King Coal is back on throne for electricity generators

Scott Haggett
Calgary Herald
March 10, 2001

Alberta-based companies such as Enmax Corp., TransAlta Corp., and Epcor have announced plans for new coal-fired plants with enough power to light more than a million homes.

Other companies that once relied on natural gas for industrial uses, such as lumber kilns or generating steam, are returning to coal as well.

With natural gas hitting record highs this winter and promising to stay expensive for the next few years, utilities are turning back in increasing number to coal as a reasonably priced alternative to gas-fired plants.

“It’s the beginning of a new era,” says Alan Johnson, president of the Coal Association of Canada, an coal-industry lobby group.

“If we have to go to the Arctic to get natural gas, then there’s a whole range of opportunities for coal.”

As almost everyone who heats their home with gas knows, the fuel has become expensive this year. Gas prices are double where they were a year ago and new gas supplies are getting increasingly tough to find.

By some forecasts, gas demand in North America is growing by as much as three per cent a year, while gas reserves are falling and new supplies, such as those from Alaska and Canada’s Arctic, are years away from coming to the market, if at all – meaning gas prices are expected to remain high for some time to come.

Those high prices are providing a window of opportunity for coal.

Because a coal-fired plant requires expensive technology to clean its emissions, it can’t compete with cheap, clean-burning natural gas as a fuel for generators. However, with natural gas getting pricey, coal is again starting to appear as the inexpensive option for the electricity industry.

“When gas was $1 or $2 (per thousand cubic feet) it was difficult for coal,” Johnson says. “But anytime gas is more than $3 then coal power is going to be cheaper.”

Gas is currently trading in the range of US$5 per million British Thermal Units.

And nowhere in North America should coal be cheaper than in Alberta. The province is Canada’s biggest coal producer, as well as the biggest consumer.

In 1999, the latest available figures, Alberta produced 34.2 million tonnes of coal, nearly half of all Canadian production, from 10 mines in the province. However, that barely taps Alberta’s coal reserves. At current rates of consumption, the province has enough coal in the ground to last 800 years.

The province’s coal consumption also leads the nation. Coal use in Alberta, mostly for existing coal-fired generating plants, accounts for 43 per cent of the national total.

Most of the province’s coal is already used for power generation, but its share of the market is shrinking. In 1997, coal generated 66.4 per cent of the province’s electricity while natural gas was used for 10.6 per cent.

By the end of last year, coal produced just 56.1 per cent of the province’s power while gas accounted for 24.4 per cent. That slipping share of the market is about to change.

Coal-fired power plants are making a comeback. In Northern Alberta, TransAlta is expanding its Keephills coal-fired plant, a $1.8-billion project that will add 900 megawatts of new power. Epcor, which supplies power to Edmonton, is boosting its existing Genesee power plant, southwest of the city, with a $500-million unit that will add 400 megawatts of power.

Enmax, which supplies electricity to Calgary, is in the early stages of planning a 400-megawatt generating plant in southern Alberta. The city-owned utility and partner Fording Coal Ltd. see the coal reserves around Brooks as a way to quench Calgary’s growing thirst for electricity.

“Coal is a low-cost fuel and Alberta needs power,” says Enmax spokesman Tony McCallum.

“With huge reserves in the province, it’s an attractive alternative and it’s fair to say that the technology has come a long way towards making coal plants more efficient and environmentally friendly.”

Indeed, much of the new investment is coming not just because coal is inexpensive, but because new technology has made it much more environmentally benign than it was in the past.

Coal producers such as David Slater, chief executive of Hillsborough Resources Ltd., a Vancouver-based coal-mining company, believes many people associate coal with Dickensian London, when coal soot blanketed the city.

“Everyone thinks of coal as a dirty fuel,” said Slater. “It’s not. I think it’s just some kind of memories of Victorian London, when everyone heated their home with coal.”

New technologies like supercritical boilers, high-efficiency turbines, flue scrubbers and others have come a long-way towards levelling the environmental playing field for coal.

“Existing technologies go a long way to mitigating acid gas emission and sulfur dioxide,” says Tom Adams, executive director of Energy Probe, a Toronto-based think-tank. “While there are still some nitrogen oxide emissions, there really isn’t a big smog problem in that part of the world.”

The last coal-fired plant built in Canada was the SaskPower’s Shand facility, outside Estevan, Sask.

The nine-year-old 300-megawatt plant was near state-of-the-art when it was built, however, even it has become outmoded.

“By the standards of the day, this plant was clean,” said Rick Patrick, SaskPower’s vice-president of power production.

“But it was designed in the 1980s and you would not be allowed to build one like it today.”

With coal the new fashion, coal prices are again on the rise. U.S. spot prices for coal have nearly doubled in recent months and coal producers worldwide have been able to make price increases stick after years of having little in the way of bargaining power with customers happy to use gas instead.

And while their new leverage is appreciated, not everyone is yet convinced that there’s a boom underway.

“I’m not spending my children’s inheritance just yet,” Slater says. “I believe higher prices are going to be sustained but I’m not betting the house on it.”

 

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