautzen, Saxony, was reconfigured for CHP operation in 1995 with the required environmental control technologies. NOTES Pulverized lignite is now the primary fuel, delivered by tank trucks and discharged pneumatically into storage silos at the A. All electrical efficiencies are reported in terms of lower heating plant site. value (LHV).

One of the two boilers supplying the back-pressure turbine REFERENCES is fired with the finely ground lignite. If required, the second boiler can be added with natural gas or heating oil. The CHP 1. Santioanni, D. (2015). Setting the benchmark: The world’s most efficient coal-fired power plants, Cornerstone, 3(1), 39–42, plant primarily delivers 40 MW of heating energy, while elec- cornerstonemag.net/setting-the-benchmark-the-worlds-most- trical generation lies at 2 MW. The operator Enso reported efficient-coal-fired-power-plants/ an electrical efficiency of 19% and overall fuel use efficiency of 78%. Lying on the outskirts of the medium-sized city of To contact the author, please visit www.stefanschroeter.com

www.cornerstonemag.net 45 TECHNOLOGY FRONTIERS

Shenhua Guohua’s Application of Near-Zero Emissions Technologies for Coal-Fired Power Plants

By Wang Shumin affordable in China. Currently, the focus of near-zero emissions Chairman, Shenhua Guohua Power Company controls includes control of PM, SO2, and NOx with mercury emissions being maintained quite low due to lower-mercury coal and co-benefits from other emission control systems. With continued research and development, the future appli- s of the end of 2014, China had an overall power gener- cation of near-zero emissions technologies could be further ation capacity of 1360 GW, of which fossil-based power extended to include CO capture. Amade up 66.7% and non-fossil power contributed the 2 remaining 33.3%. China is rich in coal, with relatively small oil and gas reserves. In fact, coal accounts for about 90% of the country’s total energy resources. As such, coal likely will “Continued application of near-zero remain the principal primary energy source for the foreseeable future. Although coal-fired power plants have provided emissions technologies at coal- the energy necessary to support the rapid and steady growth of China’s economy, these plants also contribute to emissions fired power plants is consistent affecting air quality, including particulate matter (PM), sulfur dioxide (SO2), and nitrogen oxides (NOx). with the ultimate goal of efficient,

Shenhua Group has set a strategic target of building a world- low-emissions, and low-carbon class, coal-based, integrated energy company. As part of this goal, and according to the specific characteristics of China’s development of energy in China.” coal-fired power fleet, Shenhua Guohua Power Company (Shenhua Guohua) has researched, developed, and applied key environmental technologies. The company has been an At present, coal-fired power generation is the most mature, early adopter of near-zero emissions technologies, demon- efficient, and economical large-scale source for electricity in strating that high-efficiency, low-emissions technologies are China. Thus, continued application of near-zero emissions

The Dingzhou power plant is one of Shenhua Guohua’s near-zero emissions plants in operation.

46 TABLE 1. Key area emission limits and Shenhua Guohua its role in reducing China’s haze problem, the company has targets chosen to implement steps to exceed the regulation requirements and achieve near-zero emissions, effectively operating PM SO2 NOx at or below the regulated limits set for natural gas turbine (mg/Nm3) (mg/Nm3) (mg/Nm3) units (see Table 1).2 Limits for coal-fired 20 50 100 power units (O2 = 6 %) DEVELOPING A ROADMAP OF Limits for gas turbine EMISSIONS CONTROL TECHNOLOGIES 5 35 50 units (O2 = 15 %) Shenhua Guohua Based on its emissions limit targets, Shenhua Guohua has target for coal-fired 5 35 50 evaluated advanced environmental protection technologies from China and abroad and has increased its investment in units (O2 = 6 %) such technologies. The company has developed an innovation- driven technology roadmap to achieve near-zero emissions for technologies at coal-fired power plants is consistent with power units combusting Shenhua coal (see Figure 1), which the ultimate goal of efficient, low-emissions, and low-carbon is characterized by a sulfur content of 0.4–0.8%, ash content development of energy in China. of 7–16%, and a lower heating value of 21–24 MJ/kg. In addition, Shenhua’s coal includes relatively low mercury content, averaging 0.08 mg/kg compared to an overall average of 0.188 EXPLORING THE CONCEPT OF mg/kg in China. NEAR-ZERO EMISSIONS The first link in the emissions control chain is a low-temper- In 2011, an emissions standard for thermal power plants ature economizer (LTE), which reduces the flue gas velocity (GB13223-2011) was jointly issued by China’s Ministry of and also reduces the resistivity of PM, increasing PM removal Environmental Protection and the State Administration for efficiency in the electrostatic precipitator (ESP).3,4 A wet elec- 1 Quality Supervision and Inspection and Quarantine. The trostatic precipitator (WESP) is also used, with a PM removal emissions limits for coal-fired power units and gas turbine efficiency of 70–90%. SO2 emissions are controlled using high- units in key regions are listed in Table 1. efficiency wet desulfurization (FGD) equipment with aSO2

capture rate of 98–99%. A combination of low-NOx combustion Shenhua Guohua has met the emission regulation limits stated in the boiler and a full-load denitration system, which captures in the standard as well as the “Air Pollution Prevention and more than 85% of NOx, is also used. The combination of all Control Action Plan” published by the State Council. To play these technologies comprehensively minimizes the emissions

Near-zero emission

1 9 6 3 8 { 11 2 Coal 5 7 10

Air 4

Condensed water

1 Boiler 2 Low NOx burner 3 SCR 4 Heat exchanger 5 Dry ESP 6 High-frequency power 7 Limestone-gypsum desulfurization tower 8 Spray layers 9 Demisters 10 Wet ESP 11 Stack FIGURE 1. Technical roadmap to achieve near-zero emissions from coal-fired power units

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Technical Solutions for Desulfurization

In order to achieve the SO2 emission target of less than 35 mg/Nm3, a desulfurization technology with removal efficiency higher than 98% is required. A technology consisting of a conventional spray tower, tray design, dual cycle absorption tower, series absorption tower technology, etc., was the research focus. For a conventional spray desulfurization tower, Shenhua Guohua utilized its own patented technology to prevent the flue gas from sticking to the walls. With this technology and an additional layer of spraying, capture effi-

ciency can be greater than 98%, and the target of limiting SO2 emissions to below 35 mg/Nm3 can be achieved.

Wet ESP at the Guohua Sanhe coal-fired power plant To further improve on desulfurization, the use of seawater has also been researched and tested. At the company’s Zhoushan of PM, SO , NO , heavy metals, etc. Through applying these 2 x power plant, the desulfurization efficiency is higher than 99% technologies, the coal-fired power plant emissions are not only lower than the regulation limits for coal-fired power units in key areas, but are also lower than the limits for natural gas turbine units.

Key Technologies for PM Removal

Using traditional equipment for PM removal, such as an ESP or fabric filter, PM concentration at the stack can be controlled below the required limit (20 mg/Nm3). However, to achieve the near-zero emission target of less than 5 mg/Nm3, multiple technologies with synergistic PM capture must be applied.

The combination of multiple PM-removal technologies as shown in the technology roadmap consists of three stages: traditional ESP (i.e., dry) or fabric filter, synergistic PM removal during desulfurization, and the WESP. The initial ESP (equipped with LTE and high-efficiency power) or fabric filter has a PM removal efficiency of 99.8–99.9%, and thus PM concentration using these options can be controlled to below 20 mg/Nm3. As a co-benefit, the FGD system will remove about 50% of the PM entering the system, although some gypsum droplets will be entrained by the flue gas. Therefore, at the outlet of FGD, PM can be held to 10–15 mg/Nm3. In the final step for PM control, the WESP downstream of desulfurization has a PM removal efficiency higher than 70%, and thus the PM emissions at the stack can be reduced to less than 5 mg/Nm3. As another option, if the FGD tower is equipped with a high- efficiency demister, its PM-removal efficiency will increase to approximately 80%, which would reduce PM emissions at the stack to less than 5 mg/Nm3, even without the WESP. A new turbine rotor being installed at the Suizhong power plant

48 3 using seawater, resulting in SO2 emissions below 2.76 mg/Nm . The company plans to increase investment in the research and development of this technology and aims for some of its coastal power plants to be retrofit with a seawater-based desulfurization system.

High Efficiency and Full-Load Denitration

Based on research begun in 2010, Shenhua Guohua has decided to implement a combination of low-NOx burners in the boiler and a full-load denitration system for limiting NOx 5 emissions. The NOx concentration at the economizer outlet without any emissions control is about 100–200 mg/Nm3. If low-NOx burners and staged combustion are used, as developed through cooperative R&D with partnering companies, Integrated stack and cooling tower project the NO concentration at the economizer’s outlet can be x of these technologies. According to measured data, the actual limited to around 100 mg/Nm3. Then a selective catalytic concentration can be even lower. For example, Shenhua reduction (SCR) system with a designed denitration efficiency Guohua’s Sanhe power plant has measured a stack mercury of 80–85% is applied and the stack NOx emissions can be lim- 3 ited to around 20–40 mg/Nm3, notably lower than the limit for concentration of only 3–5 μg/Nm , which is an order of mag- 3 natural gas turbine units.6,7 nitude less than the emissions standard limit of 0.03 mg/Nm (GB13223-2011).

Mercury Removal DEMONSTRATING NEAR-ZERO EMISSIONS Because the company uses relatively low-mercury coal, and as the existing flue gas purification equipment can remove some In order to meet its own environmental requirements, mercury, the mercury content of purified flue gas is quite low. Shenhua Guohua launched a “High-Quality Green Power The total mercury removal efficiency of the ESP and wet desul- Generation Plan” for existing coal-fired power units anda furization system is approximately 25% and 50%, respectively, “Near-Zero Emission Project” aimed at newly built coal-fired and thus the total mercury removal efficiency is about 75%. By power units. In 2014, Zhoushan No. 4 was commissioned to the company’s calculations, the mercury concentration at the serve as a leading example for near-zero emissions from new stack should be less than 10 μg/Nm3, based on the application coal-fired power plants. After that, Sanhe No. 1 and Suizhong

TABLE 2. Shenhua Guohua’s near-zero emissions projects

Emissions control Capacity PM SO NO Power plant and unit technology and/or plant 2 x (MW) (mg/Nm3) (mg/Nm3) (mg/Nm3) commissioning date Zhoushan No. 4 2014-06 350 2.46 2.76 19.8 Sanhe No. 1 2014-07 350 5.00 9.00 35.0 Suizhong No. 2 2014-08 800 3.20 19.80 35.0 Sanhe No. 2 2014-11 350 3.00 10.00 25.0 Dingzhou No. 3 2014-12 660 2.00 6.00 17.0 Huizhou No. 1 2014-12 330 1.40 8.00 18.0 Dingzhou No. 4 2015-01 660 2.00 7.00 21.0 Suizhong No. 1 2015-01 800 4.83 27.20 38.7 Mengjin No. 2 2015-04 600 3.77 12.00 40.0

Note: Emissions data from the environmental monitoring center of the local government

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No. 2 conducted comprehensive retrofits to achieve near-zero respectively. The absolute amounts of emissions cuts of PM, emissions. To date nine coal-fired power units in six different SO2, and NOx compared with the key area emissions limits for power plants have applied the necessary technologies to meet coal-fired power units in the standard are 94, 255, and 403 near-zero emissions targets (see Table 2). tonnes per year, respectively.

New-Plant Example: Zhoushan No. 4 ECONOMIC AND ENVIRONMENTAL BENEFITS ANALYSIS Placed into operation on 25 June 2014, Zhoushan power plant unit No. 4 was the first power plant with near-zero criteria According to China’s recently passed regulations and laws, emissions in China. The technologies applied at the plant coal-fired power units must be equipped with environmental include low-NOx burners, SCR, ESP (upgraded with high-effi- protection facilities such as PM removal, desulfurization, and ciency power, four conventional electrodes, and one rotation denitration. For those coal-fired power units meeting environ- electrode), wet ESP, and a seawater desulfurization system. mental standards, the grid purchase price is subsidized. For The emissions cuts of PM, SO2, and NOx are 88%, 94%, and PM removal, desulfurization, and denitration, the feed-in tar- 80%, respectively, while the absolute amounts of emissions iffs are RMB 0.2, 1.5, and 1.0 fen/kWh (0.032, 0.24, and 0.16 cuts are 96, 260, and 440 tonnes per year, respectively. US₵/kWh), respectively. Therefore, coal-fired power units meeting all the environmental standards may have a total Retrofitted Example: Sanhe No. 1 feed-in tariff of RMB 2.7 fen/kWh (0.43 US₵/kWh). Generally, retrofitting coal-fired power plants to achieve near-zero emis- Sanhe unit No. 1 was the first existing coal-fired power unit in sions increases electricity generation costs by RMB 0.5–2.0 China to be placed into operation (on 23 July 2014) with near- fen/kWh (0.08–0.32 US₵/kWh). Calculating the investments zero emissions retrofits. The technologies applied at Sanhe No. for retrofitting of Sanhe No. 1 and Dingzhou No. 3, the incre-

1 combine low-NOx burners, SCR, ESP (equipped with LTE and mental generating cost is RMB 1.0 and 0.6 fen/kWh (0.16 and upgraded with high-efficiency power and four conventional 0.097 US₵/kWh), respectively. electrodes), limestone-gypsum wet flue gas desulfurization, wet ESP, and a natural draft cooling tower (NDCT). The rela- From the perspective of net costs, while achieving near-zero tive amounts of emissions cuts of PM, SO2, and NOx compared emissions increases the generating cost for coal-fired power with the key area emissions limits for coal-fired power units plants, the total generating cost remains far less than that of in the standard (GB13223-2011) are 75%, 82%, and 65%, natural gas combined-cycle units. For example, in Zhejiang

Shenhua Guohua Sanhe power plant

50 Central control room of Zhoushan power plant

Province where the Zhoushan power plant is located, the total emissions reduction targets and now exceed national regu- generating cost of a natural gas combined-cycle unit is RMB lations for gas-fired turbine units. All remaining units will be 57.7 fen/kWh (9.3 US₵/kWh) while those for the near-zero upgraded within the next five years. Shenhua Guohua has emissions Zhoushan No. 4 are RMB 19.3 fen/kWh (3.1 US₵/ demonstrated that application of near-zero emissions tech- kWh)—approximately one third of the total generating cost of nologies is technically and economically feasible and the a natural gas combined-cycle unit. environmental benefits are substantial in China.

At present, more than half of China’s overall coal consumption REFERENCES is used in coal-fired power plants. Thus, reducing emissions from coal-fired power units can significantly reduce criteria 1. Chinese Research Academy of Environmental Sciences and emissions from the country’s coal utilization.8 Research and Guodian Environmental Protection Research Institute. (2011). application of near-zero emissions technologies by Shenhua GB13223-2011 Emission standard of air pollutants for thermal power plants. China Environmental Science Press. Guohua prove that the roadmap is feasible and the environ- 2. Xing, F. (2014, 5 August). Guohua coal-fired power plant mental benefits are significant. It is hoped that these practical takes the first step to air pollutants near-zero emission. China demonstration projects can serve as an example to pioneer a Environmental News. new route for clean and efficient utilization of coal in China. 3. Cui, Z., Long, H., Long, Z., et al. (2012). Technical features of In 2013, China’s total amount of PM, SO , and NO emissions lower temperature high efficiency flue gas treatment system 2 x and its application prospects in China. Power Engineering, 32(2), were 1.42 million, 8.2 million, and 8.34 million tonnes, respec- 152–158. tively. Although coal-fired power plants are responsible for 4. Zhao, H., Li, J., He, Y., et al. (2014). Research and application only a fraction of China’s total emissions, if all of the coal-fired on low-low temperature electrostatic precipitator technology. power units in China apply near-zero emissions technologies Electric Power, 47(10), 17–21. over the next five years, starting in 2015, the total annual 5. Zhou, H. (2013). Study on roadmap and schemes of denitration retrofit technology in thermal power plant. Electric Power reduction of PM, SO2, and NOx emissions would be 0.27 mil- Environmental Protection, 29(5), 43–44. lion, 1.55 million, and 1.54 million tonnes, corresponding to 6. Yang, Q., & Liao, Y. (2014). The strategy on reduction of SCR reduction rates of 19%, 18.9%, and 18.5%, respectively.9 minimum operation load. Electric Power, 47(9), 153–155. 7. Fang, Z., Jin, L., Song, Y., et al. (2014). Performance optimization

and maximum denitration efficiency analysis for SCR-DeNOx CONCLUSION power plants. Thermal Power Generation, 43(7), 157–160. 8. Wang, Z. (2014, 3 July). Coal-fired power generation is a key to Shenhua Guohua Power Company was one of the first mov- solve the problem of haze in China. China Energy News. 9. Wang, S., Song, C., Chen, Y., et al. (2015). The technology ers on research, development, and deployment of near-zero research and engineering applications of air pollutants “Near- emissions technologies for coal-fired power units in China. At zero emissions” in coal-fired power plants. Research of present, nine of the company’s units have achieved internal Environmental Sciences, (4), 487–494.

www.cornerstonemag.net 51 TECHNOLOGY FRONTIERS

Ashworth Gasifier-Combustor for Emissions Control From Coal-Fired Power Plants

By Robert Ashworth these technologies can be cost-prohibitive. Even in the U.S., Senior Vice President, ClearStack Power, LLC where inexpensive natural gas has increased competition in the power market, some power plant operators have cho- Mark Becker sen to shut down coal-fired plants rather than retrofit them Senior Process Engineer, ClearStack Power, LLC with emissions controls. Thus, having options for reducing the costs associated with comprehensive emissions control from coal-fired power plants is globally important to providing he growing role of coal is especially prominent in affordable, reliable, and low-emissions electricity. many emerging economies where rapid urbanization and industrialization are driving the growth in energy T 1 demand. In fact, the equivalent of one 500-MW coal-fired “Three-stage gasification-combustion power plant has come online every three days since 2010.2 The president of the World Bank has said that coal will be essen- technology ... can be applied to tial to helping Africa meet its demand for power and alleviate “energy apartheid”.3 Several nations leading the world in eco- new or existing power plants.” nomic growth as well as some developed countries are relying heavily on coal-fueled electricity.4 The Ashworth Gasifier-Combustor, under development by As coal-fired power generation around the world increases, the necessity of limiting the emissions becomes increasingly ClearStack Power, LLC, is a low-cost air-blown coal gasifica- vital. A range of emissions control technologies for all major tion technique that dramatically reduces the major criteria emissions is currently commercially available. However, emissions [e.g., NOx, SO2, Hg, air metal toxics, and particulate especially when power plants are retrofitted, these large matter (PM)] from a coal-fired power plant when paired with pieces of equipment are often piecemealed together, result- an electrostatic precipitator (ESP). The technology also offers ing in marginal increases in both the cost of power and the a smaller footprint and draws far less auxiliary power than tra- amount of auxiliary power required. In emerging economies ditional emissions controls.

Superheat Reheat steam steam Bag Lime- filter Reheat stone steam Existing equipment Coal bin New equipment bins w/bin 1st active -ator stage air 3rd stage air Econ- omizer Air lock (OFA) T-fired boiler BFW feeder 2nd stage air Eductor Coal Limestone Air feeders blower pre- heater ESP CO, CO2 NOX, SO2, Coal Hg splitter CEMS Pulverizer Ashworth Tempering st 1 stage Air I.D. fan air gasifier To quench To existing F.D. fan To existing ash Stack and ash ash handling disposal system FIGURE 1. Ashworth Gasifier-Combustor retrofit schematic

52 ClearStack’s approach to emissions control is based on a three-stage gasification-combustion technology (see Figure 1), “Gasifying prior to combustion which can be applied to new or existing power plants. In the first stage, pulverized coal is gasified in air in an entrained- produces nonhazardous, flow gasifier to form a mixture primarily of carbon monoxide

(CO), hydrogen (H2), water vapor (H2O), and nitrogen (N2, from salable inert slag and fly ash.” the injected air). In the first stage limestone is added, which reacts with potential contaminants in the molten ash (i.e., slag) produced. The coal and limestone are fired downward TECHNOLOGY BENEFITS into a molten slag bath, which results in the formation of PM in which the individual particles are larger than what would be Reducing Criteria Emissions created during combustion. When this technology is retrofit to existing power plants the first-stage gasifier takes the place of The principal objective of the Ashworth Gasifier-Combustor the burners and is thus fully integrated with the plant. Then, technology is to reduce emissions from coal-fired power complete combustion occurs in the second and third stages. plants in a cost-effective manner. Environmental benefits are listed in Table 1. The amount of air relative to the coal used in the first-stage gasifier is specifically selected to minimize emissions. For The approach of gasifying prior to combustion produces nonhazardous, salable inert slag and fly ash. Since selective example, an oxygen-deficient environment minimizes NOx production from the nitrogen in the coal and also provides catalytic reduction is not required (because NOx formation is the optimal conditions to reduce emissions of sulfur (captured avoided during combustion), chemicals like ammonia are not required. Similarly, since no water is sprayed into the flue gas through reaction with the limestone), mercury, and other air as is the case with wet desulfurization scrubbers, no visible metal toxics. water vapor is observed at the power plant stack. More oxygen is available for reaction in the second stage, the In addition to comprehensively reducing emissions, the tech- lower boiler furnace, to preclude NOx formation in that stage. nology also offers several co-benefits. Approximately 75% of the Excess oxygen is used for combustion in the third stage of the fly ash, or PM, is captured and removed with the molten slag technology, in the upper boiler, as the gases have cooled to produced in the gasifier. Because the PM generated is larger than a point that minimizes thermal NOx production. Using less what is created during combustion, the PM that is not removed excess air throughout the gasification and combustion pro- with the slag is less harmful and also is more efficiently captured cesses also increases the overall plant efficiency. by an ESP, since larger particles are easier to capture. Thus, a

TABLE 1. Environmental benefits

Reduction in emissions Emission or benefit Emission level Notes compared to baseline, %

6 NOx ≤0.095 lb/10 Btu ~80% Three-stage oxidation effect Depends on coal SO ~95–100% Ca/S ratio = 1 with fine limestone 2 used 7–8 ppmvd

CO (parts per million ~95% @3% O2 (Alstom modeling for T-Fired boiler) volumetric, dry) Depends on coal Captured in slag/fly ash; leachate tests of slag and Hg ~90–100% used fly ash demonstrate 0 mg Hg/L in the leachate Captured in slag and fly ash; leachate tests showed Sb, As, Ba, Be, Cd, Cr, concentrations of Ag, As, Ba, Cd, Pb, and Se in the Depends on coal Co, Cu, Pb, Mo, Ni, Se, ~100% (except 80% Mn) leachate were all below the U.S. EPA regulatory used Ag, Tl, V, Zn, and Mn limit for both the slag and fly ash. Thus, slag and fly ash are nonhazardous to human health.

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combined gasification-combustion approach would reduce TABLE 2. ESP PM removal performance plant emissions using the same ESP (in the case of a retrofit). For 5 PM , Overall example, with a particular ESP using a voltage of 94 kV, employ- Particle size 5 5 10 ing the gasifier-combustion operation would yield an overall PM % PM10, % % efficiency, % removal of 99.32 wt% compared to removal from flue gas from a Gasifier- conventional coal-fired unit of 94.96 wt% (see Table 2). combustion 0.50 2 97.5 99.32 fly ash Another benefit is that the ash is more alkaline because lime- Conventional stone is mixed with the coal. Research has shown that the coal burner 13 12 75.0 94.96 alkali and alkaline earth metal concentrations are important fly ash factors in reducing the resistivity of the fly ash (to improve the ease of capture).6 ESP efficiency 65 99 99.5

Carbon Emissions In the long term, if the technology is applied to new ultra- supercritical boilers that currently achieve 45–46% overall In addition to criteria emissions, the technology can reduce thermal efficiency,7 a power plant built with the Ashworth carbon dioxide (CO2) emissions. First, it can be applied to bio- Gasifier-Combustor would be more efficient than a coal-based mass/coal mixtures, thus reducing carbon emissions. Up to integrated gasifier combined-cycle (IGCC) power plant. It 15% of the coal could be replaced with biomass. While con- would also require less space and would be less expensive to ventional boilers can cofire some 10% biomass, the reactive install and operate. alkalis, such as sodium and potassium, can decrease boiler tube life. In the gasification-combustion system under devel- Saleable By-Products opment, these compounds are mostly tied up with other minerals in the slag and thus not as much of a concern. Since the advent of low-NOx burners and activated carbon injection for mercury capture, many coal-fired power plants In addition, the required auxiliary power is far less than tradi- that once sold their fly ash to the cement industry are no tional emissions control options. When using the traditional longer able to do so due to increased carbon content. As the emissions controls combination of low-NOx burners, selective Ashworth Gasifier-Combustor results in fly ash with 5 wt% car- catalytic reduction, and a wet FGD system, a 580-MW power bon or less, it is suitable for sale to the construction industry. plant might have 15 MW of parasitic energy consumption The slag from the first-stage gasifier could also be saleable (meaning that the plant can only sell 565 MW), not includ- since coal-fired cyclone boiler slag is currently used as a wear- ing the ESP and other auxiliary power draws required by resistant component in surface coatings of asphalt for road both systems. However, the only parasitic energy used by the paving. Finer-sized slag could also be used as blasting grit and Ashworth Gasifier-Combustor process is that for treatment is commonly used for coating roofing shingles. and injection of the limestone. Thus, the parasitic energy for a similarly sized plant would be 0.5 MW instead of 15 MW and a 580-MW power plant could sell 579.5 MW of electricity. PRELIMINARY ECONOMICS In addition, certain coals with high-calcium ash, such as some Powder River Basin coals, would not require limestone addi- Preliminary economics have been calculated for the Ashworth tion. In that case the auxiliary power for emissions controls Gasifier-Combustor. For a retrofit, the costs are compared with could be negligible. With each improvement in efficiency the a FGD scrubber to remove SO2 and Hg plus selective catalytic

CO2 emissions are decreased. reduction (SCR) for NOx control (see Table 3). The comparison

TABLE 3. 200 MWe cost comparison (2015US$)

Technology Capital Cost, US$ $/kWe Incremental operating cost, $/yr ¢/kWh

Ashworth Gasifier-Combustor $29,000,000 $145 $6,500,000 0.46 Selective catalytic reduction $36,700,000 $183.50 $7,800,000 0.56 Wet desulfurization scrubber $38,900,000 $194.50 $10,200,000 0.73 Total $75,600,000 $378.00 $18,000,000 1.29

54 assumes the same environmental performance for the two 20–75-MWe coal-fired power plant. The objective of the col- emissions control options. A 200-MWe T-fired coal boiler fir- laboration would be to retrofit the technology in order to meet ing run of mine bituminous coal was used as the basis for the the U.S. EPA Mercury and Air Toxics Standards. Depending retrofits. For calculation of operating costs, an 80% capacity on the environmental permit requirements, it will take 18 to factor was used.A The capital and operating costs are based on 24 months to retrofit the technology onto an existing coal- 2015 U.S. dollars. fired plant in the U.S. Pending a successful demonstration, ClearStack will look to deploy the technology at power plants The Ashworth Gasifier-Combustor was calculated to be ~38% needing emissions control both in the U.S. and abroad. of the capital cost and 36% of the operating cost compared to the conventional emissions control technologies. Also, this NOTES analysis does not include any credit for other air metal toxics (80–100%) that are removed by the gasifier and/or greater A. The Ashworth Gasifier-Combustor is applicable to coal-fired ESP performance. In addition, because the ash and slag are power plants of any size. A 200-MWe plant was chosen for the saleable, the economics could actually improve further. economic analysis because this represents the most likely near- term customers in the U.S.

DEMONSTRATING THE TECHNOLOGY REFERENCES

The Ashworth Gasifier-Combustor was demonstrated at a 1. Advanced Energy for Life. (2015). The world is counting on coal to power growing needs, www.advancedenergyforlife.com/ 4-MWe scale at the Lincoln Developmental Center, in Lincoln, 8 article/world-counting-coal-power-growing-needs (accessed IL, U.S., on a coal-fired stoker (see Figure 2). The gasifier April 2015) was incorporated into boiler operation. The gasifier design 2. BP. (2014). Energy outlook 2035, www.bp.com/en/global/ modifications were successful in increasing sulfur capture and corporate/about-bp/energy-economics/energy-outlook.html reducing NO emissions compared to the original two-stage 3. Kim, J.Y. (2014, 1 April). Speech by World Bank Group President x Jim Yong Kim at the Council on Foreign Relations, www. Florida Power Corporation “CAIRE” gasifier-combustor to worldbank.org/en/news/speech/2014/04/01/speech-world- which ClearStack owns the rights and completed testing at the bank-group-president-jim-yong-kim-council-on-foreign- Foster Wheeler Development Center.9 relations 4. Watanabe, C. (2015, 9 April). Japan’s new coal plants threaten emission cuts, group says. Bloomberg Business, www. LOOKING FORWARD bloomberg.com/news/articles/2015-04-09/japan-s-new-coal- plants-threaten-emission-cuts-group-says 5. Haque, S., & Rasul, M.G. (2009). Thermal power plant: Today this gasification-combustion technology remains under Performance improvement of electrostatic precipitator, development. Currently, ClearStack is seeking a project part- www.knovelblogs.com/2009/12/03/ecthermal-power-plant- ner in the U.S. to demonstrate the technology on an existing performance-improvement-of-electrostatic-precipitator/ 6. Wheland, B., Devire, G., Pohl, J.H., & Creelman, R.A. (2000). The effect of blending coals on electrostatic precipitator performance American Chemistry Society, Energy & Fuels (preprint), web. anl.gov/PCS/acsfuel/preprint%20archive/Files/45_1_SAN%20 FRANCISCO_03-00_0024.pdf 7. Power-Technology.org. (2007). Yuhuan 1,000MW ultra- supercritical pressure boilers, www.power-technology.com/ projects/yuhuancoal/ 8. Ashworth Combustor Demonstration Final Report. (2003, 15 May). ClearStack Combustion Corporation for the Illinois Department of Commerce and Community Affairs and the Illinois Clean Coal Review Board. 9. Ashworth, R.A., & Padilla, A.A. (1992). “CAIRE” Advanced Combustor Development. Presented at the Ninth Annual International Pittsburgh Coal Conference, Pittsburgh, PA, www.clearstack.com/wp-content/uploads/CAIRE-Advanced- Combustor-Development.pdf

FIGURE 2. Ashworth Gasifier-Combustion system (40 million The authors can be reached at [email protected] Btu/hr) and [email protected]

www.cornerstonemag.net 55 TECHNOLOGY FRONTIERS

Underground Coal Gasification: An Overview of an Emerging Coal Conversion Technology

By Cliff Mallett The development of carrying out gasification underground, Chairman,A Underground Coal Gasification Association UCG, can be attributed to researchers and innovators from Technical Director, Carbon Energy Limited around the world. The earliest recorded idea of producing energy by gasifying coal underground came from Sir William Siemens in the late 1800s.1 Working with his brothers, a coal ossil fuels undeniably remain the world’s principal source gasifier was invented, which Siemens suggested be placed of energy. They have underpinned the growth of industry underground. Fand standards of living for the last 300 years. However, finding ways to continue to utilize fossil fuels in a low-carbon and otherwise environmentally-friendly manner is a global “The development of carrying out priority. gasification underground, UCG, can Underground coal gasification (UCG) is one approach to energy production that may allow for emissions and other environ- be attributed to researchers and mental impacts to be effectively managed. Decarbonization could be achieved by gasifying coal and reforming the syngas innovators from around the world.” product to hydrogen (H2, a clean energy carrier) and safely

store the carbon dioxide (CO2).

Coal gasification has been carried out for centuries. During the The subsequent major step in the development of UCG was 19th and early 20th centuries numerous towns had their own in 1910 when patents were granted to an American engineer gas works, responsible for making coal gas (i.e., syngas) from for UCG methods that closely resemble modern approaches. mined coal. The gas was piped to homes and industry. Coal Then, in 1912, a British chemist, Sir William Ramsay, proposed gas, or town gas, is now referred to as syngas and is a mixture gasifying coal underground as a way to avoid emissions from burning coal, which were resulting in air quality issues in cities of energy gases such as H2, carbon monoxide (CO), as well as at the time. He believed that this coal-derived syngas would methane (CH4). be the fuel of the future.

Ramsay began preparations to trial UCG, but the outbreak of World War I derailed his plans. Interest in UCG was rekindled in the 1930s with the USSR conducting extensive experi- ments. However, the program was scaled back in the 1960s when the USSR discovered huge natural gas and oil reserves. More recently, momentum has grown yet again as countries including China, the U.S., Canada, Argentina, and Chile have commenced UCG projects.

AN UNDERGROUND APROACH TO EXTRACTING ENERGY FROM COAL

Most coal-derived energy is obtained when the contained

carbon reacts with oxygen (O2), yielding CO2 and releasing

energy in the form of heat. If excess O2 is present, combus-

tion occurs with nearly all the carbon converted to CO2. When

UCG demonstration rig coal is gasified in an O2-deficient environment, some coal is

56 • Compared to coalbed methane extraction from the same coal seam, UCG generates over 60 times more energy. • UCG offers a small environmental footprint with little surface impact and minimal waste generation. • The health and safety issues associated with people working underground can be avoided.

UCG IS SAFE AND CONTROLLED

Early 20th-century UCG trials resulted in significant lessons learned that allowed researchers and technology providers to improve the efficiency and environmental credentials of UCG. One of the major concerns related to UCG has been the ability to avoid affecting groundwater quality. Modern UCG One important benefit of UCG is the small footprint. technologies have evolved to ensure destruction of potential contaminants as part of the gasification and decommissioning converted to heat and CO2 and this heat drives the conversion of the remaining coal to syngas. Syngas generated from UCG processes, as well as managing operating pressures to protect contains about 80% of the energy that was in the original coal. groundwater.

To gasify coal underground, O2 or air is pumped down a bore- A particular observation that evolved from early trials and sub- hole into a coal seam, the coal is gasified in a cavity created by sequent research was the “Clean Cavern” concept. This is the the conversion of coal to syngas, and the sygnas is extracted process whereby the gasifier is self-cleaned via the steam pro- through a different (i.e., production) borehole. A number duced during operation and following decommissioning (during of underground gasifier designs have been demonstrated, decommissioning while the ground retains heat steam contin- the latest being from Australia-based Carbon Energy. In a ues to be generated). Another important practice is ensuring demonstration project its technology provided consistently that the pressure of the gas in the gasifier is always kept below high-energy syngas over 20 months and demonstrated the that of the groundwater surrounding the gasifier cavity. Thus, same could be achieved from a single panel of coal for up to groundwater is continuously flowing into the gasifier and liquids 10 years (see article on page 61 for further details). which could potentially contain chemicals will not be pushed out into the surrounding strata (see Figure 1). The pressure is THE ADVANTAGES OF controlled by the operator using pressure valves at the surface. UNDERGROUND GASIFICATION In addition, the high temperature in the cavity during gasifica- The primary reason to gasify coal underground is the low cost tion destroys many of the potentially contaminating organic of energy production. Estimates from UCG companies on the by-products produced during the process. When operation of cost of producing UCG syngas range from US$1–3/GJ depending on the coal deposit and on whether air or oxygen is used as Original groundwater the oxidant.2,3 Additional UCG benefits include: pressure (SWL) Surface • It is applicable to very large, deep resources that can con- Modified groundwater pressure sist of low-quality coal not suited for conventional mining (normally conventional mining occurs above 1000 m). The estimated amount of usable coal at such depths could Water inflow equal or exceed all current mineable coal resources and be into gasifier a game changer for global energy supply. UCG Gasifier • The energy is produced as syngas, which is readily cleaned using existing processes and transported via pipelines. • Multiple uses exist for syngas, such as a fuel for power Coal seam station gas engines to produce electricity, or chemical feedstock for the production of fertilizers, diesel and gaso- line, and methanol derivatives such as olefins and plastics. FIGURE 1. Operating UCG with a pressure lower than the Syngas can also be readily processed into natural gas. surrounding area draws groundwater toward the gasifier.

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ROOF Depth ≥ 200 m

Heat

Groundwater GASIFIER Groundwater ﬂow ﬂow COAL

FLOOR

FIGURE 2. Primary criteria required for a suitable UCG site. a gasifier is stopped, the groundwater pressure in the cavity is cavity resulted in the cavity posing no environmental or health reduced to near atmospheric pressure (much lower than the risks. Groundwater quality will rapidly and naturally be restored surrounding pressure) to increase the volume of groundwater to pre-project conditions and no active remediation is required. flowing into the cavity, which increases steam production. A significant percentage of remaining by-products are carried to REQUIREMENTS FOR UCG the surface as vapor via the production well and combusted. This overall approach to UCG has now been successfully imple- Industrial processes require specific, controlled conditions mented at sites in the U.S., Spain, Australia, and South Africa. for optimal and safe operation and UCG is no exception. The conditions required for operation of the underground gasifer Another historic concern related to UCG has been the ability to are established through exploration, prior to construction or understand and predict ground subsidence. The UCG process operation of a UCG panel. For example, proper UCG site selec- creates a cavity similar to those found at conventional under- tion is critical—several hydrogeological conditions must be ground coal mines. These cavities are well understood thanks satisfied before proceeding with construction. to conventional mining, and thus their behavior can bepre- dicted accurately with modern 3D computer models. Similar to First, the coal seam being gasified must be overlain by imper- conventional underground coal mining, ground subsidence is meable strata. The buoyancy of the gas forces it to move predicted before UCG operations commence; if surface subsid- upward; thus, the gas will be lost unless the coal seam is ence is predicted to significantly affect current or future land use capped by strata through which the gas cannot pass, such as or infrastructure, UCG will not proceed at that particular site. shale or clay beds. Second, as coal seams always have some permeability and gas is able to move laterally through coal, the One of the most rigorous long-term environmental evalu- groundwater in the surrounding coal seam must be at a higher ations of UCG pilot sites was carried out by the Queensland pressure than the pressure in the gasifier to prevent the flow Government in Australia from 2008 to 2014. An Independent of gas away from the gasifier cavity. These primary criteria are Scientific Panel appointed by the state government reviewed illustrated in Figure 2. Other characteristics also must exist at four years of UCG Pilot Project operations and concluded in a suitable UCG site—for example adequate groundwater pres- the “Independent Scientific Panel Report on the Underground sure for gasification to occur, coal seams of adequate thickness Coal Gasification Pilot Trials” (June 2013) that UCG “could be to maintain gasification temperatures, and appropriate separa- conducted in a manner that is socially acceptable and envi- tion from overlying and underlying water-bearing formations. ronmentally safe when compared to a wide range of resource using activities”. Field tests and digital modeling facilitate the development of hydrological models that can be used to predict risks to water Decommissioning and rehabilitation of an underground UCG supplies. Just as with subsidence modeling, if harmful effects gasifier cavity had not been attempted in the Queensland trials are predicted in the exploration stage, UCG will not proceed. at the time of the ISP evaluations, but in late 2014, independent experts advised the government that Carbon Energy had suc- Similar to other resource production industries, UCG requires cessfully decommissioned its gasifier, and steam cleaning of the appropriate pre-development exploration and investigations

58 • Insufficient knowledge of the site geology • Inability to drill boreholes with necessary precision • Operating with inappropriate gasification parameters • Lack of understanding of the impact of the gasification process on the surrounds of the underground cavity.

More recently, however, there have been major technological innovations which have addressed the issues encountered in previous UCG projects (see Table 2).

These advances facilitate proper site investigation, UCG design performance modeling, and identification of issues with respect to product gas or environmental impacts which demand speci- fication or exclude the site as a UCG prospect. In addition, UCG The syngas created underground is collected and processed operators now have access to real-time control of underground above ground. processes. This allows interpretation of changes in UCG performance and the design of appropriate responses. to ensure that hydrogeological conditions suit the technology being applied. Since 2000, long-term UCG pilots in Australia, China, and South Africa utilizing the technologies shown in Table 2 have UCG IS AN EMERGING TECHNOLOGY successfully demonstrated that deep UCG can be low cost and environmentally benign. Results from these trials continue to Until recently, there have been few new developments in UCG. demonstrate that UCG’s major challenges have been resolved A commercial UCG plant has been running for many years in and has led China to incorporate this technology into its Five- Year Plan process for resources and energy. Uzbekistan; however detailed information on the operation or output of that plant has not been made public. Developed Recent progress and innovation have made it possible that countries with accessible resources have chosen to access UCG will be an important technology in the future energy mix. shallower coal deposits using traditional mining methods. However, progress in nontechnical areas must be made with Additionally, projects based on traditional approaches to UCG respect to the interrelated areas of government regulation, com- have struggled to produce a consistent, high-quality syngas. munity understanding and engagement, and project financing.

Looking at almost a hundred historical UCG sites worldwide,5 Given that the production cost of UCG syngas can be sig- the main difficulties can be categorized as follows: nificantly lower than that for production of energy by other

TABLE 2. Major technical innovations applied to UCG

Issue Innovation source Advances in mining Geology • 2–3D seismic surveys for underground coal mines • Computer-based geological models Advances in coalbed methane gas extraction Drilling • Long-hole in-seam drilling methods to extract methane from coal seams before coal mining and for coalbed methane production Unique problem • Development of proprietary new modeling and design capability UCG design and gasification process control as well as process methodology to give real-time control of operations • Development of parallel controlled retracting injection point design Advances in mining Ground and water impacts around gasifier • Coal mining strata and gas models for prediction of strata deformation and gas and water inflow into long-wall mines

www.cornerstonemag.net 59 TECHNOLOGY FRONTIERS

The UCG ignition panel is used to carefully control the process underground. means, and its demonstrated environmental credentials, UCG position concluded near the time of article preparation. Dr. presents an opportunity for high-potential growth investors Mallett is also Technical Director at Carbon Energy. Thus, some looking for approaches to generate low-emissions power, syn- of the technical innovation discussed in the article is based on thetic natural gas and other fuels, and chemicals from coal. his direct involvement with Carbon Energy.

MEETING ENERGY NEEDS REFERENCES

Energy demands continue to grow globally, particularly in 1. Klimenko, A.Y. (2009). Early ideas in underground coal emerging economies in Asia and Africa. At the same time, gasification and their evolution. Energies, 2(2), www.mdpi. there is pressure to minimize the cost and maximize the avail- com/1996-1073/2/2/456 ability of energy supplies as well as the social imperative to 2. Carbon Energy. (2012, 26 June). Carbon Energy UCG syngas – reduce the environmental impact associated with energy. low cost source of natural gas. ASX/Media Announcement, www.carbonenergy.com.au/IRM/Company/ShowPage.aspx/ The adaption and application of new petroleum and mining PDFs/1561-83497961/LowCostSourceofNaturalGas techniques have demonstrated that consistent supplies of 3. Pricewaterhouse Coopers. (2008, May). Industry review and high-quality syngas can be safely produced in commercial- an assessment of the potential of UCG and UCG value added scale UCG projects. Further progress and innovation in the products, www.lincenergy.com/data/media_news_articles/relatedreport field of UCG has been seen recently and several new commer- -02.pdf cial UCG projects are nearing commencement. Once the first 4. Moran, C., da Costa, J., & Cuff, C. (2013, June). Independent commercial project is successfully established, I believe there Scientific Panel report on underground coal gasification will be an avalanche of follow-on projects, and the industry will pilot trials, Independent Scientific Panel to the Queensland become a valuable contributor to global energy production. Government, www.fraw.org.uk/files/extreme/derm_2013.pdf 5. UCG Association. (2015). Worldwide UCG projects and dev- NOTES elopments, www.ucgassociation.org/index.php/ucg-technology /worldwide-ucg-projects-developments (accessed April 2015) A. Dr. Cliff Mallett served as Chairman of the Underground Coal Gasification Association from 2013 to 2015. His tenure at that The author can be reached at [email protected]

60 Carbon Energy Delivers Innovations in Underground Coal Gasification

By Morné Engelbrecht for fuel or fertilizer production, electricity generation, or other Managing Director and CEO, Carbon Energy Limited uses that require syngas as a raw feedstock).

UCG requires ignition (heating of the underground coal seam to high temperatures between 1200 and 1600°C) to initiate fter decades on the fringes of world energy production, the gasification process, and the subsequent injection of an advancements in underground coal gasification (UCG) oxidant (e.g., air or oxygen and steam) to maintain the syn- are proving the process can deliver high-quality syngas A gas production. Traditional UCG approaches have employed on a commercial scale with limited impact on the surrounding a “batch process” using vertical wells and requiring manual environment, at a lower cost than current coal-to-gas produc- intervention and reignition approximately every 30 days. This tion in Australia. causes fluctuations in temperature and syngas quality. Carbon Energy Limited, based in Australia, has built on many years of work by that country’s leading research organization, the Commonwealth Scientific and Industrial Research “UCG … offers an environmentally Organisation (CSIRO), to further develop and demonstrate a UCG technology that has satisfied stringent technical and envi- responsible and economically ronmental assessments by a panel of government-appointed independent scientists. Decommissioning and rehabilitation attractive means of extracting energy processes have also been assessed by the state environmental protection authority. from otherwise unmineable coal.”

Today UCG is poised to become a valuable option to help meet future domestic and global energy demand because it offers Carbon Energy’s process, developed over more than 16 years an environmentally responsible and economically attractive of research and in-field trials, has been proven to address this means of extracting energy from otherwise unmineable coal. issue by using a unique design that provides continuous auto- mated gasification in a panel of coal to produce a high-quality COMMERCIALIZATION OF UCG syngas for up to 10 years (see Figure 1). This innovation, called the Controlled Retraction Injection Point (CRIP), was extremely One of the stumbling blocks that has held UCG back from important in achieving the consistently high-quality syngas that becoming a fully commercial industry has been the inability was produced continuously over many months during Carbon to extract a consistent-quality syngas required for continuous Energy’s demonstration at Bloodwood Creek in Queensland. feed into the selected downstream industrial process (whether With horizontal in-seam injection and production wells, and an oxidant injection point that retracts as the coal face is gasified, the gasification process is maintained at aconsis- tent temperature, which in turn produces consistent quality syngas. Moreover, a significant proportion of the potentially contaminating by-products produced with the syngas are destroyed in the path of the gasification face, contributing to the now-proven environmental credentials of the technology.

THE TIME FOR UCG IS NOW

Global primary energy demand is expected to rise 37% by 2040, according to the International Energy Agency’s “World Energy Outlook 2014”.1 With the world’s hunger for energy FIGURE 1. Carbon Energy’s approach to UCG growing, unlocking new energy sources that are commercially

www.cornerstonemag.net 61 TECHNOLOGY FRONTIERS

sustainable and are amenable to carbon capture techniques Carbon Energy operated a demonstration (pilot) project at is a priority. Coal is predicted to remain a significant source of Bloodwood Creek in Queensland from 2008 to 2012 in order energy for the world given its widespread availability and low to fine-tune the application of their unique technology, and to cost. UCG is a technology that is able to maximize the energy collect necessary data to submit to the state government for extracted from coal, while ensuring a small environmental approval to operate the technology in Queensland. Although impact and footprint. most of the syngas over the demonstration period was flared, the syngas was used to power generators, with power used on Carbon Energy’s technology has improved on previous UCG site and also exported to the local electricity grid. methods and been shown to extract 60 times more energy than coalbed methane extraction on the same area of coal. The pilot-scale demonstration project involved operating two It is also able to produce syngas from coal seams previously underground gasifiers. The “panels” of coal where the gasifiers considered too deep and uneconomical for traditional coal operated were constructed at a depth of about 200 meters, are extraction technologies. Carbon Energy’s recently completed demonstration at Bloodwood Creek was operated at depths of 500 meters long, and 30 meters wide, with an average thick- more than 200 meters below the surface; however, operation ness of 8–9 meters. A panel of this size has sufficient coal to at far greater depths is also possible and commercially viable. produce syngas continuously for five years. However, as proof of concept of the technology was achieved after almost two Rigorous scientific assessments and independent review have years of continuous production of high-quality syngas from the shown that potential environmental issues around waste and second gasifier, further expenditure on the pilot was unwar- impacts on groundwater have also been overcome. With site ranted and the demonstration project was decommissioned. selection methodology developed by CSIRO, refined engineering design to geothermal standards, and demonstrated operat- The commercial-scale project will simply replicate the panel ing protocols, it has been demonstrated that environmental module at the scale required for the project. In the case of the impacts are kept to a minimum. With the physical footprint proposed Blue Gum Gas Project, around 40 of these panels of the UCG operations contained to 50 hectares of land while will be required to generate 25 PJ of syngas per annum. recovering a significant volume of energy, good relationships are maintained with landholders. Together with the proven environmental credentials, this should assist Carbon Energy to Environmental Review achieve a social license to operate its unique technology. An Independent Scientific Panel (ISP) was appointed by the Queensland government in 2009 to review and report on BLUE GUM GAS PROJECT the pilot projects being conducted in the state at that time, focusing on the technical and environmental aspects of UCG Carbon Energy’s proposed Blue Gum Gas Project neighbors the technology. Technology developers were required to prepare existing demonstration site in the Surat Basin at Bloodwood a comprehensive report on their pilot projects and submit Creek, about 200 km west of Brisbane, Queensland, Australia. Once government approvals are received, Carbon Energy will these reports to the ISP for review. build and operate a commercial-scale UCG plant that will produce syngas which will be processed above ground to deliver pipeline-quality synthetic natural gas (SNG). The plant will produce 25 PJ of natural gas per annum, which is approximately 0.687 billion Nm3/yr natural gas equivalent, suitable for use by existing connected homes and domestic industries. SNG production is expected to commence within three years of the start of construction.

Carbon Energy’s focus on developing SNG over power or ammonia production has been driven by commercial demand. The domestic natural gas market on the east coast of Australia will see a significant increase in natural gas prices as the export of coal seam gas commences. East coast manufacturers are eager to find a low-cost natural gas feedstock. The Blue Gum Gas Project will be located near existing infrastructure Carbon Energy’s proposed commercial Blue Gum Gas project enabling ready transport of natural gas to customers. will be located near the existing demonstration site.

62 The Queensland DEHP has advised Carbon Energy that its expert consultants have completed the review of Carbon Energy’s Decommissioning Report and Rehabilitation Plan. This review will be referred to the Department of Natural Resources and Mines (DNRM), which is the lead agency in the matter of UCG policy, for a government decision on commercialization of the technology in Queensland.

Decommissioning Plan

The Decommissioning Plan was required to include:

• Evidence that gasification had ceased • Quantification ofy an contaminant load Carbon Energy’s UCG pilot site • Delineation of the zone of impact of any ontaminationc • Evidence that any contaminants were not increasing or The final peer-reviewed ISP report on the pilot projects was moving outside of the lower-pressure zone maintained by released in July 2013. The government gave in-principle sup- Carbon Energy around the gasifier cavities. port to the ISP’s conclusions that the capability to commission and operate a UCG gasifier had been demonstrated, and that The process data clearly showed that gasification stopped “the technology could, in principle, be operated in a manner within 48 hours of initiating the shutdown procedure (see that is socially acceptable and environmentally safe when Figure 2). This was evidenced by changes in the composition compared to a wide range of other existing resource-using of vented gas, which quickly returned to high percentages of activities”. However, the government required that the technol- natural methane gas with a sharp decline in the concentra- ogy developers demonstrate successful decommissioning prior tions of hydrogen and carbon dioxide, and declining syngas to any approval being granted for a commercial-scale project. flow rate and temperature.

Essentially, this meant that Carbon Energy needed to provide Once gasification stops, it cannot start again naturally, due to evidence that gasification had ceased at the pilot project site the absence of oxygen 200 meters underground beneath a and that any of the relevant environmental values affected by tightly sealed formation, with the UCG panel surrounded by the underground coal gasification process (excluding surface groundwater. facilities and landform, which would be addressed under normal processes) could be restored to a condition agreed to with the The results of the groundwater quality investigation showed that: Department of Environment and Heritage Protection (DEHP). • The majority of remaining UCG by-product was within the There was a particular focus on groundwater quality, which cavity. could potentially be impacted adversely by UCG by-products. • More than 90% of by-products were eliminated by steam venting during the shutdown procedure. To meet the government’s requirement, Carbon Energy • Concentrations of emainingr by-products are decreasing. prepared a comprehensive Decommissioning Report and Rehabilitation Plan and submitted these documents on29 August 2014 and 1 October 2014, respectively. Preparation of these documents involved a full site investigation by an independent Suitably Qualified Person for contaminated land assessment (as authorized under the Environmental Protection Act 1994), which in turn involved a drilling program for collec- tion and laboratory analysis of decommissioned gasifier cavity water and core samples, core samples from new near-cavity boreholes, and baseline core samples. Analysis of the data from these new wells was in addition to analysis of results from the ongoing monitoring of groundwater quality from 24 monitoring wells surrounding the gasifier cavity and located in the target coal seam and overlying and underlying rock formations. FIGURE 2. Carbon Energy’s pilot-scale demonstration

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groundwater (which is not fit for human consumption), the applicable environmental values for the Bloodwood Creek site were identified as stock watering and human health.

Based on the results of the site investigation, a risk assessment and highly conservative fate and transport modeling based on the applicable environmental values, it was concluded that the current groundwater conditions within the cavity do not pose harm to human health or the environment.

The independent Suitably Qualified Person under the Environ- mental Protection Act 1994 signed off on the Rehabilitation Plan, which concluded that:

• The low levels of remaining by-products will rapidly and naturally reduce to baseline levels. • No environmental receptors are likely to be impacted. • No active remediation isequired. r

Parameters have been proposed for a range of chemicals against which groundwater analysis will be assessed on a reg- ular basis and reported to the government. Monthly reporting of groundwater results from the groundwater monitoring network will also continue.

TAKING UCG TO THE NEXT STAGE Environmental testing was completed to ensure that the pilot operations had been concluded safely. Carbon Energy has demonstrated its technology is a signifi- Both during operation and after decommissioning, pressure cant advance in UCG, in producing consistently high-quality in the gasifier is maintained at a level below the regional syngas that can support commercially viable downstream use. groundwater pressure so that groundwater continuously flows More than 100 years since the first suggestion of gasifying toward and into the gasifier cavity. The pressure is controlled coal underground, Carbon Energy’s approach is an attractive, by Carbon Energy from the surface. This approach success- environmentally responsible, and economically viable means fully contains UCG by-products within the small area of low of utilizing the energy potential of coal considered too deep pressure. for viable conventional mining.

REFERENCES Rehabilitation Plan 1. International Energy Agency. (2014, 12 November). World energy As previously indicated, the purpose of the Rehabilitation Plan outlook 2014, press release, www.worldenergyoutlook.org/ was to demonstrate Carbon Energy’s ability to restore the relevant environmental values of the site, those essentially For more information, please email askus@carbonenergy. being groundwater quality. Given the baseline quality of the com.au

64 GLOBAL NEWS

Movers & Shakers India India’s Power and Coal Arch Coal announced that John Eaves, Minister, Piyush Goyal, President and CEO, has been elected announced that India and to the position of Chairman of the Japan will be collaborating Board and CEO following a planned on clean coal technology succession process, replacing Wesley development and deploy- Taylor. In addition, Paul Hanrahan was ment. named as the company’s Lead Inde- pendent Director. India’s government announced that it would sell more of its stake in Coal India in the future. In addition, the gov- Consol Energy announced that James Brock, previously ernment is continuing to sell coal blocks whose previous COO of Consol’s coal division, will lead CNX Coal Resources, allocation was cancelled by the Supreme Court. After this a new master limited partnership. third tranche, 45 of the total 214 blocks will have been sold.

The International Energy Agency has named Paul Simons as U.S. its next Deputy Executive Director. Mr. Simons has served as a U.S. diplomat. The U.S. Department of Energy announced that the Regional Carbon Sequestration Partnership has reached a milestone: Orica announced that Alberto Calderon has been appointed Under the program, 10 million tons of CO have been suc- as the Interim Managing Director and Chief Executive Offi- 2 cessfully stored. cer, replacing Ian Smith, who held the position for four years. International

International Outlook As this issue went to press, nine out of 37 parties had submitted their Intended Nationally Determined Contributions (INDCs) in advance of COP21. The largest emitters to submit China their INDCs are the EU (including Latvia), Russia, and the U.S. China has announced plans to urbanize large tracts of land near the Yangtze River, which would host several energy From The WCA and transportation projects.

China’s National Energy Administration recently released WCA Workshop the Action Plan on Clean and Efficient Utilization ofCoal Resources (2015–2020). The main targets of the plan are On 1 June 2015, WCA held a workshop entitled “Build- that the average coal intensity for new coal-fired power ing Pathways for Cleaner Coal Technologies” in London, plants should be less than 300 g of standard coal per kWh; England. The purpose of the meeting was summarized more than 70% of coal should be washed; industrial-scale by the WCA Acting CEO, Benjamin Sporton, “Cleaner coal modern coal-to-chemicals demonstrations should be com- technologies can be seen on a continuum. Deployment of pleted; and the average efficiency of coal-fired boilers high-efficiency, low-emission (HELE) coal fired power gen-

should be increased by 5% compared to 2013. Further tar- eration now can lead to significant CO2 mitigation benefits. get have been set for 2020 and beyond. HELE is a key first step to deployment of carbon capture, use, and storage technology that will be essential for all fos- Germany sil fuels if global climate ambitions are to be met.” The workshop included speakers from around the world The German Coal Importers Association (VDKi) has sharing their experience with the demonstration of -car announced that hard-coal imports were at a record high of bon capture, use, and storage and the deployment of other 56.2 million tonnes in 2014, an increase of 6.2% compared HELE technologies. to the previous year.

www.cornerstonemag.net 65 GLOBAL NEWS

Key Meetings & Conferences

lobally there are numerous conferences and meetings geared toward the coal and energy industries. The table below highlights a few such events. If you would like your event listed in Cornerstone, please contact the Executive Editor at [email protected] Conference Name Dates (2015) Location Website

Coal Association of Vancouver, 16–18 Sep www.coal2015.ca Canada 2015 Conference British Columbia, Canada China (Taiyuan) International 22–24 Sep Taiyuan, Shanxi, China www.cicne.com.cn/ Coal Industry Expo China (Shanxi) International Coal 22–24 Sep Taiyuan, Shanxi, China www.cisete.com/ Chemical Industry Exhibition International Pittsburgh 5–8 Oct Pittsburgh, PA, U.S. www.engineeringx.pitt.edu/pcc/ Coal Conference Gasification Technologies Colorado Springs, CO, www.gasification.org/events/2015-gasifica- 11–14 Oct Conference U.S. tion-technologies-conference/ 2015 Carbon Management Technology Conference 17–19 Nov Sugar Land, TX, U.S. www.aiche.org/cmtc2015 (CMTC 2015) IEA CCC 11th Workshop Chennai, Tamil Nadu, on Mercury Emissions 17–20 Nov mec11.coalconferences.org/ibis/MEC11/home India from Coal

There are several Coaltrans conferences globally each year. To learn more, visit www.coaltrans.com/calendar.aspx

Recent Select Publications China Energy Focus 2014: Towards Clean Coal — China Clean Energy Fund — This publication includes a compilation of expert contributions on the different fields of Climate Implications of Coal-to-Gas Substitution in clean coal technologies, such as criteria emissions controls, Power Generation — Herminé Nalbandian, International high-efficiency power plants, coal gasification and- conver Energy Agency Clean Coal Centre — In 2014 coal fueled 36% of sion, water conservation, and carbon capture and storage. In the world’s electricity. To reduce carbon emissions some countries are looking to displace some of their coal-fired capacity by the near term, coal is expected to play a large role in China’s using more natural gas. However, recently several studies have energy mix, although the quantity and date of China’s coal looked at the implications of methane emissions on climate utilization peak is debatable. In any case, deployment of clean change when there is large-scale switching from coal to gas for coal technologies was deemed critically important in China. To electricity generation. Because methane, the main component date, the environmental performance of China’s fleet of coal- in natural gas, is more a potent greenhouse gas compared fired power plants has been substantially improved, whereas to carbon dioxide (CO2), it is a significant contributor to cli- emissions from industrial boilers have yet to be reduced at the mate change. This is especially true in the near term (10–20 scale necessary. In the near term, the authors believe contin- years). Studies have found that methane emissions from gas ued efficiency improvements and criteria emissions controls exploration, extraction, transmission, and distribution, unless controlled, could make the benefits of coal-to-gas substitution will be the major environmental focus. Although pilot and questionable, especially in the short term. This report reviews demonstration projects have been successful, policy changes these studies and their findings. The report is available at www. will be needed to support widespread advancement of gas- iea-coal.org.uk/report/80574//83578/climate-implications- ification and carbon capture and storage. The full report can of-coal-to-gas-substitution-in-power-generation,-CCC-248 be downloaded free of charge at www.cefc.org.hk/a-list/6465

66 LETTERS

and temperature. About 5% is latent heat of water vapor from VOLUME 3, ISSUE 1 the products of combustion. This water vapor heat counts as a loss if HHV is used for the fuel heat content and does not count UPGRADING THE EFFICIEINCY OF THE WORLD’S if LHV is used for the fuel heat content. The third 5% is from COAL FLEET TO REDUCE CO EMISSIONS 2 boiler radiation losses, unburned fuel, bottom ash heat, etc. hile I found a recent Cornerstone cover story inter- The turbine’s steam path is actually fairly efficient, converting esting in its discussion of reducing global CO2 emissions from the global coal-fired power plant about 85% to 90% of the steam between the throttles and W UEEP mechanical energy (i.e., driving the generator). fleet through USC and AUSC designs, I found myself wonder- ing about the two primary options for coal plant efficiency improvements. The circulating water system that carries away the heat from the turbine’s condensing exhaust steam is the most misunder- There are two types of efficiencies that apply to a typical stood and neglected of the plant systems. This system carries Rankine cycle steam electric generating station: Carnot cycle 50% of the energy that entered the turbine throttles. efficiency and equipment efficiency. There is a mistaken impression in some quarters that the equipment, especially The heat rates for typical utility power plants frequently run as the steam generator or turbine, are the source of improved high as 5% to 10 % above design. For decades utilities in the SC/USC/AUSC efficiencies. U.S. have been reluctant to pursue significant and expensive plant efficiency improvements because public utility commis- According to Carnot a thermodynamic heat engine oper- sion mandated fuel/energy cost adjustment factors burden ates between a heat source and a heat sink where the heat the utility with the costs while passing the savings on to the available for conversion is determined by the difference in rate payer. thermodynamic properties between the source and the sink. In the long term USC/AUSC designs will improve the coal fired

A typical turbine steam path converts about 85% of the steam fleet’s Carnot cycle efficiency and reduce CO2 per megawatt energy between the throttle valves and the used energy end hour. point (UEEP). Consider two different plant options: 1) 2400 psig, 1000°F, 1460 Btu/lb and 2) 3100 psig, 1100°F, 1506 Btu/ In the short term there are significant potential efficiency lb. Condenser back pressure is 4.0 inches Hgabs, 125 °F, 1064 improvements available in day-to-day operation and Btu/lb. With a steam flow of 5,000,000 lb/h, ΔH, and 85% effi- maintenance. ciency case 1) will produce 493 MW and case 2) 550 MW. Nicholas Schroeter, PE President and Master Navigator Efficiency savings must be balanced with the additional costs Heat Rate Navigation Services, Inc. incurred for equipment and materials that must handle both short and long term stresses. T/P91 & 92 are popular materi- Response: It is true that some decent benefits in coal-fired als for USC, but has enough time and experience accumulated power plant efficiency can be gained by close attention to to predict long-term reliability? There are several vintage SC operation and maintenance. This should be part of best plants, however USC operates at higher temperatures which practices for all utilities. In my experience, some utilities are have an exponential impact on metallurgical reliability. very attentive to this approach, while others can be less so. However, once one has “wrung out” the last fractions of a per- Heat rate and fuel carbon content are the important factors. cent by this route, equipment upgrades need to be considered Coal gets most of its energy from carbon, rather than hydro- to allow the higher steam temperatures and pressures needed gen. For a typical power plant the equipment energy losses for further efficiency improvements. are distributed in this general manner. Ian Barnes About 10% to 15% of the fuel input is lost up the stack. About Associate 5% is dry gas losses which depend on the amount of flue gas IEA Clean Coal Centre

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The World Coal Association has published a concept paper on establishing a global Platform for Accelerating Coal Efficiency (PACE).

The vision of PACE is that when coal plants are built, the most efficient power plant technology possible is deployed. The overriding objective would be to raise the global average efficiency of coal-fired power plants and so minimise CO2 emissions which will otherwise be emitted, while maintaining legitimate economic development and poverty alleviation efforts. Moving the current average global efficiency rate of coal-fired power plants from 33% to 40% by deploying more advanced, off-the- shelf technology could cut 2 gigatonnes of CO2 emissions now, equivalent to India’s annual CO2 emissions.

The concept paper is available for download on the WCA website www.worldcoal.org or email [email protected] to request a copy

The WCA has released the concept paper for stakeholder input and engagement. If you would like to provide feedback or discuss PACE in more detail, contact us at [email protected]

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WCA_PACE advert_h273 x w206mm 23 Feb 2015 v3.indd 1 24/02/2015 15:56 Higher population density associated with urbanization provides an opportunity for governments to deliver basic services such as water and sanitation more cost-effectively to greater numbers of people.