Remarks by
Patricia Fry Godley
Assistant Secretary for Fossil Energy
U.S. Department of Energy
at
A How-To Guide to Survival and Success
An Energy Daily Conference
Washington, DC
Friday, July 18, 1997

Good afternoon.

We all know that the coal industry has been a major contributor to the U.S. economy for most of our nation's history. It has helped to build industries, towns, schools and transportation networks. It employs, directly and indirectly, over 1 million Americans and contributes $20 billion annually to our economy. It plays a vital role in our nation's energy security by reducing demand for imported oil.

Does the American public know that coal provides our economy with the cheapest electricity of any market economy? For example, based on 1995 data, U.S. industry spent 4.7 cents/kwh for electricity compared with Japanese industry at 18.5 cents/kwh (or 294 % more), Germany at 10.1 cents/kwh (115% more), and the average Organization for Economic Cooperation and Development (OECD) rate of 7.9 cents/kwh (68% more). Cheaper power means our industries have a competitive advantage in global markets. However, some worry that as world energy demand increases, we will be forced to lessen our reliance on coal because of the environmental impacts.

Energy and a Clean Environment -- Can We Achieve Both?

Before we get into what clean coal and power generation technology has achieved and can accomplish in the coming decades, let's talk about the trends that give cause for such strategic investment.

Visual: Power Generation (Two pies, 1995 and 2015)

First, fossil fuels -- with coal leading the way in the electric power sector -- will continue to dominate for decades to come. As energy consumption rises in the United States -- likely increasing more than 20 percent over the next 20 years -- the contribution of fossil fuels will increase. By 2015, coal, oil and natural gas will supply 88 percent of U.S. energy consumption . . . more than today's 85 percent share.

Our nation's electric power needs will increase by more than 26 percent in 2010, enough to require more than 1,500 new power plants with 100 MW capacity. Even greater growth in energy demand will occur in other parts of the world. Some nations, particularly in the Pacific Rim, are projected to have growth rates in fossil fuel use that surpass that of the United States in the early 21st century.

China, India, Pakistan -- three of the world's most populated countries -- will experience the greatest growth in population in the next 30 years. Overall, we will add 2.5 billion more people to our global population by 2025 -- and 90 percent of them will be born into the developing world. What impact will this population growth have on energy? According to the Energy Information Administration (EIA), world energy consumption is expected to rise approximately 41 percent by 2010 and 54 percent by 2015.

Where will that growth in energy demand be concentrated? The answer is developing Asia, especially China, India, and other areas of Asia which now account for 19 percent of the world's energy use. Total energy demand in developing Asia is projected to more than double in the next two decades (by 2010), according to the EIA.

China -- already the world's second largest consumer and third largest producer of energy -- may need to double its current electric generating capacity over the next 10 to 15 years. It already burns 1.5 billion short tons of coal per year-- 59 percent more than a decade ago. Coal use in China could more than double in the coming two decades.

With the fast and booming economic growth have come human health and environmental consequences. Today, chronic pulmonary disease, emphysema and chronic bronchitis -- all respiratory diseases -- are the leading causes of death in China. Much of the coal the Chinese people use is burned at home for cooking and heating. As China modernizes and implements more of its Agenda 21 environmental regulatory program, its leaders hope that the number of deaths from chronic respiratory ailments -- estimated at over 110,000 premature deaths per year -- will decline.

But whether we are talking about China, the United States, or any other nation, these health and environmental consequences come not only with a human cost, but also an economic cost. For China, the damage to human health and agricultural productivity is estimated to be $54 billion annually.

Does the United States or China have to abandon coal as an energy resource in the 21st century? The answer is No.

Technology is the Answer

As we look toward those trends and future environmental challenges, we know that increasing the electric generating efficiency of power plants is one of the most effective and affordable ways to reduce carbon, sulfur and nitrogen oxide emissions and to meet tougher environmental standards.

Technology is the answer to achieving the goals of a prosperous economy, a cleaner environment, and a reliable, affordable supply of energy both here at home and overseas. Technology allows us to find, produce and use our energy supplies more efficiently and at lower cost. It is technology that will close the gap between our energy needs and our energy supplies.

Should government invest in the development of fossil energy technologies and, if so, when? Our answer is simple: The Federal Government should invest only when market participants are unable or unwilling to take the high risk in developing technology in areas of long-term, strategic national importance. We also believe that the market -- not the federal government, should decide what technologies warrant investment in achieving these national objectives. That is why the Office of Fossil Energy does a significant amount of cost sharing with industry. Together, we can leverage limited R&D dollars to develop the technologies that meet both industry's needs and enhance our nation's energy security -- one of the Department of Energy's major missions.

Industry has responded to the challenge, sharing approximately two-thirds of the cost of our Clean Coal Technology program -- or $ 4 billion of the total $6 billion for 39 projects currently in the program.

Just look at what technology has helped us to accomplish so far . . .

Visual: Emissions Reductions Board

Industry has achieved a tremendous 90 % reduction in particulate emissions and a 25% reduction in annual sulfur dioxide emissions from U.S. coal power plants while coal use has increased by 140 %. The typical 500 MW coal-fired power plant emitted more than 60,000 tons per year of SO2 in 1970; today the same size plant emits only 20,000 tons per year. It once cost nearly $600 per ton to remove SO2 from a power plant's flue gas. Thanks to technology, those costs have decreased to $350 per ton, saving consumers nearly $25 billion.

Visual: Photo Board: Tampa Electric Power's Polk Power Station

The power plants of the 90s are a giant step ahead of the past, but we know that more emission reductions and greater efficiency are possible with sustained investment in new technologies. Last month, for the fifth time in the past 7 years, one of our Clean Coal Technology projects -- The Tampa Electric Power Company's Polk Power Station -- was named one of POWER magazine's 1997 Powerplant Award winners. This state-of-the-art, 250 MW coal gasification combined cycle power facility, dedicated last January, is one of the cleanest coal-fueled power stations in the world. By turning coal into gas and filtering out acid-rain and smog-causing impurities prior to combustion, the plant achieves emission levels closer to a natural gas plant than a traditional coal-fired facility. More than 95 % of the sulfur pollutants in coal are removed and converted into commercially valuable products.

In this era of uncertainty and rapid change, the most conservative of our industries -- the electric power industry -- is becoming even more cautious. Cost-cutting is the new name of the game in the power business. Decisions are increasingly being driven almost solely on the basis of "bottom-line" payback. Some people look into their crystal balls and say, in this era of heightened concern over costs, clean coal technologies will be too expensive. They may be technological marvels, but they will be out of the economic ballpark. On a bottom line basis, they won't compete with the tried-and-true pulverized coal boiler and certainly not with natural gas-fired power generation.

I don't believe those crystal balls are correct. The capital cost of today's gasification combined cycle or pressurized fluidized bed plants is well above the capital cost of a conventional coal plant equipped with a scrubber and NOx controls. However, these new approaches to coal-fired power generation open new technological paths -- we see exciting prospects for significant cost reductions. It is not unreasonable to predict that, with advanced technology, the capital cost of gasification combined cycle or advanced fluidized bed plant of the 21st century will drop below $1000 per kilowatt -- below the cost of an advanced conventional coal plant.

These capital costs should appeal to power generators both in the United States and abroad. For those companies wanting to stay with coal -- and if we can sustain the technological progress that leads to cost reductions -- clean coal technologies will become the standard-of-choice in the next century.

Now, what about natural gas? You will get no argument from me about the need to increase our use of natural gas, particularly for power generation. The pie is big enough, in terms of demand, for coal and natural gas to each have healthy slices, along with an increasing contribution from renewables. I don't see coal and natural gas as "either-or." You also will get no argument from me that the capital costs of gas technology are less. Where does clean coal technology stack up in terms of the bottom line cost of electricity?

Assuming that today's natural gas prices escalate only with normal inflation, we see the potential for advanced coal-fired gasification and pressurized fluid bed technology to produce electricity at or below the equivalent cost of electricity generated by a natural gas combined cycle plant, even though capital costs for natural gas plants are low.

We are not alone in our predictions, which in fact did not originate at the Department of Energy. They reflect the views of one of the major power generators in this country (American Electric Power) -- a company that will have to compete and survive in a new era. They are looking at clean coal technology not just as a way to survive, but to thrive. And they look to coal as a necessary competitive alternative to natural gas.

That's why it is important to continue the public/private R&D partnerships that can make this new era possible. At DOE, we are looking beyond the successes of the Clean Coal program......to push the boundaries of what is possible. We are beginning to focus on new technologies that, beyond 2010, would lead to the development of the highest efficiency power plants ever -- we call this concept "Vision 21."

In Vision 21, we foresee a revolutionary fleet of clean, efficient energy complexes that process coal to produce a variety of fossil energy-based commodities, including electricity and other clean fuels. The Vision 21 fleet would have near-zero pollutants and a net-zero emissions of carbon dioxide, an important feature to address greenhouse gas concerns from man-made sources. The technologies we are working on today for nearer-term deployment are the technological building blocks for these new energy complexes. Dr. Howard Feibus, Director of Advanced Research for our Coal and Power Systems division, will go into more detail about Vision 21 later in the program.

Why should we invest in high risk, advanced technologies? What do we have to gain as an industry . . . and as a nation? We should invest because, in the next 15 years, the marketplace for clean coal technology will be worth billions of dollars -- some have forecast over $600 billion if the clean coal technologies under development are deployed in the next 20 years! Our energy economists forecast that clean coal will be at least 60 percent of the clean energy technology marketplace early in the next century because coal will continue to be the major fuel of choice for baseload electric power generation worldwide.

Energy Demand and Power Market Growth

Visual: Electric Power Opportunities (World map with bars)

The growing marketplace for electric power generation will drive demand for cleaner technologies, particularly clean coal technologies. If you look at the numbers, North America and the Far East will experience the greatest growth in new power generation in the next decade and beyond. Repowering and retrofits of coal-fired plants will be a $128 billion world market in the next 15 years.

China, again, represents the largest market for clean electric power technology, with coal supplying 75 percent of its electricity needs. China plans to add about 15 GW of new electric generating capacity annually to reach a goal of 290 GW by 2000 under the government's 5-year plan. Calculated another way, China will build the equivalent of about 200, 300 MW plants in the next five years. DOE officials met with a delegation of Chinese energy and embassy officials last month. Not surprisingly, their greatest interest during the talks was electric power generation technology and equipment.

If the United States could capture just 20 percent of new annual coal capacity additions in China, it would translate into well over $2 billion in annual sales and create some 40,000 new jobs here at home. Clean coal technologies are vital to ensuring that the explosion of energy demand is met with clean and efficient plants -- and the United States, the current leader, is in an excellent position to capture such a promising market.

U.S. industry and government must act now to deploy and also to continue developing the technologies for these lucrative global markets. China and other developing countries will not buy new technologies from entities they do not know or believe to be credible. That is why the Department of Energy and the Clinton Administration have worked to build the relationships and to lay the groundwork for increased international commerce and trade. Other nations also will not buy our technologies if they are not proven and price competitive, which takes both investment and time to achieve.

So far, the U.S. has the most advanced Clean Coal Technology being demonstrated. Other countries, including Japan and the European Community nations -- are developing clean coal and advanced electric power technologies. If the U.S. does not continue to develop these advanced technologies, it will be left out of the running for new, lucrative markets and jobs.

Taking the Message Public

While you -- the professionals attending this Energy Daily Conference on Coal and Electric Power Markets -- know that coal and clean power systems are vital to environmental quality and economic development worldwide in the next century, much of the public does not. We simply have not communicated this information frequently or clearly enough.

Our humble and exceptionally insightful former President, Abraham Lincoln, said that:

Public sentiment is everything. With public sentiment, nothing can fail; without it, nothing can succeed.

Today, I challenge this industry -- coal producers, transporters, marketers, and power generators -- to conduct a major outreach campaign to get the message out that "COAL IS A VITAL ENERGY RESOURCE FOR OUR NATION." We have more proven reserves of coal in this country than the rest of the world has proven reserves of oil!

"COAL USE CAN BE COMPATIBLE WITH A CLEAN ENVIRONMENT with ADVANCED TECHNOLOGY." The paper and forest products industry has been very effective in communicating that they can co-exist with a clean environment -- through recycling and planting millions of trees to replace those it harvests. The plastics and chemical industries also have launched campaigns demonstrating their environmental stewardship.

I urge you to use and pool the resources of your trade associations, professional organizations, and companies to educate the public about coal -- using all resources, media and otherwise, available to you. Encourage your employees to visit schools and to go out into their communities to help educate students, the public, and local leaders about the contributions of and future potential for clean coal technologies. The future of coal may depend on getting the facts out about the importance of coal to every citizen in this country, and the progress that technological advances already have made and can make to make coal a clean energy resource.

We must let the people and the decisionmakers in Congress know that -- with the projected increase in global energy demand in the next century -- it is vital that we invest in these technologies not only for ourselves, but for future generations. We cannot eliminate the "bad air" (high ozone) days of Washington and other large metropolitan areas -- only the transportation sector can do that. But, we can substantially decrease carbon and other emissions in the coming decades, and the world's people will breath easier.

Thank you.