Friday, February 6, 2009

Arch Coal at Harvard

In this post I am going to review some of the presentation of Steven Leer, CEO and Chairman of the Board at Arch Coal in St. Louis. First let me address a question that many have up front in relation to coal and coal mining. In response to a question from the audience, Steven stated that his company no longer does open-pit coal mining on mountains with drag lines in West Virginia, and they have left those old pits looking like rolling fields with grass. A later conversation with a colleague suggested that the hills might be heaps of "glop." The larger point however would be that Arch Coal by this account is quite different from many minerals companies that Jerrod Diamond describes as going bankrupt once they have extracted their riches, and leaving the cleanup to the local communities, the states, and the Federal government.

Although Leer's presentation focused on a justification for coal and carbon capture and sequestration (CCS) in our modern world, there was one key implicit point -- that it is critical to enable CCS. This might be seen purely as a self-serving argument for a coal company to make, since it would serve to extend the lifetime of coal in a world increasingly threatened by global warming. If I may draw an analogy to bridge, Leer's presentation within its own frame presents a strong argument for our society to continue to embrace coal as a fuel. It is available and cheap, and it is one of many fuel sources, none of which can supply the entire needs of our society. For some time the coal industry has been winning trick after trick within this suit. However, that argument is now being trumped by the limitations imposed by Mother Earth. One strand of thought among members of the audience was that the new trump suit would now take all the tricks, but there is yet another trump suit that may in certain situations trump the environmental limitations suit. That is the behavior of other nations. Internationally, Leer's argument is much stronger. The burgeoning use of coal by China and India itself provides a sufficient argument for giving a priority to CCS R&D. If we in the United States are capable of developing and perfecting CCS, then we can export it to other nations. If we simply allow other nations to implement coal, they will increase their carbon going into the atmosphere much faster than we could counterbalance that through any reductions we make in our carbon emissions ... and the ballgame is quickly over. This of course assumes that funding and research is not a zero-sum game. A possible next level of trumping would be the argument that clean coal is a boondoggle, an oxymoron, a distraction that steals valuable resources and commitments from implementing proven solutions such as wind energy. The next level of trumping, perhaps relevant more for a physicist such as myself than for most others, comes from Niels Bohr. Bohr embraced dilemnas, grinding the horns against each other to develop deeper understanding. In my current level of understanding, setting aside all the other issues,this is still useful in the energy and global warming domain. The nagging question, however, is "How long can we set aside the other issues?"

Now let's look at some of the slides and evaluate the degree to which we can agree with Leer's points. The first slide shows the growth of electrical demand over the past few decades. This is real. It also fits with the commonly accepted theory about the growth of electrical demand with the growth of the GDP. Some people talk as though electrical growth caused or at least enabled economic growth. However, looking at international figures such as those displayed in the second Arch graph, it is apparent that some nations are able to be vastly more efficient in their use of electricity relative to their standard of living. Some of the inefficiency of a nation such as Norway may be related climate or the degree of dispersal of the population. There are hints of it in Graph 1. One can see this in the downturns in electrical demand circa 1976 and circa 1983. The first may be a response to the energy crisis, the second the delayed results in the industrial sector to efficiency efforts. With the Reagan administration began a long period of encouragement of free use of electricity and fuels. The decreases indicate that our culture can make significant decreases in electrical use if we all choose to place our priorities in that direction. While this may seem arcane to policy makers, it is obvious to people who have done value engineering or energy conservation engineering in facilities or who have thought carefully about their own electrical consumption in homes and workplaces.

Thus it is no surprise to most people that electrical demand will be increasing dramatically over the next decades. This is only partly because of rising standards of living. It is also because of industrialization. As one historian commented, where the First Industrial Revolution was based on water power, the Second Industrial Revolution was based on electrical power.

The next figure shows why much of the new electrical generation will be coal fired. Coal is cheap if one does not take consideration of full life cycle costs including emissions that create global warming, if one does not accept that the earth is an increasingly finite system. Coal is also locally available in many key countries, including the United States, Europe, China, and India.

And the resulting increases in CO2 emissions will be dramatic. The only problem is that they cannot be alloowed to happen. If they happen the game is over. Thus, if the world economic system as we know it is not to be simply shut down within a few decades, it is critical that we achieve rapid worldwide adoption of CCS. This may involve giving away the technology to many other countries. Otherwise they will not be able to afford it, and the adoption will happen too slowly for our civilization to survive.

As an addendum, I am going to insert the numbers projected by ISO so that they can be compared with the reserve margins provided by Arch Coal.

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