5
Commercialization

The focus of this chapter is on the commercialization of Vision 21 technologies, both domestically and internationally, in the post-2015 period. A great deal can be done in the next 15 years to increase the likelihood of commercialization, within and beyond the Vision 21 Program. Substantive buy-in by industry, public policy makers, international leaders, and the general public will be essential for the commercialization of these technologies. Therefore, Vision 21 must educate potential stakeholders and the general public about the credibility, affordability, and productivity that would be provided by Vision 21 plants.

The construction of prototype, or commercial-scale, demonstration plants is not included in the Vision 21 Program Plan. The goals of the program are restricted to providing complete commercial plant designs and cost estimates, as well as verified virtual simulations of plant performance and demonstrations of key modules by 2015. However, the committee believes that the designs, cost estimates, virtual simulations, and module demonstrations would be much more valuable if they were accompanied by a commercial deployment program.

The remainder of this chapter describes the market opportunities for Vision 21 plants in the post-2015 period, the barriers to commercialization, and some strategies for overcoming these barriers. The chapter concludes with a discussion of commercialization in developing countries.

CHARACTERISTICS OF THE FUTURE MARKET

Vision 21 plants are being planned for a marketplace roughly two decades from now. Taking into account the four to seven years required for construction of a plant, first-generation Vision 21 plants based on commercial designs will not



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Vision 21: Fossil Fuel Options for the Future 5 Commercialization The focus of this chapter is on the commercialization of Vision 21 technologies, both domestically and internationally, in the post-2015 period. A great deal can be done in the next 15 years to increase the likelihood of commercialization, within and beyond the Vision 21 Program. Substantive buy-in by industry, public policy makers, international leaders, and the general public will be essential for the commercialization of these technologies. Therefore, Vision 21 must educate potential stakeholders and the general public about the credibility, affordability, and productivity that would be provided by Vision 21 plants. The construction of prototype, or commercial-scale, demonstration plants is not included in the Vision 21 Program Plan. The goals of the program are restricted to providing complete commercial plant designs and cost estimates, as well as verified virtual simulations of plant performance and demonstrations of key modules by 2015. However, the committee believes that the designs, cost estimates, virtual simulations, and module demonstrations would be much more valuable if they were accompanied by a commercial deployment program. The remainder of this chapter describes the market opportunities for Vision 21 plants in the post-2015 period, the barriers to commercialization, and some strategies for overcoming these barriers. The chapter concludes with a discussion of commercialization in developing countries. CHARACTERISTICS OF THE FUTURE MARKET Vision 21 plants are being planned for a marketplace roughly two decades from now. Taking into account the four to seven years required for construction of a plant, first-generation Vision 21 plants based on commercial designs will not

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Vision 21: Fossil Fuel Options for the Future be in service until at least 2020. The full commercial deployment of Vision 21 plants should not be expected until after 2030. According to current projections, the market in the post-2015 period might resemble the current market in some respects but differ in others (DOE, 1999). According to these projections, continued global economic growth will lead to greatly increased consumption of electricity and fuels. Environmental pressures will lead to a global regime of carbon management and widespread, stringent local regulations of air emissions. Restricted availability of gas supplies in many regions and extensive replacements of both coal and nuclear power plants could create many new market opportunities for coal. Finding. Vision 21 has set extremely challenging goals for the efficient and clean use of coal in the future. The biggest challenge for the Vision 21 Program will be to develop high-efficiency technologies that can be commercialized and will be cost competitive with other forms of power generation. Recommendation. Vision 21 should consider the potential for commercialization and cost competitiveness as key factors to the development of technologies. Finding. The U.S. Department of Energy's goals for the Vision 21 Program are very ambitious. The combination of very high efficiency, reductions in environmentally sensitive emissions to near zero, and competitive cost is unprecedented. The achievement of these goals will require breakthroughs, both technical and operational, in a number of technologies. Recommendation. The U.S. Department of Energy should consider competitive cost as a governing factor in the selection and funding of research and development projects for Vision 21. For example, the thermal efficiency requirement level could be modified if a less complex system would be cost competitive with other forms of power generation. Compliance with environmental regulations can not be compromised. Future Energy Consumption Projections indicate that the world's total primary energy supply will continue to be dominated by fossil fuels. In 2020, fossil fuels are projected to account for 92 percent of the total primary energy supply, (89 percent in the Organization for Economic Cooperation and Development [OECD] countries, and 94 percent in the rest of the world). The generation of electricity in 2020 is also projected to be dominated by solid fossil fuels and natural gas. For the world as a whole, solid fossil fuels will be used to generate 46 percent and natural gas for 27 percent (44 percent and 27 percent for OECD, and 48 percent and 27 percent for the rest

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Vision 21: Fossil Fuel Options for the Future of the world). The use of coal is projected to dominate the generation of electricity, especially in China, where, in 1995, coal accounted for 88 percent of power generation. By 2020, China's demand is projected to represent 36 percent of the total demand for coal (IEA, 1998). On a worldwide basis, solid fuel-fired and gas-fired electric generating capacity are projected to increase between 1995 and 2020 by 728 gigawatts (GW) and 1,464 GW, respectively (IEA, 1998). Between 2010 and 2020 alone, these increments are expected to be 398 GW and 726 GW. The opportunities for the construction of Vision 21 plants are projected to be strong throughout the world, especially in China and other developing countries. In the United States, the net summer electricity generating capacity between 2000 and 2020 is projected to increase by 217 GW (EIA, 1999a). Increases of 16 GW in coal capacity and 264 GW in combustion turbine, diesel, and combined-cycle capacity are projected to replace retired capacity and to meet new demand. Similar growth is expected in energy consumption for transportation. The worldwide demand for transportation fuels and chemical feedstocks is expected to increase by 66 percent between 1995 and 2020; in the developing world, the demand for oil is projected to increase by 77 percent. In 2020, oil consumption in developing Asia is projected to be 28.6 million barrels per day (Mbbl/day), exceeding the U.S. consumption of 24.4 Mbbl/day. Most of the increase worldwide is projected to occur in the transportation sector, where oil has no substantial competition (EIA, 1999b). The demand for refined petroleum products in the United States is expected to increase by 33 percent between 1998 and 2020. The greatest share of the increase is expected to be in transportation fuels, where gasoline, jet fuel, and distillate are projected to increase by 38 percent, 86 percent, and 19 percent, respectively. The demand for chemical feedstocks and other nonfuel petroleum products is projected to increase by 24 percent. Active Carbon Management Carbon management to address global climate change is already an international priority, especially in the OECD countries, many of which have already made commitments to reduce carbon emissions and placed restrictions on industry. By 2015, the entire world may be carbon-constrained, regardless of whether or not such constraints evolve from the Kyoto Protocols. Even if carbon constraints are imposed, fossil fuels will continue to be used. Therefore, the worldwide demand for low-carbon-emitting technologies and cost-effective, safe carbon capture and disposal techniques will be enormous. Broad international trading in carbon emissions will encourage the United States and other developed countries to spend dollars abroad on carbon-saving opportunities. Because transportation fuels account for almost as much carbon as power generation and, because it is harder to find nonfossil-fuel substitutes for transportation

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Vision 21: Fossil Fuel Options for the Future fuels than for electricity, tremendous interest will be generated in reducing carbon emissions from fossil fuels in the transportation sector (IEA, 1998). Stringent Local Regulations on Air Emissions Fossil-fuel combustion, especially coal combustion, is likely to be subjected to increasingly stringent emissions limits. Pressure to reduce emissions of sulfur dioxide and NOx will come from several directions: the reduction in acid deposition; reductions in smog in major metropolitan areas; lowering ambient levels of fine particulate matter; and elimination of visibility impairment in 156 national parks and wilderness areas in the United States. Pressure to reduce emissions of mercury from coal-fired power plants is also likely. The emission control requirements for the OECD countries are also expected to be more stringent. Restricted Gas Supplies Diverse, readily available, cost-competitive supplies of energy have resulted in the United States having lower energy costs than most other industrialized countries (IEA, 1998). The diversity of supply has led to competition between fuels and the widespread use of the lowest cost readily available fuels. This situation is expected to continue in the future as new low-cost, gas-fired generation displaces coal generation as the fuel of choice. The United States also enjoys a high level of security of supply (i.e., a large economically recoverable resource, many suppliers and many modes of delivery). According to projections of the production of electricity in 2020 in the United States, the use of natural gas for power generation will rise from 10 percent in 1998 to 28 percent in 2020, an increase of 386 percent (EIA, 1999a). This prediction is based on the assumptions that gas reserves will be sufficient to meet rising demands, that the infrastructure for gas transmission will be completed, and that advances in technology will keep delivery costs under control (GRI, 1999). Competition between coal and natural gas after 2015 will be affected by many factors related to the resources themselves. Coal and natural gas are both readily available. World coal reserves are estimated to be adequate to accommodate 1996 production levels for more than 200 years (IEA, 1998). Coal reserves are widely dispersed around the world, and the current international market for coal is robust (23 percent in the former Soviet Union, 23 percent in the United States, 11 percent in China, 9 percent in Australia, 7 percent in India, and 92 percent in five other countries) (IEA, 1998). Ninety percent of the current coal production is in China (30 percent), the United States (25 percent), the former Soviet Union (8 percent), India (6 percent), Australia (6 percent), and five other countries (IEA, 1998). Non-OECD countries have more than half of the world's coal reserves and supply more than half of the production. In the United States,

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Vision 21: Fossil Fuel Options for the Future fossil energy resources are dominated by coal (85 percent), followed by natural gas (10 percent) and oil (5 percent) (EIA, 1997; USGS, 1995). In 1998, coal was produced in 25 states from 1,750 mines (NMA, 1999). Forty-five major coal producers supplied 80 percent of the coal. Natural gas production is not as widespread. In the United States, coal is exported, but natural gas is imported. By 2020, imported natural gas is projected to account for approximately 15 percent (5.1 trillion cubic feet [TCF]) of U.S. consumption (EIA, 1999a). Six areas contain 71 percent of the proven dry natural gas reserves in the United States. Approximately half of the remaining untapped conventional natural gas resource base is on federally owned land. In response to environmental concerns about drilling, moratoria have been imposed on leasing/drilling along the entire East Coast, the western coast of Florida, and all of the West Coast, except for a few areas along the coast of California (EIA, 1998). In most instances, natural gas must be transported by pipeline. By contrast, coal can be transported by rail, water, or truck, and many users have access to multiple modes of transportation. A major uncertainty about the rate of increase in gas-fired power generation is the difficulty of routing natural gas pipelines to power-generation sites. Difficulties in obtaining regulatory approvals for installing the new pipelines to meet future commitments may limit the rate at which baseload capacity can be shifted from coal to natural gas. Replacement of Electric Power Plants No one knows the schedule of retirement of existing power plants. Historically, with routine maintenance, the economic life of a power plant has been 50, 60, or more years, depending on the design of the steam generator and major plant components. Given the financial costs and risks of developing new plants, utility companies are inclined to continue making routine investments in maintaining existing plants. New regulations to limit emissions of sulfur dioxide and NOx beyond the requirements of the 1990 Clean Air Act Amendments, could create pressures to retire existing coal-fired plants prematurely. Reductions are being discussed of 65 to 85 percent in NOx emissions from 1990 levels and more than 50 percent in sulfur dioxide emissions beyond the requirement of Phase II of the 1990 Clean Air Act Amendments. At the same time, new control requirements for source emissions of sulfur dioxide and NOx at existing power plants are being discussed. One option being discussed is a requirement that, after 2010, existing units should be subject to a new source emission control level upon their fiftieth year of service, with all units being subject to the standard by 2025. Another option under discussion is limiting emissions of mercury from coal-fired plants. Approximately 18 percent (or 54 GW) of current coal-fired plants in the United States will be 50 years or older by 2010. Because of the high cost of

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Vision 21: Fossil Fuel Options for the Future retrofitting control technologies, new regulations on these older plants could result in the premature retirement of more than 40 GW of capacity in 2010 and an additional 65 GW between 2011 and 2020 (a cumulative total of 105 GW). Even though full-scale Vision 21 plants will not be available to address the problem of plant retirements prior to 2020, some components, such as oxygen-separation technology and gasifiers, will be available prior to 2020. Full-scale Vision 21 plants, which are scheduled to be commercialized after 2020, could play a significant role in addressing the turnover of remaining plants in the post-2020 time frame. Finding. The schedule of retirements and replacements of existing power plants is not known. Interim retirements and additions of plant components represent an opportunity for Vision 21 technologies. Recommendation. The Vision 21 Program should make an immediate and ongoing analysis of the domestic and international market potential for the Vision 21 technologies, based on the current status of power-generating assets and likely additions and replacements. Finding. Because the commercialization of full-scale, Vision 21 plants is not expected to begin until after 2015, these plants will not directly address the anticipated need for replacing existing plants and providing new power-generating capacity between 2010 and 2020. Recommendation. The U.S. Department of Energy should sequence its commercialization strategy for Vision 21 technologies to encourage the commercialization of components (e.g., gasifiers and oxygen-separation technology) in the post-2010 time frame. Early commercialization would capitalize on the domestic and international opportunities for improved coal-based technologies. BARRIERS TO COMMERCIALIZATION Slow Growth in the Demand for Electricity The demand for electricity between 1995 and 2020 is projected to increase in the OECD countries at an average rate of 1.5 percent per year; in the United States the rate of increase is projected to be 2.2 percent per year between 1998 and 2000 (IEA, 1998). Some factors that will keep demand in check are new energy conservation programs, saturation of the market, and restructuring of the economy as a result of the information technology revolution. The cost of electricity may rise as existing coal plants are retired and replaced by natural gas-fueled units, if increased demand causes upward pressure on natural gas prices.

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Vision 21: Fossil Fuel Options for the Future Competition between Coal and Other Fuels Electric power generation in the United States is moving toward natural gas, and the trend is likely to continue. In regions of the United States and the world where gas is readily available at a competitive price, Vision 21 coal plants will face stiff competition from gas-fired electric power generation and oil/gas-based transportation fuels and chemical feedstocks. Unless the price of gas increases and/or the capital cost of coal technology decreases, gas-fired combined-cycle power plants are expected to produce electricity at a lower cost than advanced coal-fired plants (Booras, 1999). According to projections, the break-even point for the differential prices of gas and coal is more than $2.00 per million Btu (MMBtu) (Booras, 1999). The differential price, of course, depends on the differential capital cost. The capital cost for the natural-gas combined-cycle (NGCC) plant is less than $600/kW and is expected to remain at that level for the foreseeable future (EPRI, 1999; GRI, 1999). Deregulation and Capital Cost Deregulation of the electric utility industry, which has already begun in many parts of the United States, is creating a competitive marketplace for electricity. The current price of energy is volatile, varying seasonally, monthly, weekly, daily, even hourly (peak and off-peak hours). Investors have no guarantees that capital costs can be recovered or that the rate of return on capital investment will be adequate. This volatile market is replacing the regulatory framework that favored capital-intensive expenditures that was in place when most existing power plants were built. Thus, deregulation has increased the competitiveness of power sources with low capital costs, which has had the effect of promoting natural gas at the expense of coal for the generation of electricity. Deregulation has also promoted small-scale facilities. An exception to this trend may be existing (capital-intensive) nuclear plants, which may be competitive under deregulation because of the low-cost of the electric power generated. Investment Risk The costs of deploying any new technology are difficult to cover, and market incentives motivating developers to take the technical and economic risks may not be sufficient. Vision 21 technology will enter a market characterized by three-way competition between natural gas plants, conventional steam-based coal plants, and Vision 21 coal plants. Even if natural gas finishes third and the costs of conventional coal plants and Vision 21 are equal, a plant owner may not opt to build a Vision 21 plant. Incremental improvements in steam-based coal plants will have the advantage of familiarity, and to secure financing for an early Vision 21 plant, a developer is likely to pay a risk premium. For example, lending

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Vision 21: Fossil Fuel Options for the Future institutions could require a higher level of equity participation by the developer and/or charge a higher interest rate. The risk premium will remain until the lending institution's level of confidence that the plant will operate as designed is high, which will require an operational experience base. Long-term reliability and maintainability are sources of risk for all new technologies, and these issues cannot be addressed in the short term. Construction of a coal-based generation plant typically takes one to two years longer than for gas-fired plants, and construction is likely to take even longer for Vision 21 plants until the best construction practices have been established. Permitting for coal-based power generation is typically more difficult to obtain than for natural-gas-based power generation because of the larger emissions profile of coal-based plants. The goal of Vision 21 plants is to close this gap. Negative Image Coal-fired plants suffer from the public image of coal as a ''dirty fuel." As a result, the construction of coal plants may be met with greater public resistance than the construction of noncoal-based plants. Policy makers could also oppose the development of Vision 21 technologies. OVERCOMING BARRIERS TO COMMERCIALIZATION The successful commercialization of Vision 21 technologies will require both focusing on the program itself and reaching beyond it. In the following sections, strategies for relationships beyond the program involving industry, the general public, and regulatory agencies are discussed, as well as strategies for the Vision 21 Program itself. Interactions with Industry As the electric utility industry is restructured, the identity of the industry could undergo fundamental changes. Independent power producers, restructured utilities, and others will provide much of the new power-generating capacity. The industry will increasingly comprise the users of power generation technology, and even the fuel supplier and transporter in some cases. Industry knows best what its needs are for the short term. But for the long term, industry will need help determining which technologies should be developed and when. The Vision 21 Program addresses anticipated needs in the middle distance, beyond the usual planning horizon of the energy industry. Many of the industrial firms currently targeted for participation in Vision 21 are big companies with extensive field experience and, in many cases, their own R&D programs. Unlike the commercialization of renewable energy sources, the

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Vision 21: Fossil Fuel Options for the Future commercialization of Vision 21 technologies is not expected to depend on small business. The key to the success of the Vision 21 Program will be the downselection of the most promising technologies from many competing innovative technologies. In the committee's opinion, industry should be closely involved in the down-selection process. Therefore, industry will have to be induced to share at least the broad outlines of its plans for the future. For example, the timing of the introduction of next-generation gas turbine technology will affect many decisions by the Vision 21 Program that will determine which components become the building blocks that connect to the gas turbine. Industry is also better suited than DOE to making detailed market assessments. Incentives and Risk Sharing In some industries, new technologies have been introduced without direct financial incentives. Therefore, DOE should carefully analyze the rationale and consequences of adopting financial incentives to accelerate the introduction of Vision 21 technology for societal benefits into the marketplace. If financial incentives are introduced to offset some of the technical and financial risk, the committee believes tax incentives would be more effective than direct subsidies because they can be tied to performance and commitment by the developer more easily than direct subsidies. Grants, which have a public image of "corporate welfare," should be avoided. In any case, the incentives should expire after a limited period of time to ensure that they are operative in the early stages of commercial application and to force the private sector to take responsibility for full commercial penetration. Incentives should be targeted to domestic markets but should also be applicable to international markets. Incentives focused on high-risk technologies would further the bold performance, financial, and scheduling goals in the Vision 21 Program Plan. Finding. The Vision 21 Program Plan does not include ways to stimulate the construction of the first full-scale Vision 21 plants, which will entail the first-of-a-kind costs typical of new technologies. Recommendation. The U.S. Department of Energy (DOE) should work with private industry to develop an incentive program to overcome the technical and economic risks associated with early domestic or international commercial applications (the first three to five installations). The incentives should be directed toward high-risk, "breakthrough" applications and should be consistent with incentives for competing alternative technologies (e.g., end-use efficiency and renewable and nuclear technologies). DOE should evaluate past government

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Vision 21: Fossil Fuel Options for the Future incentives for technology deployments, such as those used by the Clean Coal Technology Program. Vision 21 could use tax credits, grants, and other tools to "buy down" the costs of new technology deployment. Public-Private Partnerships One of the most effective ways of encouraging the private sector to deploy new technologies invested in by the federal government has been to create public-private partnerships. The partnering firms share in the development costs (sometimes up to 50 percent, or more) and receive generous licensing of intellectual property rights in return. (Some of these partnerships have evoked cries of corporate welfare at taxpayer expense.) The reason a firm invests in a technology is to sell the technology in the market. Therefore, if the technology is successfully developed, the firm will pursue its deployment vigorously to recoup its investment. At the same time, the government achieves its purpose of faster deployment of new technologies that serve social purposes. Production incentives (e.g., an energy-production tax credit), is another form of private sector involvement. The methodology of the Vision 21 Program, with its compartmentalization of technologies into modules and distinction between enabling and supporting technologies, will improve the prospects for cost sharing. Companies may find they can sell improved components more easily than whole systems. DOE's strategy should be flexible, encouraging the private sector to invest in the technologies that have near-term market potential and arranging for the government to fund fully the technologies with more uncertain market potential, using industry as contractors. The committee encourages DOE to be innovative in the area of public/private partnerships. For example, it should encourage the development of consortia to spread investment risk. The Coolwater Project, led by the Electric Power Research Institute (EPRI), was financed through a similar consortium. Coolwater developed the field data confirming that the IGCC concept works well technically, and the institutional structure allowed Coolwater's results to be widely disseminated. The Power Systems Development Facility, which is being jointly developed by DOE, EPRI, and six industrial concerns, is a more recent example of a public/private partnership. Finding. The methodology of the Vision 21 Program, with its compartmentalization of technologies into modules and distinction between enabling and supporting technologies, may be best actualized by public/private partnerships. Recommendation. The U.S. Department of Energy should design innovative public/private partnerships to ensure the sharing of risk among members in support of commercialization of Vision 21 technologies.

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Vision 21: Fossil Fuel Options for the Future Standardization Agreements Standardization agreements throughout a single industry and between two neighboring industries will be critical to meeting Vision 21 commercialization objectives. In the energy industry, a vendor's announcement of the unit size of a forthcoming component, such as a turbine, stimulates advanced planning for related building blocks. Early standardization also encourages cooperation between the manufacturer and owner and between the manufacturer and policy makers. Public Support The greater the support of the general public for the Vision 21 Program, the greater the likelihood of meeting the commercialization objectives. A broad consensus about safety, for example, will be critical to success. In the 1960s, the nuclear industry believed it had the confidence of the general public, but in hindsight the involvement of the public had not been sufficient. Broad public support will be required for reaching consensus on environmental standards, subsidies for the risk taking associated with first-of-a-kind deployment, and sustained funding for R&D. Finding. Educating the public about the Vision 21 Program will require a deliberate effort. Recommendation. The U.S. Department of Energy should devote considerable efforts to making the Vision 21 Program visible to the general public and to obtaining support from important constituencies, such as industry, utility companies, nongovernmental organizations, and the media. Regulatory Structure for Controlling Local Emissions Carefully designed regulations can create a favorable climate for the development of new technologies that can meet the new regulations and improve performance. To reap the greatest benefit at the most reasonable cost, the timing of regulatory requirements and technology development should be linked. Emissions from Vision 21 plants are expected to be significantly lower than those of conventional coal-based plants. In fact, the emissions from Vision 21 plants may be no larger than those of natural gas-fired plants. If Vision 21 plants are as clean as natural gas plants, the air quality barriers and permitting barriers should eventually be no greater for a Vision 21 plant than for any other plant. Of course, regulatory agencies and the general public will have to be convinced that the Vision 21 emission controls will operate as designed.

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Vision 21: Fossil Fuel Options for the Future Commercialization will be much more feasible in a predictable regulatory environment. The commercialization of Vision 21 technologies will be easier if regulatory constraints are well defined for a significant period of time. Clearly defined, predictable environmental standards will greatly facilitate moving Vision 21 technologies out of the laboratory and into the marketplace. The situation is quite different today. Although the utility industry understands the regulatory demands that may be imposed in the next five years, no one knows the extent of, or schedule of, regulatory demands for the next 10 to 20 years. The pace of retirement of existing plants will certainly be affected by future regulatory changes, including new regulations that bear on emissions of NOx, sulfur oxides, organic compounds, trace metals, mercury, and carbon dioxide; the discharge of cooling water; and the disposal of solid and liquid wastes. Policy makers should consider the impact of the timing of regulatory actions on technology deployment. Perhaps some sort of temporary freeze on environmental requirements would make sense, so that investment could be recovered before a facility was modified to meet new environmental requirements. Finding. The commercialization of Vision 21 technologies will be strongly dependent on the adoption by the United States of predictable, long-term environmental regulations. Recommendation. The U.S. Department of Energy should work with industry, the Environmental Protection Agency, and other regulatory institutions to establish a predictable, long-range regulatory environment for electric power. Policy Framework for Carbon Management Carbon management, which is being driven by concerns about climate change, is an evolving technological frontier. In the Vision 21 Program, carbon management is dominated by reductions in emissions of carbon dioxide per unit of electricity or fuel produced. Two Vision 21 strategies for reducing emissions of carbon dioxide are being considered: (1) improving overall system efficiency and (2) separating, capturing, and sequestering carbon dioxide. From the standpoint of Vision 21 Program management, the two strategies should be compared objectively to determine relative costs per unit. Moderate reductions in carbon levels will be made from improvements in efficiency as Vision 21 coal plants replace conventional coal plants. However, Vision 21 plants will not offer improvements in carbon management over natural gas-fired plants, not only because Vision 21 coal plants will be less efficient than natural-gas-fired plants, but also because coal has a higher carbon content than gas, per unit of energy. Nevertheless, Vision 21 plants that deliver lower cost electricity and leave behind a smaller environmental footprint make sense.

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Vision 21: Fossil Fuel Options for the Future Substantial improvements in carbon management will require low-cost sequestration techniques for Vision 21 coal plants. In electricity production, the carbon can be extracted via a strategy of gasifying coal and converting the synthesis gas largely to hydrogen and carbon dioxide, thereby converting most of the energy from coal into hydrogen. The hydrogen can then be used either as a source of electricity (via turbines or fuel cells) or as a fuel. The carbon dioxide could be transported away from the facility to a site for long-term disposal. Successful sequestration of carbon will require that technologies for using hydrogen be more fully developed as part of the Vision 21 Plan. New hydrogen production and utilization technologies will certainly face market challenges in terms of cost, safety, and emissions. Therefore, strategies for the deployment of hydrogen technology must be well thought out and should take into account differences among countries. With careful planning, Vision 21 should be able to take advantage of the worldwide push for carbon management. Because responses may vary initially in different countries, niche opportunities for a wide variety of new technologies may be created. Alliances with the Organization for Economic Cooperation and Development U.S. interests would be well served by U.S. participation in OECD and European Union projects, as well as by encouraging participation by OECD countries in U.S. technology development. Deployments in OECD countries will be competitively determined, based on price and performance (i.e., efficiency, emissions, fuel and product flexibility, and grid-synchronization speed for power production). U.S. firms should be encouraged to bid aggressively in these markets, including on demonstration projects. In the current restructuring of energy suppliers, U.S. ownership in many of these countries is becoming increasingly common, creating opportunities for showcasing new U.S. technologies. OECD and other European countries, like the United States, will typically have rigid environmental standards, and some will have greenhouse-gas management requirements. Demonstration projects conducted with international partners could advance U.S. suppliers' understanding of capabilities and competitiveness in these countries, as well as in the United States. DOE should encourage the global use of technologies developed in the Vision 21 Program. Operational experience abroad should lead to lower costs, a better environment, and a healthier global economy. Finding. The Vision 21 Program has not yet specified how it will relate to similar programs in the Organization for Economic Cooperation and Development countries. Recommendation. The U.S. Department of Energy should enter into partnerships

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Vision 21: Fossil Fuel Options for the Future with research and development institutions, industry, and governments in other Organization for Economic Cooperation and Development countries to develop, demonstrate, and deploy Vision 21 technologies. TIMING OF VISION 21 PROGRAM STRATEGIES Phased Development of Materials, Components, and Systems The Vision 21 Program will have to establish detailed milestones for the entire program schedule. Early in the program, milestones charting progress in applied science (e.g., work in metallurgy leading to high-temperature superalloys or ceramics) will be necessary for the timely follow-on development of sub-components, components, and, eventually, full systems. Component Testing Prior to Commercialization A well designed Vision 21 Program will require moving components continually from the laboratory to field testing, and then putting them together into fully functioning commercial units. Between now and 2015, components of Vision 21 will have to be tested separately in field situations so that the characteristics and performance of components have been proven by 2015. Testing could take the form, for example, of inserting a new oxygen plant or gasifier or gas-cleanup system or turbine or fuel-cell topping cycle into a commercial complex, leaving the other components intact. This is not the strategy described in the Vision 21 Program Plan. Industry may require incentives to agree to in-field tests of components because disrupting operations to test new components has obvious costs. Opportunities for testing may be more available when interim plants are constructed, perhaps outside the United States. For example, coal gasifiers have been introduced into the chemicals industry in China, as components of ammonia plants, providing a wealth of operational experience with this technology. The introduction of Vision 21 technology into distributed power-generation facilities may provide additional opportunities for testing components that are less sensitive to scale, like fuel cells. If incentives for testing specific components are well designed, the interim results of the Vision 21 Program could be commercialized as they become available, but this scenario must be planned for. Finding. Vision 21 does not have a plan for the early deployment of an integrated Vision 21 plant. The Vision 21 Program Plan assumes individual components that have been tested separately in the field can be successfully combined in 2015.

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Vision 21: Fossil Fuel Options for the Future Recommendation. The U.S. Department of Energy should identify market niches (domestic and foreign) where component technologies can be tested and evaluated singly and in combinations. Testing component technologies in the field is a stepwise strategy to develop confidence in the components that will be part of Vision 21 plants and to provide data for plant designs. Validation of Virtual Designs One goal of the Vision 21 Program is to deliver commercial designs and cost estimates, as well as virtual simulation tools, which will be of much greater value if all of them have been validated against existing databases, component demonstrations, or full-scale commercial applications. Validation is important for building confidence among users of simulation tools that the costs and simulations are reasonably accurate. Otherwise, the program deliverables will be suspect. DEVELOPING COUNTRIES Market Opportunities Priorities differ widely among developing countries, reflecting different combinations of resources, economic health, environmental conditions, and government policies. Most developing countries are hard pressed to supply or secure capital investments to meet growing demands for electricity. As a result, although privatization and restructuring of the electricity industry in most developing countries is moving at a slower pace than in most industrialized countries, some domestic markets are being opened to independent power developers to build, own, and operate power-generating plants. These markets present opportunities for third parties to supply the required capital in return for long-term power supply agreements or rights to compete in local power markets. Thus, an opportunity may exist for Vision 21 plants to be introduced into these markets. Coal is expected to remain a key energy source for the non-OECD countries. Between 1995 and 2020, the production of electricity is expected to increase by 179 percent. The generation of electricity from coal is expected to increase by 195 percent, and the generation of electricity from natural gas by 361 percent. By 2020, solid-fuel-based generation of electricity in non-OECD countries is expected to be greater than in OECD countries: 5,700 trillion watt hours (TWh) in non-OECD countries compared to 4,800 TWh in OECD countries (IEA, 1998). Given the global abundance of coal, coal will be an available, affordable resource for the foreseeable future; coal is cheap, available, and U.S. supplies should last for more than 200 years. However, coal is also the most troublesome fossil fuel in terms of public health and other local and regional environmental

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Vision 21: Fossil Fuel Options for the Future conditions. As concerns about climate change have increased worldwide, concerns have been raised about the use of coal, which necessarily produces large amounts of carbon dioxide. China and India, which have about 40 percent of the world's population between them, do not have significant natural gas reserves and will probably rely on domestic coal for most of their electricity needs (BP, 1997). The situation is similar in many other developing countries. The Vision 21 Program, by addressing the serious local health problems and global climate related to the direct combustion of coal, can become a source of new technologies that can meet the needs of developing countries. As the economies of developing countries grow, environmental objectives tend to become more important. Electrification is a direct path to improving environmental quality because it can displace traditional devices used by industries and consumers that cause serious pollution problems. Because the costs of pollution control increase as the magnitude of control increases, optimal environmental benefits may be realized initially with moderate levels of control. However, both economic and environmental needs could be met more fully if the high-efficiency, environmentally friendly, cost-competitive power-generation plants envisioned in the Vision 21 Program can be deployed in non-OECD countries. As the use of energy in the non-OECD countries increases, carbon emissions will also increase. In 1995, emissions of carbon dioxide in the non-OECD countries (3.9 billion metric tonnes, or Gmt) was approximately equal to the carbon emissions from the OECD countries (3.0 Gmt). By 2020, emissions of carbon are projected to be nearly 50 percent greater (non-OECD at 6.2 Gmt and OECD at 4.0 Gmt). If carbon management becomes a constraint for electricity generation in the non-OECD countries, Vision 21-type plants will become an attractive option for countries rich in coal and poor in natural gas. In summary, new power-generating capacity is clearly needed in non-OECD countries. To meet the growing demand for electricity, coal will have to play a major role. Furthermore, addressing local health issues and global environmental concerns will require plants with high efficiency, high environmental performance, and competitive costs. The chances of the commercialization of such plants worldwide will be greatly enhanced by a program that promotes early commercial deployment of component technologies and first-of-a-kind full-scale demonstrations in non-OECD countries. Such a program will probably require technical and financial support from the United States and other developed countries. For the United States to offer commercially available technology, both the public and private sectors will have to be actively involved in their development. Barriers to Commercialization Powerful Partnerships, a report released in 1999 by the President's Committee of Advisors on Science and Technology, raises the possibility that developing

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Vision 21: Fossil Fuel Options for the Future countries will "lock in" conventional coal generation by making major commitments to proven technologies in the next decade or two (PCAST, 1999). If so, this would close out the option of a phased introduction of Vision 21 plants. In addition, decision makers in developing countries considering the option of deploying Vision 21 plants, will consider whether their country has the capability of manufacturing Vision 21 plant components domestically, as well as the capability of operating and maintaining the plant. The technological capacities of many developing countries is steadily increasing and may be up to those levels by 2015. Another barrier to the deployment of Vision 21 technologies in developing countries is resistance by international lending institutions and the governments of developing countries to treating developing countries as proving grounds for new technologies. Other barriers could be the lack of a reliable infrastructure for the transportation of fuel to the plant site and the lack of domestic construction labor. Protection of intellectual property is important in all markets, including the energy market. Clearly, the United States should exploit its technology advantages, which can be done by industry for technologies that don't have security implications. The usual objective is profit, but other considerations could also motivate industry, government, or international agencies to subsidize early developments. Because coal will be used in new plants abroad particularly in developing countries where gas is not available or affordable, these countries should be encouraged to use coal-based energy as efficiently as possible. If international carbon dioxide markets have been established, the United States could buy credit from international deployments rather than developing U.S. facilities prematurely. International agencies could provide assistance in encouraging the construction and operation of advanced coal plants in developing countries. Other countries are already aggressively developing these options, and they will not hesitate to sell into these markets for both economic and humanitarian motives. European Union countries have been active developers and marketers of ultra-critical steam plants as well as IGCC. Commercialization Strategies The promotion of commercial applications for Vision 21 technologies in developing countries is in the best interest of the United States. This strategy would accelerate the availability of commercially mature Vision 21 plants thereby increasing the likelihood that the United States could meet its future economic and environmental goals. As a by-product of this strategy, emissions of greenhouse gases would be reduced wherever Vision 21 technologies were used. This strategy would also ensure that U.S. industry would remain in the forefront of world electricity production, would create jobs, and would contribute to the U.S. economy.

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Vision 21: Fossil Fuel Options for the Future Building Confidence To counter the strong resistance in many developing countries to becoming proving grounds for new technologies, the United States could take some initial steps to allay these fears. For example, the United States could assist in the commercialization of technologies that offer incremental improvements that closely resemble technologies already deployed in developing countries. Partnerships with International Institutions The mission of many international institutions is to work with developing countries and technology providers to share the risk of introducing new technologies that offer environmental and economic benefits. Among these institutions are the World Bank, the Global Environmental Facility, the United Nations Environment Program, and the international assistance institutions in many OECD countries, as well as U.S. government-funded agencies, such as the Export-Import Bank, the U.S. Agency for International Development, the U.S. Trade and Development Agency, and the U.S. Overseas Private Investment Corporation. The Vision 21 Program could take advantage of the activities of these institutions to establish an ongoing dialogue to identify niche opportunities for the testing and commercialization of Vision 21 technologies. Finding. The Vision 21 Program Plan does not specify how it will take advantage of opportunities for testing Vision 21 components in coal-based power plants in developing countries that are currently under construction or coal-based power plants that will be built in the future. Recommendation. The U.S. Department of Energy should strengthen its ties with several key developing countries (e.g., India and China) that are expected to produce coal-based electric power on a large scale for many years. These ties could lead to collaborations in research and development projects and the eventual commercialization of Vision 21 technologies. REFERENCES Booras, G. 1999. Overview of the Economics of Clean Coal Technologies as Compared to Alternatives for Power Generation. Presentation by G. Booras, at the 7th Clean Coal Technology Conference, Knoxville, Tennessee, June 21-24, 1999 . BP (British Petroleum). 1997. Statistical Review of World Energy 1997. Available on line at: http:www.bp.com/bpstats DOE. 1999. Response from DOE to questions from the Committee on R&D Opportunities for Advanced Fossil-fueled Energy Complexes, National Research Council, Washington, D.C., September 15, 1999.

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Vision 21: Fossil Fuel Options for the Future EIA (Energy Information Administration). 1997. United States Coal Reserves: 1997 Update. Washington, D.C.: Energy Information Administration. EIA. 1998. Natural Gas Annual 1998. DOE/EIA-0131(98). Washington, D.C.: Energy Information Administration. EIA. 1999a. Annual Energy Outlook 2000 with Projections to 2020. DOE/EIA-0383(2000). Washington, D.C.: Energy Information Administration. EIA. 1999b. International Energy Outlook 1998. DOE/EIA-0484(98). Washington, D.C.: Energy Information Administration. EPRI (Electric Power Research Institute). 1999. Electricity Technology Roadmap: Power Progress. Pleasant Hill, Calif.: Electric Power Research Institute Distribution Center. GRI (Gas Research Institute). 1999. 1999 Policy Implications of the GRI Baseline Projections of U.S. Energy Supply and Demand to 2015. GRI-99/0002. Arlington, VA.: Gas Research Institute Baseline Center. IEA (International Energy Agency). 1998. World Energy Outlook. Paris, France: International Energy Agency. NMA (National Mining Association). 1999. Coal Data 1999. Washington, D.C.: National Mining Association. PCAST (President's Committee of Advisors on Science and Technology). 1999. Powerful Partnerships. Washington, D.C.: Executive Office of the President. USGS (U.S. Geological Survey). 1995. National Assessment of United States Oil and Gas Resources. USGS Survey Circular 1118. Washington, D.C.: U.S. Department of the Interior.