Glossary and Conventions

COST OF COAL CONVERSION PROCESSES

The cost of producing electricity or clean gaseous and liquid fuels from coal is highly dependent on the level of capital investment and, therefore, on the return required by investors. This return depends on both the prime rate, which reflects the anticipated effects of inflation and the desire of the Federal Reserve Bank to control inflation, and the investors' assessment of risk.

The electric utility industry, with its relatively predictable selling prices for electricity and stable production costs, can attract capital at a lower prime rate than, for example, the oil industry, where future product and feedstock prices are much less certain. Major investments are frequently split between a component with relatively assured, but lower, return and a higher-return component that will incur a larger risk. In the utility industry, a substantially larger component of low-risk borrowed money is more common than in the petroleum industry, where 100 percent equity financing has been more commonly practiced. Hence, the term ''utility financing" is frequently used to describe highly leveraged investments, whereas "petroleum financing" describes investments with the smaller component of borrowed money generally employed in that industry.

The costs presented by the U.S. Department of Energy (DOE) and used in this report are based on leveraged financing. Key assumptions are summarized below.1 It has also been assumed that sufficient plants have been built to reach a stable cost (nth plant costs; see Chapter 8).

1  

DOE, 1993, Direct Coal Liquefaction Baseline Design and System Analysis: Final Report on Baseline and Improved Baseline, Executive Summary, prepared for the U.S. Department of Energy, Pittsburgh Energy Technology Center, under contract no. DEAC22 90PC89857, DOE, Pittsburgh, Pennsylvania.



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--> Glossary and Conventions COST OF COAL CONVERSION PROCESSES The cost of producing electricity or clean gaseous and liquid fuels from coal is highly dependent on the level of capital investment and, therefore, on the return required by investors. This return depends on both the prime rate, which reflects the anticipated effects of inflation and the desire of the Federal Reserve Bank to control inflation, and the investors' assessment of risk. The electric utility industry, with its relatively predictable selling prices for electricity and stable production costs, can attract capital at a lower prime rate than, for example, the oil industry, where future product and feedstock prices are much less certain. Major investments are frequently split between a component with relatively assured, but lower, return and a higher-return component that will incur a larger risk. In the utility industry, a substantially larger component of low-risk borrowed money is more common than in the petroleum industry, where 100 percent equity financing has been more commonly practiced. Hence, the term ''utility financing" is frequently used to describe highly leveraged investments, whereas "petroleum financing" describes investments with the smaller component of borrowed money generally employed in that industry. The costs presented by the U.S. Department of Energy (DOE) and used in this report are based on leveraged financing. Key assumptions are summarized below.1 It has also been assumed that sufficient plants have been built to reach a stable cost (nth plant costs; see Chapter 8). 1   DOE, 1993, Direct Coal Liquefaction Baseline Design and System Analysis: Final Report on Baseline and Improved Baseline, Executive Summary, prepared for the U.S. Department of Energy, Pittsburgh Energy Technology Center, under contract no. DEAC22 90PC89857, DOE, Pittsburgh, Pennsylvania.

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--> Key assumptions for capital cost estimation: Bank interest rate (percent) 8 Percent equity 25 Percent internal rate of return 15 Years of construction 4 Years of operation 25 Depreciation, years 10 Maintenance, percent initial capital 1 Working capital, percent revenue 10 Working capital, percent liquid 50 Owner's cost, percent initial capital, first-year operation 5 Federal income tax rate, percent 34 General inflation, percent 3 Raw material price escalation, percent (same as general inflation) 3 State tax 0 General inflation of 3 percent per year was applied to all costs and selling prices. As mentioned above, an assumed rate of inflation was included in the investment required by investors. ECONOMIC CONVENTIONS Throughout this report, all costs, prices, and so forth, are given in constant 1992 dollars unless otherwise specified. A Gross Domestic Product Implicit Price Deflator2 has been used to adjust current dollars to 1992 dollar figures. An exception is DOE budget data, which are quoted in current dollars. THERMAL EFFICIENCY Throughout this report all thermal efficiency figures are based on the higher heating value (HHV) of fuel, which is the convention most widely used in the United States for coal-based systems. HHV credits the fuel with the heat of vaporization of water formed in the combustion reaction; that is, water is assumed to exist in the liquid phase after combustion. This is consistent with the standard thermodynamic conditions of 25 °C (77 °F) and 1 atmospheric pressure used to calculate the heat of formation or reaction of any chemical compound (recall that "heating value" is simply the name commonly used for the heat of reaction of a hydrocarbon used as fuel). 2   EIA, 1994, Annual Energy Review 1993, Energy Information Administration, U.S. Department of Energy, DOE/EIA-0384(93), DOE, Washington, D.C.

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--> In parts of Europe and elsewhere, however, the lower heating value (LHV) is commonly used in reporting thermal efficiencies. In the United States LHV is commonly used to quote efficiencies based on natural gas as a fuel. The LHV assumes that water formed in combustion remains in a vapor state, as in actual combustion systems that discharge flue gases at temperatures of several hundred degrees. Thus, the energy potentially recoverable by condensing water in the flue gas is assumed to be unavailable and not credited to the fuel. Since the LHV assumes that fuel delivers less energy input than the HHV, any thermodynamic efficiency, E, based on LHV will be higher than one based on HHV in simple inverse proportion; that is, ELHV/EHHv = HHV/LHV. The numerical difference between LHV and HHV depends on the fuel. The difference is smallest for coal (where LHV is roughly 4 percent less than HHV) and greatest for natural gas (where LHV is about 10 percent lower). Accordingly, a power plant efficiency of 40 percent based on HHV would be reported as 42 percent based on LHV using coal and about 44 percent based on LHV using natural gas. ABB Asea Brown Boveri AFBC Atmospheric fluidized-bed combustion Anthracite Highest rank of economically useable coal, with a heating value of 15,000 Btu per pound, carbon content of 86 to 97 percent, and moisture content of less than 15 percent APC Advanced pulverized coal APS Advanced power system AR&ET Advanced research and environmental technology AR&TD Advanced research and technology development ATS Advanced turbine system Baseload Baseload is the minimum amount of power required during a specified period at a steady state. Bbl Barrel Bituminous coal Type of coal most commonly used for electric power generation, with a heating value of 10,500 to 15,000 Btu per pound, carbon content of 45 to 86 percent, and moisture content of less than 20 percent Btu British thermal unit CAAA Clean Air Act amendments CCT Clean coal technology CCTC Clean Coal Technology Coalition CE Combustion Engineering CH4 Methane Cl Chlorine CO Carbon monoxide CO2 Carbon dioxide

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--> COM Coal-oil mixture CWM Coal-water mixture CWS Coal-water slurry DOE U.S. Department of Energy DRB Demonstrated reserve base DSM Demand-side management; DSM programs are instituted by utilities, such as rebates to customers for installation of energy-efficient appliances or reduced rates for nonpeak-load use of electricity, to encourage customers to reduce electricity consumption overall or at certain periods. ECU European currency unit EFCC Externally fired combined-cycle EIA Energy Information Administration EMF Electromagnetic fields EPA U.S. Environmental Protection Agency EPACT Energy Policy Act of 1992 EPRI Electric Power Research Institute ESP Electrostatic precipitator EU European Union FBC Fluidized-bed combustion FE Fossil energy FGD Flue gas desulfurization F-T Fischer-Tropsch process; catalytic conversion of synthesis gas into a range of hydrocarbons. GDP Gross domestic product Greenhouse gases Gases, such as water vapor, carbon dioxide, tropospheric ozone, nitrous oxide, and methane, that are transparent to solar radiation but opaque to long-wavelength radiation; their action is similar to that of glass in a greenhouse. GRI Gas Research Institute GW Gigawatt (109 Watts) GWh Gigawatt-hour H2 Hydrogen Hg Mercury HHV Higher heating value HIPPS High-performance power system IFC Indirectly fired cycle IGCC Integrated gasification combined-cycle; IGCC power generation systems replace the traditional coal combustor with a gasifier and gas turbine. IGFC Integrated gasification fuel cell KRW Kellogg-Rust-Westinghouse kW Kilowatt kWh Kilowatt-hour LEBS Low-emission boiler system

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--> LHV Lower heating value Life extension Life extension is achieved by maintaining or improving the operating status of an electric power plant within acceptable levels of availability and efficiency, beyond the originally anticipated retirement date. Lignite Type of coal with a heating value of 4,000 to 8,300 Btu per pound, a carbon content of 25 to 35 percent, and moisture content up to 45 percent. LNG Liquefied natural gas Mcf Thousand cubic feet MCFC Molten carbonate fuel cell METC Morgantown Energy Technology Center MHD Magnetohydrodynamics Mild gasification See Pyrolysis MMBtu Million (106) Btu MW Megawatt (106 Watts) Mwe Megawatt electric MWt Megawatt thermal NCA National Coal Association NCC National Coal Council NH3 Ammonia NO2 Nitrogen dioxide Nox Oxides of nitrogen; a mix of nitrous oxide (NO) and nitrogen dioxide (NO2) NSPS New Source Performance Standards NUG Non-utility generator 03 Ozone OECD Organization for Economic Cooperation and Development OPEC Organization of Petroleum Exporting Countries PAFC Phosphoric acid fuel cell PC Pulverized coal Peak load Peak load (usually in reference to electrical load) is the maximum load during a specified period of time. PETC Pittsburgh Energy Technology Center PFBC Pressurized fluidized-bed combustion Ppm Parts per million psi (or psig) Pounds per square inch (psig indicates gauge pressure, that is, pressure above atmospheric pressure) PURPA Public Utility Regulatory Policy Act of 1979 Pyrolysis Thermal decomposition of a chemical compound or mixture of chemical compounds. Quad Quadrillion (1015) Btu Rank Variety of coal; the higher the rank of coal, the greater its carbon content and heating value. RD&D Research, development and demonstration

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--> RDD&C Research, development, demonstration and commercialization Repowering Repowering is achieved by investments made in a plant to substantially increase its generating capability, to change generating fuels, or to install a more efficient generating technology at the plant site. ROx Particulate matter Sasol South African Coal, Oil, and Gas Corporation; coal conversion plant in operation at Sasolburg; coal is gasified by the Lurgi process and then converted to liquid hydrocarbons through the Fisher-Tropsch process. SCCWS Superclean cold water slurry SCR Selective catalytic reduction; postcombustion NOx control with the use of catalysts. SNG Synthetic natural gas SNOx Combined SO2 and NOx catalytic advanced flue gas cleanup SOFC Solid oxide fuel cell SOx Sulfur oxide SO2 Sulfur dioxide Synthesis gas Mixture of carbon monoxide and hydrogen and other liquid and gaseous products Subbituminous coal Coal with a heating value of 8,300 to 11,500 Btu per pound, a carbon content of 35 to 45 percent, and a moisture content of 20 to 30 percent. Synthetic Fuels Corporation Organization established by the Energy Security Act of 1980 to facilitate the development of domestic nonconventional energy resources. TBC Thermal barrier coatings Tcf Trillion (1012) cubic feet UF6 Uranium Hexafluoride UNDEERC University of North Dakota Energy and Environmental Research Center VOC Volatile organic compounds