1
Introduction and Scope of the Study

The fossil fuels coal, petroleum, and natural gas have been central in supplying reliable, low-cost energy in the United States for more than a century. Today they account for almost 90 percent of the nation's primary energy consumption. The domestic coal resource base is extensive, representing over 94 percent of proven U.S. fossil energy reserves (DOE, 1993). While the United States imports significant amounts of oil and gas, coal is a net export commodity for the U.S. economy.

Coal prices declined in real terms through most of the 1980s, due primarily to higher mining productivity, overcapacity, and competition from natural gas. The abundance and low-cost of coal make it an attractive fuel, but the environmental controls required for coal combustion, together with the inconvenience of handling a solid fuel, have made natural gas and oil the fuels of choice in developed nations for many domestic, commercial, and industrial applications. Of the total 1992 U.S. domestic energy production, 32 percent (21.6 quadrillion Btu) was coal, 27 percent natural gas, and 23 percent crude oil, with the remaining 18 percent from nuclear power and renewables (EIA, 1993a).

Electricity generation is the single largest use of coal in the United States. Electric utilities consumed 87.4 percent of the total 1992 coal consumption of 892 million tons, while industrial users consumed 8.3 percent and coke plants 3.6 percent (EIA, 1993b). Over the past 20 years the electric utility industry's coal consumption has doubled. In 1992 coal-fired steam electricity generating plants accounted for 56 percent of the electricity produced in the United States.

Coal's continued viability as a domestic energy source will be strongly linked to its environmental acceptability relative to that of competing fuels such as natural gas. Research, development, demonstration, and commercialization



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--> 1 Introduction and Scope of the Study The fossil fuels coal, petroleum, and natural gas have been central in supplying reliable, low-cost energy in the United States for more than a century. Today they account for almost 90 percent of the nation's primary energy consumption. The domestic coal resource base is extensive, representing over 94 percent of proven U.S. fossil energy reserves (DOE, 1993). While the United States imports significant amounts of oil and gas, coal is a net export commodity for the U.S. economy. Coal prices declined in real terms through most of the 1980s, due primarily to higher mining productivity, overcapacity, and competition from natural gas. The abundance and low-cost of coal make it an attractive fuel, but the environmental controls required for coal combustion, together with the inconvenience of handling a solid fuel, have made natural gas and oil the fuels of choice in developed nations for many domestic, commercial, and industrial applications. Of the total 1992 U.S. domestic energy production, 32 percent (21.6 quadrillion Btu) was coal, 27 percent natural gas, and 23 percent crude oil, with the remaining 18 percent from nuclear power and renewables (EIA, 1993a). Electricity generation is the single largest use of coal in the United States. Electric utilities consumed 87.4 percent of the total 1992 coal consumption of 892 million tons, while industrial users consumed 8.3 percent and coke plants 3.6 percent (EIA, 1993b). Over the past 20 years the electric utility industry's coal consumption has doubled. In 1992 coal-fired steam electricity generating plants accounted for 56 percent of the electricity produced in the United States. Coal's continued viability as a domestic energy source will be strongly linked to its environmental acceptability relative to that of competing fuels such as natural gas. Research, development, demonstration, and commercialization

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--> (RDD&C) programs will therefore be critical in ensuring that coal technologies meet or exceed requirements for acceptable use and that they are available for timely deployment. The present study assesses the directions of coal RDD&C strategies and priorities for the United States, with emphasis on programs funded by the U.S. Department of Energy (DOE). The scope and objectives of this National Research Council study and the committee's approach to its task are further detailed below. Prior to reviewing DOE's coal programs and planning in Chapter 2, some essential background is provided in this chapter on relevant coal-related provisions of the Energy Policy Act of 1992 (EPACT) and on coal-related research and development (R&D) outside DOE, both in the private sector and overseas. THE ENERGY POLICY ACT OF 1992 The major impetus for this study, EPACT, represents the culmination of several years of energy policy deliberations, prompted largely by the Bush administration's 1991 National Energy Strategy proposals (DOE, 1991). EPACT provides congressional guidance on a wide range of energy-related issues. Its provisions are intended to support a more competitive economy, a cleaner environment, and increased energy security. EPACT enumerates many coal-related RDD&C activities, specifically as shown in Box 1-1. (Key coal-related provisions of the act are discussed further in Chapter 10 and reproduced in full in Appendix B.) The act gives the Secretary of Energy certain responsibilities for DOE's coal program and further requires the Secretary to submit reports to the Congress, including a plan to meet the objectives defined in the act's Title XIII—Coal, Section 1301. These high-level objectives focus on ensuring a reliable electricity supply, increasing the environmental acceptability of coal technologies, and achieving the cost-competitive conversion of coal to transportation fuels. Relevant technologies are to be available for commercial use by 2010. In addition to Subtitle A, subtitles B and C of Title XIII and Subtitle A of Title XX identify other coal-related activities to be implemented by DOE. The principal technical areas EPACT identifies in sections relating to coal are electric power generation and conversion of coal to liquid and gaseous fuels. Nonfuel uses of coal—for coke, chemical feedstocks, and other products—also are addressed. EPACT emphasizes improving the environmental acceptability of the entire coal fuel cycle, from coalbed methane recovery, through power generation and conversion to fuels, to the utilization of coal wastes. A distinction is made between RDD&C activities described in Subtitle A of Title XIII and the Clean Coal Technology (CCT) program described in subtitles B and C. As discussed in Chapter 2, the latter program specifically addresses the need for cost-effective, high-efficiency, low-emission coal technologies ready for commercial application by 2010.

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--> BOX 1-1 Sections of the 1992 Energy Policy Act Considered by the Committee TITLE XIII—COAL Subtitle A: Research, Development, Demonstration, and Commercial Application Section 1301: Coal Research, Development, Demonstration, and Commercial Application Programs Section 1302: Coal-Fired Diesel Engines Section 1303: Clean Coal, Waste-to-Energy Section 1304: Nonfuel Use of Coal Section 1305: Coal Refinery Program Section 1306: Coalbed Methane Recovery Section 1307: Metallurgical Coal Development Section 1308: Utilization of Coal Waste Section 1309: Underground Coal Gasification Section 1310: Low-Rank Coal Research and Development Section 1311: Magnetohydrodynamics Section 1312: Oil Substitution Through Coal Liquefaction Subtitle B: Clean Coal Technology Program Section 1321: Additional Clean Coal Technology Solicitations Subtitle C: Other Coal Provisions Section 1332: Innovative Clean Coal Technology Transfer Program Section 1336: Coal Fuel Mixtures Section 1337: National Clearinghouse TITLE XX—GENERAL PROVISIONS; REDUCTION OF OIL VULNERABILITY Subtitle A: Oil and Gas Supply Enhancement Section 2013: Natural Gas Supply STUDY SCOPE AND OBJECTIVES In May 1993 the DOE's Acting Assistant Secretary for Fossil Energy requested that the National Research Council assess DOE's coal program. In keeping with this request, the National Research Council formed the Committee on Strategic Assessment of the U.S. Department of Energy's Coal Program (see Appendix G for biographical sketches of committee members), to address the broad priorities that DOE's Office of Fossil Energy ought to consider in updating its strategic plan and in responding to EPACT. Recent or current DOE programs have addressed, or are addressing, many of the areas identified in EPACT. The National Research Council committee was specifically charged as follows: Review the DOE coal program, including the current version of the coal strategic plan and additional details contained in the administration's budget requests for fiscal year (FY) 1994 and FY 1995, as appropriate.

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--> Review the relevant sections of EPACT (identified above in Box 1-1) and the DOE coal program vis-à-vis both EPACT provisions and coal-related R&D outside DOE. Recommend objectives, including performance and schedule, that ought to be emphasized for those areas in EPACT that are not in the current DOE coal program. Make recommendations pertaining to EPACT Section 1301(c), especially subparagraphs c(3) through c(5), which relate to the modification and extension of existing demonstration and commercialization programs to ensure the timely availability of advanced coal-based technologies. Identify priorities for DOE's future coal program, based on the foregoing reviews and recommendations and on the assumption that the future budgets appropriated for the DOE coal program will remain at the FY 1994 level in real terms. (See Appendix A for a detailed description of the project and the charge to the committee.) THE COMMITTEE'S APPROACH To address its charge, the committee conducted four major tasks: (1) acquisition and review of information on DOE's current coal programs and planning; (2) development of a strategic planning framework, including criteria for program objectives, timing, and priorities; (3) assessment of current and alternative coal RDD&C activities in the context of EPACT and the committee's strategic planning framework; and (4) development of conclusions and recommendations based on all the foregoing committee activities. DOE's "Coal Strategic Plan" was still in preparation and not available during the conduct of the study. The committee therefore used a number of other documents that DOE provided to obtain an overview of current and planned coal-related RDD&C activities. Documentation provided by DOE is referenced as appropriate throughout this report. This information was supplemented by DOE staff presentations to the committee (see Appendix F). In developing a framework for strategic assessment of the DOE program, the committee sought to reflect the key factors likely to affect future coal use in the United States and elsewhere. Scenarios were developed for three time periods: near-term (1995-2005), mid-term (2006-2020), and long-term (2021-2040). The committee defined these time periods based on anticipated major trends in coal use. For the near-term period—over the next 10 years—scenarios for coal use will likely remain similar to those of today. Power generation will continue to be the principal U.S. use of coal, although the need for new baseload power generation facilities will be low. The mid-term period (2006-2020) will likely be one of transition. Power generation will remain the largest coal use, with substantial

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--> demand for new generating capacity. Interest in the production of synthetic fuels from coal will also likely increase significantly in response to rising international oil prices. In the long-term (2021-2040) the balance of coal uses may well shift, with liquids and other clean fuels from coal becoming increasingly important compared to power generation. The emphasis on power generation will continue to be significant, but the need to minimize carbon dioxide (CO2) and other emissions will impose severe demands on efficiency and emission control systems, resulting in increased interest in other energy sources. To develop scenarios for the three periods and related RDD&C planning criteria, the committee devoted significant effort to identifying those factors that would affect the use of coal (see Chapter 3). The committee explored alternative views of future energy needs, environmental control requirements, institutional factors, international developments, and resource availability. The information and perspectives developed were then used to assess current DOE programs and to draw conclusions and recommendations consistent with the committee's strategic planning framework and its overall charge. COAL RESEARCH AND DEVELOPMENT Over the years, R&D has been conducted in the United States on all stages of the coal fuel cycle, from mining to end use, in both private and public sectors. Coal R&D has also been undertaken overseas and has been pursued cooperatively between the United States and other countries. The pace of domestic R&D has been uneven, depending on economic circumstances, perceived U.S. vulnerability to energy interruptions, and the reality of such energy problems as the 1973 oil embargo by the Organization of Petroleum Exporting Countries (OPEC). The following brief discussion of private sector and international activities provides some general background for the committee's assessment. Specific private and international programs, such as the development of Fischer-Tropsch (F-T) processes and of gasification technology, are addressed in later technical discussions of the DOE program. Private Sector Activities R&D by the private sector has been affected by the ebb and flow of government support for coal-related R&D, although much R&D has been carried out independent of government support, driven mainly by perceived economic opportunities. Prior to the 1973 OPEC oil embargo, the private sector was involved in technical developments relating to coal mining, electric power generation, and, to a lesser degree, coal liquefaction. The subsequent energy uncertainties of the 1970s resulted in rapid price rises for petroleum and natural gas. With some forecasts projecting high petroleum prices for the longer term, the private sector envisioned opportunities to produce liquid fuels or synthetic natural gas from

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--> resources other than gas or petroleum. Programs were undertaken on technologies to exploit coal, oil shale, tar sands, biomass, and other nonconventional domestic resources, but these programs have now largely been abandoned. Coal gasification technologies have been pursued extensively by private industry. Gasification is a critical step in converting coal to electricity, liquid fuels, or synthetic natural gas, and/or any number of chemicals, including methanol, petrochemicals, and ammonia. Commercial coal gasification plants in the United States include the Great Plains Gasification Plant, the Dow gasification-cogeneration plant, and the Tennessee Eastern syngas-to-chemicals plant. Coal technologies to produce electric power have been pursued extensively by both the private sector and DOE. The Electric Power Research Institute (EPRI), which is funded by the utility industry, is developing advanced electricity generation technologies powered by coal, with a current annual coal R&D budget of approximately $150 million, excluding cosponsors' funds. In addition, the private sector will contribute approximately two-thirds of the total $6.9 billion budgeted for the DOE's CCT program. International Activities In Organization for Economic Cooperation and Development (OECD) countries, the most important consideration for future coal use is environmental. R&D programs within the OECD emphasize the development of cost-effective clean coal technologies to limit sulfur dioxide (SO2), oxides of nitrogen (NOx), and CO2 emissions from power plants (IEA, 1993). A number of OECD countries, including the United States, are also pursuing R&D individually to compete for the large anticipated markets for clean coal technologies in China, India, and other non-OECD nations. Outside the United States, the major effort to develop clean coal technologies is within the European Union (EU). Japan's New Energy and Industrial Technology Development Organization is funding a clean coal technology program, and there are limited clean coal technology developments in Australia, but these activities are not of the magnitude of the U.S. effort to develop and commercialize clean coal technologies. EU coal programs are aimed at ensuring the availability and use of technologies for clean, cost-effective exploitation of coal, which provides nearly 40 percent of EU power generation requirements. The EU Energy Demonstration program (1978-1989) provided financial support to pilot and demonstration projects in liquefaction, gasification, and combustion of solid fuels. EU grants totaling 302 million ECUs made up about 40 percent of the program costs (ECUs = European currency units; at present 1 ECU = US$1.15). The EU THERMIE program (1990-1994) was aimed at promoting greater use of European energy technologies and at developing new clean processes, notably for the combustion and conversion of solid fuels. EU funding for this program was about 150 million ECUs annually, with additional funding coming from industry participants and

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--> governments of EU member nations. Clean coal technologies supported by THERMIE include transport fuels from coal, NOx emission controls, atmospheric fluidized-bed combustion (AFBC), pressurized fluidized-bed combustion (PFBC), gasification, and an integrated gasification combined-cycle (IGCC) plant (Commission of the European Communities, 1992). ORGANIZATION OF THE REPORT The remaining chapters in Part I of this report elaborate on issues and findings central to the committee's formulation of a strategic planning framework. Chapter 2 provides an overview of current DOE coal-related programs and planning, highlighting the current program structure and recent budget trends. Chapter 3 discusses principal issues for future U.S. coal use, including potential markets, the requirements for coal use, the domestic energy resource base, and competing energy sources for various applications. Special attention is given to environmental requirements and the institutional factors that will shape the future of coal technologies. The findings presented in Chapters 2 and 3 were used by the committee to develop a framework for DOE strategic planning, a framework summarized in Chapter 4. This framework provides the basis for a more detailed assessment of DOE programs and planning. Part II of the report (chapters 5-9) provides more detailed evaluations of current DOE programs with respect to the strategic planning criteria. Chapters 5 through 7 follow the fuel cycle, with Chapter 5 addressing coal preparation, coal-liquid mixtures, and coalbed methane recovery: Chapter 6 addresses coal conversion to clean fuels and specialty products, and Chapter 7 covers electric power generation. Chapter 8, on technology demonstration and commercialization, and Chapter 9, on advanced research programs, describe a variety of cross-cutting activities within DOE's coal program. In all cases the discussions focus on the main technical issues, including both risks and opportunities, that must be considered in developing a coal program. In the final section of the report, Part III, the information in parts I and II is synthesized to develop conclusions and recommendations on the strategic priorities for DOE's RDD&C programs on coal-related technologies and to address other provisions of the committee's charge related to EPACT (Chapter 10). Appendixes provide additional background in support of the committee's work. A glossary provides explanations of the acronyms used and of major technical and economic conventions the committee adopted. REFERENCES Commission of the European Communities. 1992. Coal Can Be Green—A Review of Coal Technologies Supported by the European Community. Brussels: Directorate-General for Energy (DG XVII).

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--> DOE. 1991. National Energy Strategy, First Edition 1991/1992. Washington, D.C.: U.S. Government Printing Office. DOE. 1993. Clean Coal Technologies: Research, Development, and Demonstration Program Plan. U.S. Department of Energy, DOE/FE-0284. Washington, D.C.: DOE. EIA. 1993a. Monthly Energy Review, October 1993. U.S. Department of Energy, Energy Information Administration. DOE/EIA-0035 (93-10). Washington, D.C.: DOE. EIA. 1993b. Coal Production 1993. U.S. Department of Energy, Energy Information Administration. DOE/EIA-0118(92). Washington, D.C.: DOE. IEA. 1993. Annual Report 1992-1993: International Energy Agency Coal Research. Paris: Organization for Economic Cooperation and Development.