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TRANSCRIPT
Fredrick D. Palmer
Senior Vice President of
Government Relations
The Peabody Plan and the Social
Benefits of Coal – A Model for the World
6th Annual Energy Supply Forum
The U.S. Energy Association (USEA)
2 2
Electrification Powers Civilization
“The top-rated improvement to the life of earthlings in the 20th
Century was electrification. If anything shines as an example…
it is clearly the power that we use in our
homes and businesses.”
– Neil Armstrong U.S. Astronaut,
National Academy of Engineering
“ High rates, of course, bear hard
on the individual. But from a social
standpoint they are chiefly to be
regretted because they restrict the
use of electricity.” – Franklin D. Roosevelt,1930
“As a country with coal dominating
its energy structure, China still has
a huge potential. We will… put in
place a system that supplies
stable, economical and clean
energy. ” – President Hu Jintao, PRC, 2009
Electrification is Life; Coal is Electricity
3
First, the United States
“I had seen first hand the grim drudgery and grind which had become the common lot of American farm women… growing old prematurely;
dying before their time.” - Senator George Norris, sponsor, Rural Electrification Act of 1936
Then China
“Electrification in China is a remarkable success story… the most important lesson for other developing countries [is] that electrified
countries reap great benefits, both in terms of economic growth and human welfare.”
- IEA, 2007
“India has more people without adequate access to energy than any country in the world.”
- National Resources Forum, 2008
And Now India
Only Universal Electrification Can Eradicate Energy Poverty
4
The Primary Challenge of the 21st Century: Eradicating Energy Poverty
The greatest crisis we confront in the 21st Century is
not an environmental crisis predicted by computer
models… but a human crisis fully within our power to
solve.
Study after study – and pure common sense – tells
us that access to electricity helps people live longer
and better. For every agency voicing a 2050 GHG
goal… we need 10 working toward the goal of broad
energy access to reduce global poverty.
– Gregory H. Boyce,
Peabody Energy
Chairman and CEO
“
”
Millions of People Who Lack Adequate Electricity
Energy Is a Human Right and Rapidly Rising Need
Half the World’s Population Lacks Proper Access to Electricity
136
209
378 70
1,054
449
Source: International Energy Agency World Energy Outlook 2011 and The World Bank World Development Indicators 2012.
Millions of People Who Have No Electricity
585
31
184 21
493 2
6
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Hu
ma
n D
eve
lop
me
nt
Ind
ex
(0
-1)
Japan
USA
Sweden
Philippines
Every 10-Fold Increase
in Per Capita Electricity
Use Drives a 10-Year
Increase in Longevity
Sources: CIA World Fact Book, United Nations Development Program’s Human Development Report.; Developed from International Energy Agency World
Energy Outlook (1995-2011); USDA 2011.
United Nations Links Affordable Energy to Quality of Life
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1970 1980 1990 2000 2010 2020 2030
Coal Electricity
Global GDP
Ele
ctr
icit
y f
rom
Co
al (T
Wh
)
Wo
rld G
DP
(trillion
s o
f 20
05
$)
7
Electricity Enables People to Live Longer and Better
Electricity Use per Capita per Year (kWh)
China
Vietnam
Malaysia
Myanmar
Brunei
Singapore
Thailand
Laos Cambodia
Indonesia
France
Do We Recognize the Enormity of the Challenge?
Ethiopia Nigeria Bangladesh India IEA
Benchmark Mexico Indonesia Euro Area
40 144 137
542
63
2,036
566
6,963
Kil
ow
att
Ho
urs
Electric Power Consumption Per Capita
Source: World Development Indicators 2010, International Bank for Reconstruction and Development, The World Bank; International Energy
Agency, World Energy Outlook 2010.
Citizens Need 60+ Times IEA Benchmark for Human Development
8
Population Growth Greatest In Developing World
68%
87%
65%
70%
75%
80%
85%
90%
0
2000
4000
6000
8000
10000
1955 1990 2013 2050
Developing WorldDeveloped Nations
Global Population
(In Millions, %)
Sources: U.S. Census Bureau, 2013;
United Nations, 2013
“Developing
countries,
especially in Africa,
are still growing
rapidly.”
– UN Under-Secretary-
General Wu Hongbo
By 2050, 87% of ~9.6 Billion Global Population in Developing World
9
Coal Is The Solution To Energize The World
Extraordinary Global Growth by 2050… • Global GDP up 285%
• Electricity generation up 130%
• Steel production up 125%
• World population exceeds 9.3 billion
• 15 billion tons of coal used annually
10
The World Needs More Energy
Hong Kong
Survive
Childhood
Live
Longer
Drink
Cleaner Water
Eat
Better
Are Better
Educated
25%, 70% and 90% average percent of population with access to electricity. “Out of Poverty” study, Frank Clemente,
Professor Emeritus, Penn State University
Under Five
Death Rate/1000
Life Expectancy
(years)
Access to
Improved Sources (%) Under-
Nourished (%)
Literacy
Rate (%)
China Out of Poverty Study: Energy & Progress Closely Linked
China is the Model: Coal Fuels Social Development
11
Coal: The World’s Fastest Growing Major Fuel
Source: Peabody Energy Analytics, BP Statistical Review of World Energy 2013; Wood Mackenzie; International Energy Agency (IEA), World Energy Outlook.
2010
2020
2035
53%
39%
32%
14%
-8%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Coal Hydro N. Gas Oil Nuclear
Growth 2002 – 2012
12
● Coal grows twice as
fast as average of other
major fuels in past
decade
● Coal expected to pass
oil as world’s largest
energy source in
coming years
● New IEA report
increases global coal
growth projections to
47% by 2035
Annual World Coal Demand to Grow 1.2 Billion Tonnes in Five Years
● New coal-fueled
generation of ~425
GW by 2017
● Steel production
growth requires
additional 150 MTPY
of metallurgical coal
in 2017
● More than 80% of
projected global
demand growth in
China/India
Source: Peabody Global Analytics.
Expected Global Coal Demand (Tonnes in Millions)
726
2,886
4,069
920
3,065
4,890
0
1,000
2,000
3,000
4,000
5,000
India ROW China
20
12
20
17
P
13
14
SOLAR*
WIND*
NUCLEAR
NAT. GAS
HYDRO
500x Current Solar Generation
No Energy Alternative Can Replace Coal
To Replace Coal Generation by 2035, the World Would Need…
6 Million Wind Turbines
2,200 New Nuclear Plants
165 Trillion Cubic Feet >7x Current Russian Gas Production
215 new Three Gorges Dams
* Requires backup generation.
Source: International Energy Agency World Energy Outlook 2012; U.S. Energy Information Administration International Energy Outlook 2012.
China, India to Account for 85% of Global Coal Demand Growth
● China and India coal
imports expected to grow
220 million tonnes by 2017
● Significant new coal
generation driving demand – ~225 GW in China
– ~70 GW in India
● China closing marginal
cost production – Costs rising >10% per year
● New port projects
underway to enable
greater imports
Source: Peabody Global Analytics, China Customs, India Market Watch.
China and India Coal Imports (Tonnes in Millions)
0
100
200
300
400
500
India China
160
235
137
410
289
325
2017P
2013P
2012
15
U.S., Too, is a Young and Developing Nation
● The U.S. population expands by 3.3 million people per
year and will exceed 430 million in 35 years
● Urbanization proceeds apace and will reach 90% in the
next generation
● Economic growth linked with this continuing rise of cities
will spur the demand for energy – especially electricity
16
U.S. History Proves Social Benefits of Electricity from Coal
● Low-cost coal-based energy is engine for jobs, growth and prosperity
● Coal fuels 40% of power; America has 27% of global reserves
● Clean coal technologies work, lead to near zero emissions
● Beneficial electrification is the foundation of modern life: the positive externalities of coal overwhelm “cost of carbon”
● EPA’s plan to artificially increase the price of electricity is adverse to human health and welfare
● Coal is the only energy source that can meet the scale of future demand
17 17
0
250
500
750
1000
1250
1500
1750
2000
1950 1960 1970 1980 1990 2000 2010 2020 2030
Coal is the Cornerstone of America’s Energy System
18 Source: U.S. Energy Information Administration, 2012.
Tera
watt
Ho
urs
Coal
Natural Gas
Nuclear
Hydro Other
U.S. Has World’s Largest Coal Supply – Secure and Accessible
Source: EIA, Electric Power Monthly, August 2013
Coal Means Affordable Electric Rates
19
$-
$5
$10
$15
$20
$25
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Oil
Natural Gas
Coal
U.S. Natural Gas Cost Almost 2x Coal, Oil Cost 9x Coal in 2013
Price of fuel delivered to the plant includes all commodity, freight, taxes and other costs incurred in the delivery of the fuel.
Source: EIA Electric Power Monthly, Table 4.1. Receipts, Average Cost, and Quality of Fossil Fuels: Total (All Sectors) Jan 2000 – June 2013 (monthly).
Natural Gas Has Averaged Over Three
Times the Cost of Coal This Past Decade
20
Rising Natural Gas Prices Drive Switching Back to Coal
EPA Plan Dramatically Increases Electricity Costs for U.S. Families
● Americans pay the price
for EPA policy; estimated
80% annual electricity
cost increase per family
● NERC: EPA regulations
could result in 77 GW of
lost coal power causing
“significant impact” to
electric reliability
● EPA’s approach similar to
using an electric car to
set emissions standards
for new vehicles
21
Annual Household Electricity Cost Hikes >$1,000 in Some States
EPA Projections: Annual Increase
in Household Electricity Bill
$864
$918
$984 $996 $1,032
$1,104
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
IL IA IN OH MO PA
Source: EPA Projections, July 2012; NERC.
Sticker Shock: EPA Energy Experiment Causes National Electric Bill to Soar
22
$200
$300
$400
$500
$600
$700
2010 With 80% Increase inRates
Billi
on
Do
llars
$369 Billion
$664 Billion
National Electric Bill
Source: EPA’s Projections, July 2012.
Rising Electricity Prices Are Closely Correlated with Unemployment
23
Faltering Economy Greatest Threat to People – Not Flawed Models
Source: Bureau of Labor Statistics; U.S. Energy Information Administration, 2011 Annual Energy Review.
2 ₵
4 ₵
6 ₵
8 ₵
10 ₵
12 ₵
14 ₵
16 ₵
18 ₵
0%
2%
4%
6%
8%
10%
12%
14%
16%
Ele
ctr
icit
y P
rice
Cen
ts / k
Wh
Un
em
plo
ym
en
tP
erc
en
tag
e (%
)
Unemployment
Avg Retail Elect Price
1 Average Retail Electricity Price is shown in Real terms (2005$)
Source: Bureau of Labor Statistics
U.S. Energy Information Administration, 2011 Annual Energy Review
80% IncreaseElectricity Price
1
Europe’s Disastrous Carbon Emissions Trading System Sent Prices Soaring
11.7
18.6 20.2
25.4
28.2
33.8
0
8
16
24
32
40
Cen
ts p
er
kW
h
Sources: Europe’s Energy Portal; EIA, 2011 and 2012.
“Instead of a model for the world to emulate, Europe has become a
model of what not to do.” – The Washington Post, April 21, 2013
24
Residential Price
of Electricity
0
5
10
15
20
25
30
12
14
16
18
20
22
11.4
20
The Lesson of Spain: Still Waiting for “Green” Jobs
“Spain has already
attempted to lead the
world in a clean energy
transformation. But our
research shows that
Spain's policies were
economically
destructive… and a
source of social harm
and net job destruction.”
- Professor Gabriel Calzada, King
Juan Carlos University, “Study of
the effects on employment of public
aid to renewable energy sources"
Spain’s Rising Unemployment Rate
Study: For Every Green Job, Subsidies Cost 2.2 Jobs Elsewhere
Source: Ycharts, Eurostat 25
% U
ne
mp
loym
ent
18
21.7
25
27
2008 2010 2011 2012 2013 2009
Ho
use
ho
ld E
lectric
ity C
ost (E
uro
ce
nts
/kW
h)
Household Electricity Cost (Eurocents/kWh)
Australia Has Highest Electricity Prices in the Developed World
0
5
10
15
20
25
30
Australia Japan EuropeanUnion
U.S. Canada
Avg. Electricity Price of
Key Developed Nations
AEMC Projections for 2013/14
2011/12 prices @ exchange rates
26
Nearly Double the Average of Other Developed Nations
Average Household Electricity Prices in 2011/12
and Australia Projections to 2013/14
(2011 Exchange Rates)
Cen
ts p
er
kilo
watt
ho
ur
Source: CME, 2012
Ontario: Anti-Coal Polices Increased Rates, Reduced Competitiveness
27 Source: Hydro Quebec
$0
$30
$60
$90
Quebec Manitoba Michigan Ontario
Industrial Electricity
Rates $ per MWh
Ontario Now Has Highest Delivered Industrial Prices in North America
California’s Anti-Coal Policies Massively Increase Prices for Ordinary Consumers
$0
$8
$16
$24
$32
$40
1970 1975 1980 1985 1990 1995 2000 2005 2010
California
U.S.
28
“Excessive energy costs have helped obliterate the state’s
manufacturing base.” – Wall Street Journal, March 29, 2013
Do
llars
per
Millio
n B
tu
● Electric rates 40%
> national average
● 12 million people
eligible for low
income energy
assistance
● 700,000
manufacturing jobs
lost since 2000
● Negative net
worth of $127 billion
in 2013
Lesson Learned: Price Matters and High Power Costs Hurt People, Industry
11
12
13
14
15
16
17
18
4
4.5
5
5.5
6
6.5
7
2000 2001 2002 2003 204 2005 2006 2007 2008 2009 2010
29
Ele
ctr
icit
y P
ric
e (
¢ /
kW
h)
Man
ufa
ctu
ring
Em
plo
ym
en
t (millio
ns)
17.3
11.7
4.64
6.85
In past decade, U.S. has lost nearly 6 million manufacturing jobs
as electricity prices increase by 50 percent
How Coal? Through 21st Century Technology
● The World Needs Energy
● Other Energy Forms Have
Inherent Limitations
● Energy from Coal Creates
Health and Longevity
● Advanced Technologies
Deliver Ultra Low Emissions ● Long Record of Progress
● Ultimate Goal: Near-Zero
Emissions
30
GreenGen Power Plant and
Carbon Research Center; Tianjin, China
Why Coal? How Coal?
-100%
-50%
0%
50%
100%
150%
1970 1980 1990 2000 2011
GDP per Capita
+ 103%
- 87%
Regulated Emissions/MWh from
Coal
Coal-Based
Power Generation
+ 170%
Source: USDA 2011; Energy Information Administration 2012; U.S. EPA Air Trends Data, 2012; Peabody analysis 2012. GDP in 2005 dollars.
Clean Coal is the Answer to Environmental Problems, Not the Cause
U.S. Emissions Decline 87% Since 1970 as Coal Use Nearly Triples
31
Pittsburgh 1950s
Pittsburgh Today
32
The Better Way: 21st Century Coal and the Peabody Plan
Fuel the Future in 5 Steps
● Ensure at least half of
new generation is from
coal
● Replace older coal fleet
with supercritical plants
● Develop 100 CCUS/CCS
projects in a decade
● Deploy coal-to-gas, coal-
to-chemicals, coal-to-
liquids
● Commercialize near-zero
emissions technology
33 33
Green Coal Provides Path to Near-Zero Emissions
2008 Path to Near-Zero Emissions
87%
Supercritical Plants
Carbon Capture and Storage (CCS) Demonstrations
Commercial Coal-to-Gas with CCS
Commercial Coal-to-Liquids with CCS
Commercial integrated
gasification with combined
cycle plants with CCS
Oxyfuel, carbon-consuming algae and other
low-carbon technologies
Retrofit Pulverized Coal
Plants with CCS
Clean Coal…Green Coal…
33
34
Advanced Coal Older Fleet ↑
89% Sulfur Dioxide
93% ↑
Nitrogen Oxide
↑
99.9% Particulates
-30%
CO2
21st Century Coal Technology TODAY Achieves Near-Zero Criteria Emissions
U.S.
96 GW
Japan
20 GW
India
37 GW
Russia
16 GW
S. Korea
17 GW
Germany
12 GW
Other EU
11 GW
429 GW of Supercritical On Line and Under Construction
Source: Platts World Electric Power
Plant Database, January 2011.
“A single, large coal plant, if
built with the best-available
technology, can reduce
emissions by the annual
equivalent of taking a million
cars off the road…”
– Maria van der Hoeven
Executive Director
International Energy Agency
December 2012
Every 21st Century Coal Plant Takes ‘A Million Cars Off the Road’
35
China
175 GW
U.S.
96 GW
India
37 GW
ROW
45 GW
New 21st Century Coal Plants
= 265 Prairie State Facilities
0
1.5
3
4.5
Po
un
ds
Pe
r M
illio
n B
tu
Sulfur Dioxide
Nitrogen Oxide
Prairie State
Below
U.S. Average
Source: EPA’s Clean Air Markets database, July 2012; Project Permits.
U.S.
Average
2011
Prairie State
Permit
Clean Air
Interstate
Rule 2015
4.37
0.17 0.26 0.12 0.182
0.07
1.08
0.54
U.S.
Average
1970
0.015 0.027
IGCC
(Permitted)
2015-2016
Turk - PRB
(Permit)
0.065 0.05
CO2 Emissions Drop 25 % from Oldest Operating U.S. Coal Plants
Prairie State
Operating
0.08 0.05
Prairie State is 21st Century Coal
36
Largest Coal Plant Built in U.S. in 30 Years
Prairie State Energy Campus 1,600 MW Mine Mouth Plant
37
Prairie State Partners Serve More Than 2.5 Million People In Nine States
AMP-Ohio
368 MW
Indiana Municipal Power
200 MW
Missouri Joint Municipal
Electric Utility Commission
195 MW
Prairie Power, Inc.
130 MW
Illinois Municipal Electric
240 MW
Southern Illinois
Power Cooperative
125 MW
Northern Illinois Municipal
Power Agency 120 MW
Kentucky Municipal Power
124 MW
38
Coal Fuels 80% of China’s Economic Engine
Electricity
Industrial Gas
Pipeline SNG
Ethanol
Diesel
Jet Fuel
Hydrogen
CO2 Capture and
Sequestration
Conversion/
Gasification
Coal
China is the Model, Using Coal Like World Uses Oil
39
CCUS-The EOR Option: Proven and Profitable at $100/bbl Oil
40
Over the next 30 years:
● 87 billion barrels in stranded oil could be recovered in the U.S. alone
● CO2 is a necessary feedstock for EOR
● Maximum needed: 14 billion tons of CO2 7 billion tons of coal
● Carbon is a product… not a problem.
Source: National Energy Technology Laboratory, U.S. Department of Energy, “Storing CO2 and Producing Domestic Crude Oil
with Next Generation CO2-EOR Technology,” Jan. 9, 2009; International Energy Agency: “Coal-Fired Power Generation:
Replacement/Retrofitting Older Plants,” 2008; Management Information Services and Peabody analysis. Source:
DOE/NETL_2012/1540-Figure 1.5.
Carbon is a Product and EOR Commercial Since Early 1970’s
Air Separation
Unit (ASU)
Boiler Island
Compression &
Purification Unit (CPU) 41
Technology Path is Clear From DOE’s FutureGen 2.0 from U.S…
Boiler Island ASU & CPU
● First-of-its-kind near-zero
emissions plant
● Upgrading Meredosia in
Illinois with oxy-
combustion technology,
capturing 90% of CO2
● Cleaner than
conventional natural gas
combined cycle
● Lower cost than other
forms of post-combustion
CO2 capture
● Safe, proven pipeline
technology
… To China’s GreenGen, a Global Model
● Peabody only non-
Chinese partner
in GreenGen
● Multi-phase power
project with carbon
capture and carbon
research center
● First 250 MW unit
commissioned
in 2012
GreenGen: Among World’s Largest Near-Zero Emissions Coal Plants
42
Control Room at the GreenGen Plant
Tianjin, China
Clean Coal Projects in the United States, Australia and Asia
Global Leader Advancing Clean Energy from Coal
● China’s GreenGen, Australia’s COAL21
Fund and U.S. FutureGen projects
● Australia’s Global Carbon Capture and
Storage Institute
● Consortium for Clean Coal Utilization
● U.S. Department of Energy National
Carbon Capture Center
● GreatPoint Energy Hydromethanation
Gasification Technology is China-Bound
43
Fredrick D. Palmer
Senior Vice President of
Government Relations
The Peabody Plan and the Social
Benefits of Coal – A Model for the World
6th Annual Energy Supply Forum
The U.S. Energy Association (USEA)