Coal: Has the Reign of King Coal Ended? Part A Peter Schwarz Professor of Economics, Belk College of Business and Associate, Energy Production and Infrastructure Center (EPIC) UNC Charlotte of 18

Outline Introduction A Brief Economic History Supply Chain Cost Market Structure Environmental Considerations of 18

Introduction (1) Primary applications Metallurgical/ coking coal Industrial applications Especially heating steel Thermal/ steam coal Electricity generation Major use and our focus Large but declining share of electricity generation Benefits Available Reliable Low cost 250 year supply. Static analysis. of 18

Introduction (2) Why declining share of electricity generation? Scars the landscape and pollutes neighboring water Strip mining Mountaintop removal Debris may be relocated near water SO2 emissions Acid rain Health impacts Lung functions E.g. asthma NOx Smog Hg Brain and nervous system development Heavy metals E.g. Arsenic Toxic (poison) of 18

Introduction (3) Major reason for decline CO2 emissions Electricity accounts for 1/3 Coal emits most on a per-unit of electricity basis. Utilities converting some coal plants to NG Closing down many coal plants. No new coal plants being built in U.S. Clean Power Plan in limbo of 18

Introduction (4) Coal holding its own: In India In China Germany Starting to scale back Pollution GHG concerns Germany Phasing out nuclear Withdrawing subsidies for renewables Lignite, a highly polluting form of coal Low heat rate (low amount of electricity per unit of coal combusted) Consequently, high CO2 emissions per unit of electricity produced of 18

Brief Economic History (1) Geology 300 million years ago Swamps covered earth Buried vegetation formed peat Under heat and pressure formed coal Lignite Soft, brown High water content Low heat rate Sub-bituminous 2nd most common, used for electricity generation Bituminous Most abundant cost common for electricity generation Anthracite Hard, highest heat content, lowest moisture, lowest ash Takes longest to form. of 18

Brief Economic History (2) China used for heating 3,500 years ago May have been because they had limited wood remaining. By 200 AD, burned in furnaces. Around 1000 AD, used to produce iron and steel In place of wood charcoal Romans used in England around 200 AD 1200 AD: British shipped coal from Newcastle. Soon after, began underground mining Early 1700s Made coke from coal Coke burned hotter Could melt iron ore and extract pure metal of 18

Brief Economic History (3) 1700s: Industrial Revolution Great Britain Steam engine, factory system Profitable to dig deeper for coal Coal mine explosions, air pollution By 1885, passed wood as major energy source. More compact. Didn’t require large amounts of land for cultivation. Falling transportation costs Coal-fired trains, ships Depletion of wood of 18

Brief Economic History (4) 20th Century: Age of Oil New use for coal Generating fuel Often cheaper than oil Large scale Dominated urban areas Spread costs over many customers Mid-20th century on Demand grew, despite environmental concerns Especially in developing world Major baseload technology for generating electricity of 18

Brief Economic History (5) Prospects Clean coal technologies Plants that operate at higher temperatures Current (sub-critical) technology Increasingly common super-critical technology China is using ultra-super-critical technology High pressure can change coal into gaseous state Syngas Can be used in place of NG in combined-cycle plants Syngas plants have required large subsidies in U.S. Duke Energy operates plant in Edwardsport, Indiana FutureGen in IL Funding for FutureGen was suspended by U.S. DOE of 18

Supply Chain (1) From Rio Tinto https://agusdaniel.wordpress.com/2013/07/30/rio-tinto-coal-australia-swot-analysis/ of 18

Supply Chain (2): Extraction Mining: Surface Predominant in U.S. and developed countries Strip Coal close to surface Mountaintop removal Access deposits several hundred feet below Restoration 1977: Surface Mining Control and Reclamation Act (SMCRA) Company posts performance bond May affect some regions disproportionately WV: Thin coal seams Costs spread over fewer tons of coal per acre and narrower profit margin. of 18

Supply Chain (3): Extraction Mining: Underground Predominant where coal seams deep Room-and-pillar Retreat mining Dangerous of 18

Supply Chain (4) Location of Supply Almost all countries contain coal reserves U.S., Russia, China dominate Over 50% of total reserves China largest producer, followed by U.S. China produces, consumes as much coal as other countries combined. Imports about 5% of consumption. EU imports more than half. Japan close to 100% U.S., South Africa, Australia self-sufficient Big debate in U.S. about whether to allow coal exports. of 18

Supply Chain (5): Processing Coal cleaning Remove impurities, ash Increases heat rate Less coal needed Lower carbon emissions. Lower transportation costs Crushing Sorting Pulverization More surface area of 18

Supply Chain (6): Transportation Rail dominates Life-cycle perspective Additional emissions Diesel emissions Coal dust Barges near waterway Pittsburgh https://www.youtube.com/watch?v=0JV1JI5mCSA Pipelines Coal slurry Ships Exported coal of 18

Supply Chain (7) Should Duke Energy own its own coal mines? Economics- lower transactions costs by controlling coal supply Harlan County USA Award-winning documentary Violent protests between United Mine Workers Union and Duke Energy of 18