Statement of
Robert S. Kripowicz
Principal Deputy Assistant Secretary
for Fossil Energy
U.S. Department of Energy
to the
Subcommittee on Energy and Power
Committee on Commerce
U.S. House of Representatives
June 8, 2000

Mr. Chairman and Members of the Subcommittee. I appreciate the opportunity to discuss the important role that coal - and especially cleaner coal technology - can play in continuing to strengthen our nation's economic future while at the same time, improving our environment.

Today, coal is an indispensable part of our nation's energy mix. Because of its abundance and low cost, coal now accounts for more than half of the electricity generated in this country.

Coal is our nation's most abundant domestic energy resource. One quarter of all the world's known coal supplies are found within the United States. In terms of energy value (Btus), coal constitutes approximately 95 percent of U.S. fossil energy reserves. Our nation's recoverable coal has the energy equivalent of about one trillion barrels of crude oil - comparable in energy content to all the world's known oil reserves. At present consumption rates, U.S. coal reserves are expected to last at least 275 years.

Coal has also been an energy bargain for the U.S. Historically it has been the least expensive fossil fuel available to the country, and in contrast to other primary fuels, its costs are likely to continue to decline as mine productivity continues to increase. Between 1988 and 1997, minemouth coal prices (in real 1992 dollars) declined by $9.40 per ton, or 37 percent; between 1998 and 2020, prices could decline by another $5.00 per ton (1998 $), or about 1.5 percent a year. The low cost of coal is a major reason why the United States enjoys some of the lowest electricity rates of any free market economy.

Coal Consumption for Electricity Projected to Continue Rising

America's coal industry - 81,000 miners working in 25 states - produces approximately 1.1 billion tons of coal per year. Just under 950 million tons goes to U.S. power plants (the rest is used for industrial purposes, such as steelmaking, or is exported). According to the Department's Energy Information Administration (EIA), domestic coal demand could increase by 20 percent by 2020, growing to 1,316 million tons, primarily because of increasing coal use for electricity generation.

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As this chart shows, although coal's overall contribution to the nation's electric power supply is projected to decline somewhat - from 52 percent in 1998 to 49 percent in 2020 - the substantial growth in U.S. power consumption means that the U.S. will mine and use more coal in the foreseeable future.

A key element in EIA's projection is that very little new capacity is planned during that time period, about 7% of existing capacity (or around 21 gigawatts). Most of the increased generation from coal-fired units will come from existing plants increasing their hours of operation. The primary barrier to construction of new coal-fired power plants will be intense competition from natural gas combined cycle powerplants. These natural gas-fired plants have much lower capital costs than coal plants and are very low pollutant emitters.

Electricity restructuring is another important development in the industry. Using authorities provided by Congress in the Energy Policy Act of 1992 and other statutes, the Federal Energy Regulatory Commission has taken action to make wholesale electricity markets more competitive. To date, 25 states have taken action to introduce competition into retail electricity markets and many others are considering this option. The Administration sent its own comprehensive legislative proposal to Congress more than two years ago. Both the House Commerce Committee and the Senate Energy and Natural Resources Committee have announced plans to mark up legislation this month to update the federal statutory framework for the electricity industry. A comprehensive restructuring bill will both protect the reliability of our electric system and facilitate the smooth functioning of restructured electricity markets. Properly implemented, restructuring will be good for consumers, the economy, and the environment. Restructuring can also be good for coal - the Administration's analysis of its comprehensive restructuring proposal projects that coal-fired generation would continue to increase through 2015 under competition, and that competition modestly increases coal-fired generation above reference-case levels in the near-term.

Coal and the Environment

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Largely because of improving pollution control technology, the nation has been able to use more coal while improving the quality of its air. Coal use has more than doubled since 1970 while emissions of sulfur and nitrogen pollutants have declined by 70 percent and 45 percent respectively.

EIA's coal projections reflect existing environmental regulations only. Whether expectations for future growth in coal demand actually materialize will depend largely on the nation's coal users' ability to comply with increasingly stringent environmental regulations. Increased compliance costs can lead to early retirement of a unit, or to less use of the coal-fired generating unit as it becomes more costly to operate. The most critical regulations and policy initiatives are air pollution related and include:

• Rules to address the Regional Transport of Ozone (the ozone "SIP Call" and related rules promulgated by EPA). The SIP Call rule required 22 Eastern states and the District of Columbia to reduce nitrogen oxide (NOx) emissions by specified amounts by May 2003. Although the rules are being revised to comply with judicial direction, the primary mechanism to achieve the required reductions is expected to be additional NOx reduction requirements at coal-fired power plants.

• Revised National Ambient Air Quality Standards for Particulate Matter and for Ozone. These revised standards were promulgated in 1997, with anticipated annual compliance costs for full attainment of $37 billion per year and $10 billion per year, respectively. The Supreme Court will be reviewing the EPA rules. Both are significant for power plants because they will lead to additional reductions in emissions of NOx and sulfur dioxide (SO2) which are precursors to fine airborne particles.

• Mercury regulations. Under a court sanctioned agreement, EPA is scheduled to decide by December 15 whether or not it is necessary to control mercury from coal-fired power plants. If EPA deems it necessary, the agency must promulgate regulations by December 2003.

• Enforcement initiative. On November 3, 1999, EPA filed lawsuits against seven utility companies, and issued an administrative order against an eighth, charging violation of new source review requirements. The civil actions, now in the discovery stage, all seek retrofit of state-of-the-art control technology. A total of 33 gigawatts of capacity is involved in EPA's initiative -- over 10% of total U.S. coal-fired capacity. The basic allegation is that activities at these plants were modifications requiring new source permits. In the only settlement to date, the Tampa Electric Company (TECO) agreed to 85% reductions in NOx and SO2 by 2010, retirement of significant coal capacity, and payment of a $3.5 million civil penalty.

The 305 gigawatts of existing coal-fired powerplants can be categorized into three groups: (1) very large and relatively new plants, (2) very small and relatively old plants, and (3) those in between. The first category will probably be able to continue to operate economically, even with the new regulations. Many of the smaller plants in the middle category will not, and in fact several utilities have recently announced plans to replace some older coal units with new natural gas-fired units.

The pivotal group is the third group -- moderate size coal plants with significant remaining operational lifetimes. It is this group which will benefit most from development and deployment of advanced emission control technologies. The greater the success of DOE and its private sector partners in developing more effective, and lower cost mitigation technologies, the more of these plants which will continue to operate, and the lower the overall cost of electric power will be to the consumer.

A major caveat is that none of the projections assumes the implementation of new regulation to address climate change concerns. DOE is also pursuing technologies to reduce greenhouse gas emissions from coal (and natural gas) power plants - both by increasing efficiency of the power generating process and by capturing and sequestering carbon gases. Although these technologies are longer term and unlikely to be available prior to 2015, they could allow for the use of coal as a fuel for new generating plants while substantially reducing or even eliminating emissions of greenhouse gases to the atmosphere.

Measures to reduce greenhouse gas emissions before 2015 could lead to significant reductions in domestic coal use. Impacts on domestic coal use would likely be directly related to the amount of reduction in greenhouse gas emissions that takes place within U.S. borders. For a given level of greenhouse gas emissions commitment, provisions that allow the U.S. to meet the commitment by (1) relying on purchased emissions reductions from sources in other countries, (2) sequestration of carbon dioxide through forestry activities, and (3) additional reductions of non-carbon dioxide greenhouse gases would reduce the impact of any such obligation on the level of domestic coal use.

Clean Coal Technology - The Investment is Paying Off

With coal expected to remain one of the nation's lowest cost energy sources, its future will be determined largely by the availability of affordable technology that can reduce the impact of its use on the environment.

In the mid-1980s, the United States began an unprecedented joint public-private investment in a new generation of cleaner coal technologies. The Clean Coal Technology Program led to 40 projects in 18 states, over half successfully completed. More than $5.6 billion has been committed to this program, with private industry and states investing two dollars for every one from the federal government. Today, because of the Clean Coal Technology Program and the research efforts that undergird it:

• Pollution control costs are significantly lower.
  In the mid-1980s, the only options to reduce smog-causing nitrogen oxide (NOx) pollutants from coal-fired power plants cost $3,000 per ton of NOx. Today, technologies such as low-NOx burners demonstrated in the Clean Coal Technology Program have reduced NOx control costs to less than $200 per ton. Nearly 75 percent of the nation's coal-fired generating capacity now uses low-NOx burners. The cost of selective catalytic reduction, which removes NOx from coal flue gases, has been cut in half because of technology advances.

  Similarly, in the 1970s, scrubbers - the flue gas treatment devices that remove sulfur pollutants from the exhausts of coal-fired boilers - were expensive, unreliable, and posed waste handling problems. The Federal Government's R&D program (both at DOE and EPA) and DOE's Clean Coal Technology Program helped improve scrubber technologies. Today, flue gas scrubbers are one-fourth as expensive as the vintage-1970s units and operate much more reliably. The reduced costs, alone, have saved American ratepayers more than $40 billion since 1975. Today, advanced scrubbers produce a waste product that can be recycled into wallboard or easily disposed of in a safe, powder form, rather than the sludge of older systems.

• Coal combustion is cleaner.
  In the 1970s and 80s, DOE's R&D program helped develop the fluidized bed coal combustor - an advanced coal-burning technology that removed sulfur pollutants and limited the formation of NOx pollutants inside the boiler, eliminating the need for scrubbers or other post-combustion controls. The new technology found widespread acceptance in the industrial boiler market.

  The Clean Coal Technology Program helped move this clean-burning technology into the larger-size, utility market. Using this technology, coal-fired power plants can reduce sulfur emissions by more than 95 percent and NOx emissions by more than 90 percent, even when burning high-sulfur coal.

• Utilities have a new option for coal-based power.
  The Clean Coal Technology Program also pioneered a fundamentally new way to use coal to generate electricity. Rather than burning it in a boiler, gasification-combined cycle technology first converts coal into a combustible gas, cleans the gas of virtually all of its pollutants, then burns the gas in a turbine, much like natural gas. More than 99 percent of sulfur, nitrogen, and particulate pollutants can be removed in the process. Moreover, heat from the turbine can be used in a conventional steam cycle to generate a second source of electricity, increasing overall power plant efficiencies.

  Because of the Clean Coal Technology Program, the nation now has three full-scale, pioneering coal gasification combined cycle power plants located in Florida, Indiana, and Nevada. These are among the cleanest fossil fuel power generating facilities in the world.

• Steel mills have an environmentally attractive alternative to coke ovens.
  Much of the nation's coal not used by power plants is shipped to steel mills for use in making the coke needed for the steelmaking process. Coke production, however, is a significant source of air pollutants, including air toxics. The Clean Coal Technology Program demonstrated a way to use coal directly in the blast furnace, displacing coke virtually on a pound-for-pound basis. Direct coal injection offers the steel industry a clearly superior economical and environmental alternative to traditional coke-making.

The Future

When the Department of Energy issued the Comprehensive National Energy Strategy in April 1998, the first of its five overarching goals was to:

Improve the efficiency of the energy system - making more productive use of energy resources to enhance overall economic performance while protecting the environment....

One of the major strategies to achieve this goal is to demonstrate cost-effective power systems that can achieve electrical generating efficiencies greater than 60 percent.

Today's coal-fired power plants convert only about a third (between 33-35 percent) of the energy value of coal into electricity. The rest is typically discarded as waste heat. The Clean Coal Technology Program has demonstrated new technologies that can boost efficiencies to nearly 45 percent. Advances now in the DOE research and development program - for example, more energy-efficient gas separation technologies, improved turbines, and coal-capable fuel cells - could push coal power plant efficiencies into the 60-percent range.

What are the benefits of a more efficient coal-fired power plant?

Cleaner operation is one, since a coal plant that uses less fuel to generate the same amount of power will emit fewer emissions. Reduced greenhouse gas emissions is another benefit; a 60-percent efficient coal power plant can cut carbon dioxide emissions by more than 40 percent. A third is cost to consumers. Improving the efficiency of a power plant can lower costs of the electricity generated, perhaps by up to 20 percent.

The Vision 21 Concept. It may be possible in the future to eliminate virtually all of the environmental concerns at a coal-based power plant.

DOE is developing a concept for a new fleet of energy facilities that would incorporate breakthrough technologies in advanced power generation and pollution controls. With a target date of 2015, this new energy concept, called Vision 21, would incorporate technologies that would reduce SO2 (sulfur dioxide) and NOx emissions to near zero, and cut in half the amount of carbon dioxide emitted from the plant.

Moreover, the Vision 21 concept could incorporate various coproduction options - producing not only electricity but other high-value products such as hydrogen, clean transportation fuels, chemicals and other commercial commodities. By developing a multi-product energy facility - rather than just a single-product electrical generating plant - it may be possible to boost overall coal use efficiencies to more than 80 percent. Improving the efficiency of tomorrow's coal-fueled energy facilities can be beneficial companion to improving end-use energy conservation efforts. For example, by raising the efficiency of U.S. coal-fired power plants to 50 percent, the nation could achieve fuel savings equivalent to weatherizing 400 million homes - more than 5 times the number of homes in the United States.

Carbon sequestration. Even with improved efficiencies, a future coal-fired power plant still may not be able to achieve the substantial greenhouse gas reductions that may be necessary to counter concerns about global climate change. Therefore, one of the keys to coal's long-term future (and to the future of other fossil fuels) may be the emerging technology of carbon sequestration.

Only a few years ago, concepts for capturing greenhouse gases at their point of emission, or even from the ambient air, and either storing them for centuries or recycling them into useful products were considered laboratory curiosities. Today, the opinion is much different.

DOE has set a goal of developing technologies that can capture and sequester carbon dioxide at costs as low as $10 per ton of carbon. This is equivalent to adding only 2/10ths of a cent per kilowatt-hour to electricity rates that today range from 4 to 12 cents per kilowatt hour.

Carbon sequestration - if the technology can be successfully developed - could be the only option that doesn't require large-scale turnover of the world's energy infrastructure. Along with low-carbon and carbon-free energy supply technologies, such as natural gas and renewable energy systems, and more energy-efficient end-uses, carbon sequestration could become an important 3rd option in reducing the buildup of greenhouse gases.

Conclusion

The United States needs a variety of energy sources to continue the unprecedented economic expansion that has made us the envy of the world. At the same time, Americans have consistently ranked environmental quality as one of their highest priorities for both current and future generations.

While the U.S. will continue to expand the role of renewable and other alternative energy resources in its energy portfolio, coal will continue to provide a large share of the overall energy - and the dominant share of electricity - that can keep our economy growing. New technologies can make it possible to use all of our domestic energy resources - including our largest resource, coal - in ways that are compatible with our goals to protect the environment.

Over the past 20-year history of the Department of Energy, we have made substantial progress in improving the environmental acceptability of coal use while, at the same time, keeping the costs of coal-derived energy low. Through the continued public and private investment into advanced, more efficient, and cleaner coal technologies, coal can remain a beneficial contributor to America's energy future.