Navigant Research Blog

Disasters Spotlight Dangers of Energy Transport

— August 1, 2013

Police in Québec said on August 1 that they have ended the search for the remaining bodies from the flaming crash of an oil tanker train that destroyed 40 buildings in the small town of Lac-Mégantic and claimed the lives of 47 people on July 6.

That news came on the same day that the federal Pipeline and Hazardous Materials Safety Administration wrapped up its initial review of a report on the oil pipeline explosion that spilled thousands of barrels of oil in Mayflower, Arkansas in March. The two accidents have raised, once again, questions about the safety of fossil fuel transport in North America and around the world.

In particular, the Lac-Mégantic disaster has spotlighted the fact that oil and gas transport by rail is rising swiftly.  Even as the political fight over the Keystone XL pipeline continues, domestic oil and gas production has outstripped existing pipeline capacity; deliveries of crude oil to refineries by rail, truck, and barge grew to nearly 1.1 million barrels a day in 2012, according to the U.S. Energy Information Administration, jumping from around 7% of total refinery receipts to almost 11%.  Overall shipments of crude by rail increased 48% in the first half of 2013 compared to 2012.  That means the likelihood of more derailments, spills, and explosions grows – but it’s not at all clear that the risks of transporting oil by rail are any greater than by any other method.

400 Deaths a Year

The question of how best to get fuel, or energy, from its source to the point of use is a complicated one with many, many variables. Coal, of course, can’t be shipped by pipeline, and coal mines tend to be found far from population centers, where the energy is actually used.  In the United States, railroad shipments of coal surpass a trillion ton-miles a year, add to emissions of greenhouse gases (mostly from diesel-powered locomotives), and, according to a 2004 report from a pair of researchers at Carnegie Mellon University, result in 400 deaths  a year – most of them at railway crossings.

The report examined the economic and environmental impacts of alternative methods for delivering electricity to end users, looking at four options to get a hypothetical 6.5 billion kilowatt-hours of electricity to Dallas from coal mines in the Powder River Basin, in Wyoming: shipping pulverized coal to a power plant in Texas; transmitting electricity across the power grid to Dallas from a coal plant in Wyoming, close to the mines; a gas pipeline that transports methane coal-gas from a gasifer in Wyoming to a combined cycle power plant in Dallas; and a gasifier/methanation/combined-cycle plant in Wyoming that transmits electricity via the grid.

More to Come

The answer to “Which is best?” is, as you might guess, not clear-cut.  Shipping coal by rail is cheapest but dirtiest, burning 130 million gallons of diesel fuel (and killing 15 people, on average); transmission lines result in losses on the grid, requiring additional power generation; gasifying the coal is environmentally more beneficial but also much more costly than burning pulverized coal; and so on.

Pipelines, despite spectacular accidents like the 2010 disaster in San Bruno, California, which killed eight people and leveled 35 homes, boast a fairly sterling safety record – the report on the Mayflower spill reportedly blames manufacturing defects for that pipeline’s failure.  A series of moves by Congress and the Obama administration in recent years have strengthened regulations for fossil-fuel pipelines.  A panel of “Energy Insiders” on, asked to comment on the recent accidents, mostly punted, saying that “all human activity carries risk” and pointing out that rail accidents have significantly fallen in recent years, as well.

That doesn’t change the fact that sensational tragedies will likely rise as rail cars full of oil, and pipelines transporting natural gas, continue to crisscross the continent.  The costs – economic, environmental, and in human lives – of this transport are largely invisible until a bunch of people all get killed at once. It’s time they were factored into the overall cost of energy.


Old Coal Plants Raise New Dilemmas

— July 12, 2013

Since its coal-fired boilers were shut down permanently in 1983, the Battersea Power Station – one of London’s most iconic structures – has been the subject of several different redevelopment schemes, all of which have failed.  The Art Deco monument, with its four tall chimneystacks set against the south London sky, has essentially been abandoned for three decades.  Earlier this month the latest redevelopment plan, from the plant’s current owner, a Malaysian firm called SP Setia, was kicked off by British prime minister David Cameron.

“This is a great day,” said a beaming Cameron.  “It has been a long time to get the Battersea Power Station development going.”  London mayor Boris Johnson said the Battersea renovation “is now sparking the wider rejuvenation of a once neglected part of London into a vibrant new quarter. ”

That remains to be seen.  What’s already evident is that the troubled history of Battersea illustrates the challenges of cleaning up and re-purposing retired coal plants – of which there are going to be hundreds in the coming years.  Battered by cheap, abundant natural gas on the one hand and tightening pollution controls on the other, owners of aging coal plants are finding that the best option is often just to shut them down.  In the United States, operators have announced the retirement of more than 100 coal plants over the next few years, and Navigant Consulting’s coal generation service estimates that up to 45 gigawatts of coal capacity, representing more than 300 plants, could be shuttered by 2020.  What to do with those facilities, many of which need extensive clean-up and environmental remediation, is a question that will loom large over the power generation industry for the next couple of decades.

Brick and Dreams

Battersea became operational in 1933, with a second facility added in 1953.  Battersea A ceased producing electricity in 1975, and Battersea B was shut down in 1983.  The plant has achieved an odd afterlife in rock music annals: it was a primary backdrop for The Beatles’ 1965 film Help!, and appeared on the cover of Pink Floyd’s 1977 album Animals.

Besides its evident popularity with bands, Battersea has been seen as a prime candidate for redevelopment.  An initial plan to create a large amusement park collapsed.  An Irish real estate developer bought the site for $607 million in 2006, planning to turn it into a luxury residential and shopping complex.  That scheme was undone by mounting unpaid debts.  At one point the owners of Chelsea Football Club proposed to build a stadium at the power station.  Battersea’s status as a Grade II historical building means that any new project must preserve the elaborately decorated brick building, making redevelopment an expensive prospect.  For years it seemed that Battersea would be a beloved but abandoned hulk on the bank of the Thames.

SP Setia bought the property last year, and formed a partnership with Malaysian conglomerate Sime Darby to build a massive residential and shopping complex with nearly 900 luxury apartments in phase one.  The developers are reportedly in talks with Emaar Properties of Dubai (builder of the Burj Khalifa, the world’s tallest building) to open a five-star hotel at the site.

Dozens of other coal plants have been retired, abandoned, or demolished since World War II in the United States, the United Kingdom, and other European countries.  In the U.S., a number of former coal plants (several of them coal gasification plants) are now on the Environmental Protection Agency list of Superfund sites.  Most often, these plants were shut down because they became uneconomic.  The expense and difficulty of rehabilitating such facilities have left many of them in place, awaiting demolition or repurposing, decaying artifacts of an earlier stage of industrial development.


Coal-To-Gas Plant Conversions Face Challenges

— July 5, 2013

The prospect of more stringent carbon emissions restrictions for existing power plants, as laid out in President Obama’s late-June speech on climate change, leaves the coal industry facing a series of hard choices.  Among the main questions: What to do with aging coal plants, many of which will be prohibitively expensive to fit with emissions-control systems to meet the new requirements?

One option is to simply decommissioning them – demolishing the plant, selling off the scrap metal, and finding a re-use for the brownfield site on which the plant was located.  A growing number of coal plant owners and operators, though, are considering converting those plants to run on natural gas: a seemingly straightforward changeover that would enable the same boiler, turbines, and other plant infrastructure to run on a fuel that is both less expensive than coal (for now) and less polluting.  A SourceWatch page on coal plant conversions lists dozens of such projects, from Washington, D.C. to California.

A closer look at these projects, though, indicates that converting to natural gas is neither as simple nor as cost-effective as it might appear.  Some announced projects have already been delayed, or killed; others are merely under consideration and may never become reality.  Many so-called “conversions” are, in fact, simply replacements, according to a 2010 study by the Aspen Environmental Group.

New Pipelines, New Hurdles

The problem is one of cost.  In many cases it’s simply cheaper to tear the plant down and start all over, rather than fueling the existing units with gas.  Combined-cycle gas-fired generation plants cost roughly $1 million per MW, installed; the cost of converting existing coal-fired equipment can be twice as much.  A 2012 study by engineering firm Black & Veatch considered several options for switching from coal to some form of natural gas generation for a hypothetical 250-MW power plant.  “Full conversion to natural gas only” and “Conversion to coal with natural gas co-firing” were the least cost-effective options, the study concluded; simply replacing the existing plant with a new combined-cycle system, fired by natural gas, was among the most attractive.

What’s more, older coal plants are not necessarily located in places served by natural gas pipelines.  New pipeline construction, accounting for rights-of-way acquisitions, metering stations, compressors, and other costs, can itself reach more than $1 million per mile, adding millions of dollars to the conversion, when a new plant integrated into existing natural gas infrastructure.

Thus it’s no surprise that some utilities with ambitious coal-to-gas conversion plans have begun to have second thoughts.  Minneapolis-based Xcel Energy, for instance, issued an RFP in March for new generating capacity that could replace the 109-MW Arapahoe plant and its 352-MW unit at the Cherokee plant, in north Denver.  Both of those stations had been slated to be converted from coal to natural gas.  The Tennesse Valley Authority, which last year said it would condider switching its huge Widows Creek Fossil Plant to natural gas, to coincide with a proposed natural gas pipeline across the Southeast.  That decision is now on hold.

Considering the growing public opposition to expansions of oil and gas infrastructure in the Lower 48, any major addition to the existing natural gas pipeline system has to be viewed as a long-term, risky endeavor.  Converting from coal to natural gas will no doubt be an option for many existing plants.  But it’s hardly going to be the answer for a majority of the country’s aging coal fleet.  These options will be explored in further detail in an upcoming Navigant Research report on decommissioning coal plants.


China’s Coal Conundrum

— June 21, 2013

International climate-change diplomats, who have had a rough decade, got some potentially exciting news in May when reports emerged that China will consider an absolute cap on carbon emissions in advance of the climate talks scheduled in Paris for 2015.

A hard emissions cap would be a dramatic policy shift for the People’s Republic, which has previously limited emissions reduction schemes to compressing the Chinese economy’s energy intensity (the amount of CO2 released per unit of GDP) and which has decried international efforts to limit the greenhouse gas (GHG) emissions – and thus the economic growth – of developing countries.

The shift was signaled by remarks made by Jiang Kejun, a carbon policy researcher at the influential National Development and Reform Commission in Beijing, who told the Financial Times, “I am sure China will have a total emission target during the 13th Five-Year Plan.”

The move could enable an achievement that has eluded the world’s major nations for years: a binding international agreement on carbon caps that includes both the developed economies of West and East Asia and rising economic powers like China and India.

If true, this move would mark the latest in a series of measures to reduce GHG pollution in China, the world’s largest producer of atmospheric CO2.  Seven Chinese cities plan to enact experimental carbon-trading programs, starting in 2014.  Already the world’s largest investor in renewable energy, China has set the goal of obtaining 15% of its power from nuclear power and renewables by 2020.  Since taking office in March, President Xi Jinping has made shifting to a less resource-intensive economy and reducing the country’s catastrophic air pollution major priorities.  In many respects China has leaped ahead of both the United States and the European Union in its efforts to shift away from fossil fuels.

There’s one problem with this scenario: any program to reduce carbon emissions on the mainland depends on shrinking China’s reliance on coal – and coal-fired power in China is not going away anytime soon.

No Peak Soon

“It is very unlikely that demand for thermal coal in China will peak before 2030,” said William Durbin, the Beijing-based president of global markets with Wood Mackenzie, an energy research and consulting firm, in a statement accompanying the release of a new report entitled “China: The Illusion of Peak Coal.”

“Despite efforts to limit coal consumption and seek alternative fuel options, China’s strong appetite for thermal coal will lead to a doubling of demand by 2030,” the report concludes.  Coal consumption in China, bolstered by a period of rampant construction of coal-fired plants that has only recently slowed, must rise to feed China’s explosive demand for power, which will nearly triple to 15,000 TWh by 2030.

Even existing goals for reducing coal consumption are sketchy, many analysts believe.  “Achieving these targets eventually would come at considerable economic cost,” John Reilly, an environmental economist at MIT, told New Scientist magazine.

China is by far the world’s largest importer of coal, and despite massive investments in nuclear, wind, and solar power, along with a crash program to develop domestic natural gas reserves, no other energy source can replace coal as a source of primary power in the next two decades.  China’s leaders are determined to replicate America’s shale gas boom, but “natural gas supplies will struggle to meet demand growth due to modest investment in conventional reserves and the very slow development of domestic unconventional shale gas reserves,” Wood Mackenzie states.

Gray Market, Black Fuel

The continued coal boom in China also reflects the provincial divisions that make enacting nationwide policies increasingly challenging for leaders in Beijing.  Most coal-reduction schemes are centered in the big cities of the coast, while the poorer provinces of the interior still rely on dirty, cheap coal.  Ambitious plans to build long distance ultra-high-voltage transmission networks, for example, won’t reduce overall coal burning; they’ll simply shift coal demand from the coast to the interior.  What’s more, official statistics on coal use in China significantly underestimate the true demand, because of the size of the gray market consisting of small, unlicensed mines and untracked sales.  A 2011 report on the Chinese coal industry produced by Stanford’s Program on Energy & Sustainable Development stated the problem clearly: “One important driving force underlying the existence of gray coal markets in China is the historic and chronic difficulty of compelling local officials to obey central policies.”

China’s evident intention to institute firm caps on GHG emissions is an encouraging sign.  But the grim reality is that such a cap has no chance of succeeding without a dramatic, and unlikely, reduction in power generation from coal.


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