Another Problem with Cogen

Cogeneration, the use of waste heat from electricity generation for other purposes such as heating buildings, gets discussed quite a bit as one way to increase energy efficiency and deal with various energy-related problems.  Indeed, it is sometimes lumped together with wind, solar, biomass, and various other “renewable” options as a more “green” and “sustainable” alternative to conventional fossil-fuel generation.  This is problematic, however, because unlike wind and solar cogen is not really a type of energy at all, renewable or otherwise, but rather a different way of using energy than the standard and rather inefficient generation process.  It does indeed increase the efficiency of a plant dramatically, but it still depends on there being some kind of steam turbine generating both electricity and waste heat, and that turbine can be powered by anything.  As Kevin Bullis points out, in China cogen is much more widely used than it is in the US, but this is actually not necessarily a good thing in terms of emissions because all that cogen is attached to coal plants and used to heat nearby buildings.  This creates a strong incentive to keep using those coal plants rather than switching to cleaner energy sources, because even if the electricity output can be replaced by renewables such as wind, the heat can’t.  Some “renewable” energy sources, such as biomass, could be hooked up to cogen systems, but the logistical challenges of actually replacing existing coal-fired cogen systems with new ones using biomass are formidable.  This highlights one of the most important aspects of the energy industry: its enormous level of sunk cost in capital facilities, which tend to be operated for as long as possible once they’re in place.  This makes effecting dramatic change in energy infrastructure a huge challenge.

(I mentioned one other problem with cogen, the fact that the heat can’t be transported nearly as far as the electricity, before.  That makes this “another” problem with cogen.  In the Chinese case, it appears that they’ve dealt with the transport problem by just building the coal plants near population centers.  That doesn’t sound like a plausible solution in the US context to me.)

Coals to Newcastle

It seems China’s been importing vast quantities of coal, including a small amount from Canada and the US, despite having massive coal reserves of its own.  This is interesting for a variety of reasons.  The article makes a big deal about how coal is becoming less important in richer countries like Australia and the US, which I think is a bit overstated at least in the American context.  The Sierra Club and other environmental groups have been fairly successful in blocking new coal plants, but the existing ones are mostly still going strong, and there are a hell of a lot of them.  The age of coal in the US is far from over.

The reason usually given for the continued use of coal is that it’s cheap.  This is true enough, but the whole story is a bit more complicated.  The characteristics of coal vary wildly from one area to another, and the price does as well.  Among the factors involved in determining the price of coal are energy content, which is correlated with “rank” or quality, presence of polluting contaminants such as sulfur, and distance the coal must be transported.  Transportation costs are particularly important and drive a lot of the variation in coal prices within the US.  Coal is heavy, so it can cost a lot to transport.  Over sufficiently long distances, the additional cost to transport the coal outweighs the lower price of the coal itself, and in some cases natural gas can even be cheaper per unit of energy content.  This also depends on the energy content of the coal, since higher-quality coal may contain enough energy to make moving it long distances worthwhile when inferior coal would not be worth moving that far.  In general, however, coal needs to be transported as efficiently as possible, which over land generally means by train.  Coal will virtually never be moved by truck; the cost of trucking it even relatively short distances will usually be far more than it’s worth.

Boats, however, are also very efficient ways to move heavy, cheap cargo, and coal is often shipped over water.  The Times article mentions this when it talks about how it can be cheaper for the Chinese to ship high-quality coal across the Pacific than to bring it over land from mines in the Chinese interior.  Similarly, although the US is a major coal exporter, we also import a small amount of coal, mostly from Colombia.  Indeed, so far this year we’ve imported well over twice as much coal from Colombia as we’ve exported to China.  For some parts of the US, it’s just cheaper to get coal via boat from Colombia than via train from Kentucky or Wyoming.

When viewed in this context, it’s not all that surprising that China would be importing coal.  They need a lot of it, and they’re going to get it as cheaply as they can.  If that means putting it on a boat in Vancouver and waiting for it to cross the Pacific, so be it.

Obviously this is not good news for efforts to address climate change.  While environmental advocates may have some success in trying to forestall this trade from the export side, both the coal industry and the Chinese government are sufficiently wealthy and powerful to make that an uphill battle.  Some more general measure to increase the cost of coal, however, would swiftly change the economic calculus and likely make this sort of long-distance trade unprofitable.  A cap-and-trade or carbon tax system instituted on the national level wouldn’t really affect international trade, of course, and it would plausibly even accelerate coal exports if it made the domestic market for coal dry up.  Some sort of tax specifically on coal, however, might work better.  In general, I think policies that attempt to address issues of an underlyingly economic nature will work best if they try to affect economic incentives directly.

EPA’s Greenhouse Gas Regulations

Via Matthew Yglesias, Dave Roberts has a detailed and interesting discussion of EPA’s recent announcement of its plan for addressing greenhouse gas emissions under its Clean Air Act authority.  The bottom line is that there’s not a whole lot of potential for major progress here, but it’s better than nothing.  I haven’t looked closely into the EPA documents myself, but judging from Roberts’s description it sounds like EPA is likely to steer a pretty conservative course here, focusing on efficiency improvements at existing plants rather than more effective but extremely expensive options like carbon sequestration.  The underlying problem here is that the CAA system is based on the concept of Best Available Control Technology.  This works fine for the traditional pollutants that have been covered by the Act up until recently, but for carbon dioxide the technology isn’t as well developed and the technologies that provide the best control of emissions are so expensive that requiring them would effectively mean forcing coal plants out of operation.  Which would not really be a problem from an environmental standpoint, of course, but politically the result of such stringent regulations would almost certainly be concerted action by the coal lobby and its friends in Congress to strip EPA of its authority.  So EPA is instead looking more at efficiency-enhancing technologies which would make some marginal improvements in reducing emissions but wouldn’t have anything like the effects of a carbon-pricing policy in reducing overall emissions.  It’s better than nothing, but it’s definitely not enough to handle the problem alone.

By the way, I definitely don’t buy Roberts’s argument, which is pretty popular in environmentalist circles, that cogeneration is an important part of the solution.  He does note that increased use of cogen would involve more small plants located near population centers, which is true, but he sees this as a good thing whereas I don’t see how it does anything but add needless additional expense in a context where any serious solution is already going to be very expensive.  Energy is an industry in which economies of scale are enormous.  Building big power plants and transmitting the power long distances is in most contexts going to be much cheaper than building a bunch of small plants closer to the demand.  Transmission losses are tiny compared to conversion losses in the generation process for traditional steam turbines, and while cogen does boost conversion efficiency a lot, the heat it generates can’t be moved nearly as far as the electricity.  Building cogen plants at the scale of the big coal plants that currently serve a huge portion of baseload generation need would be prohibitively expensive, and building enough smaller ones to replace that load would also be prohibitively expensive.