Impacts of Energy Research and Development (S.1766 Sections 1211-1245, and Corresponding Sections of H.R.4) With Analysis of Price-Anderson Act and Hydroelectric Relicensing
Fossil Energy (Subtitle C, Sections 1231 and 1232)
S. 1766 distributes R&D for fossil energy over three main areas: core research designed to reduce emissions associated with fuel combustion for electricity generation, oil and gas exploration—both onshore and offshore—and transportation fuels. Total authorization for these activities in FY 2003 is $485 million, and over the period FY2003 to FY2006, the authorization is $2.083 billion. Additionally, the Power Plant Improvement Initiative is authorized $200 million in each Fiscal Year 2003 to 2011. Total authorization for these R&D activities is $3.91 billion over the period FY2003 to FY2011.46
Electricity Generation . The goals of the R&D program for core fossil energy research are to reduce emissions by developing technologies with the following capabilities by 2015: electricity generating efficiencies of 60 percent for coal and 75 percent for natural gas; combined heat and power thermal efficiencies of more than 85 percent; fuels utilization efficiency of 75 percent for the production of liquid transportation fuels from coal; near zero emissions of mercury and other emissions; reduction of carbon dioxide emissions by at least 40 percent through efficiency improvements and 100 percent with sequestration; and improved reliability, efficiency, reductions of air pollutant emissions, or reductions in solid waste disposal requirements.
Technologies such as advanced gasification combined-cycle, pressurized fluidized bed, and gasification fuel cell generating units may lead to significant improvements in efficiency. Fluidized-bed combustion evolved from efforts to find a combustion process able to control pollutant emissions without external emission controls (such as scrubbers). Prior R&D 47 led to the initial market entry of first generation pressurized fluidized bed technology, with an estimated 1000 megawatts of capacity installed worldwide. These systems pressurize the fluidized bed to generate sufficient flue gas energy to drive a gas turbine and operate it in a combined-cycle. A second generation pressurized fluidized bed combustor, currently under development, uses "circulating fluidized-bed" technology and a number of efficiency enhancement measures. Circulating fluidized-bed technology has the potential to improve operational characteristics by using higher air flows to entrain and move the bed material, and recirculating nearly all the bed material with adjacent high-volume, hot cyclone separators. Second generation pressurized fluidized bed combustion is expected to achieve a 52 percent fuel-to-electricity efficiency level and have near-zero emissions of nitrogen oxides, sulfur dioxide, and particulates. Market entry is projected for 2008.
The DOE Advanced Turbine System effort, in support of central electric power systems, is developing advanced technologies that enhance the efficiency and environmental performance of utility-scale gas turbines. The utility-scale Advanced Turbine Systems program objectives call for 60 percent efficiency or more in a combined-cycle mode, nitrogen oxide emission levels less than 9 parts per million, and a 10 percent reduction in the cost of electricity; these goals have already been met under full speed, no load conditions.48 Completion of prototype system testing to evaluate combustion, heat transfer, and aerodynamic design under actual operating conditions was scheduled for 2001. Commercial units are scheduled for market entry in 2002 to meet increasing demands for natural gas-based power.49 Additionally, DOE’s Vision 21 program is working for breakthrough R&D that would enable the S.1766 goal of 60 percent efficiency for coal and 75 percent efficiency for natural gas, with near zero emissions.50 Note that 60% efficiency in an integrated coal gasification generator would require efficiencies greater than the 60% combined-cycle efficiency demonstrated in 1999.
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EIA includes these technologies in its modeling and analyses.51 Integrated coal gasification (IGCC), the most efficient coal technology, achieves some market penetration in the AEO2002 Reference Case in the period after 2010. Because new natural gas-fired plants are much more economical, coal’s contribution to new capacity is 14 GW by 2015, of which about 2 GW are IGCC. The IGCC technology modeled in the Reference Case has an overnight capital cost of $1,338/kW and reaches an efficiency of about 49 percent, far below the stated goal of 60 percent (Figure 3, p. 21). In the AEO2002 High Fossil Case, DOE’s Vision 21 goals are modeled,52 and IGCC penetration improves to 34 GW by 2015. If the efficiency improvements stated in S.1766 could be achieved and widely deployed, the carbon reduction goals (40 percent reduction) could be achievable. The 60 percent efficiency goal for coal implies carbon emissions of 323 pounds per MWh output, and the 75 percent goal for natural gas implies an emission rate of 145 pounds per MWh. Both of these rates are far below the most efficient technologies currently modeled in NEMS, which models efficiency under actual operating conditions in the field, rather than test conditions.
Oil and Gas Extraction . The goals for the oil and gas resources programs are to speed technological advances for exploration and production of domestic petroleum resources, both onshore and offshore, especially in the ultra-deepwater of the Gulf of Mexico. Effective use of improved exploration and production technologies has aided the discovery and development of oil and natural gas resources. Major advances have occurred in data acquisition, data processing, and the display and integration of seismic data with other geologic data. These advances, combined with lower cost computer power and experience gained with new techniques, continue to put downward pressure on costs while significantly improving finding and success rates. Some drilling technological improvements include horizontal drilling, fracturing, polycrystalline diamond compact drill bits, and coiled tubing. In addition, new rig designs, such as jackup rigs, semisubmersible drilling rigs, and modular rigs, have enabled drilling in ever deeper offshore waters of the Gulf of Mexico. Other technologies, such as 3-D seismic, 4-D seismic, and remote sensing, have boosted success rates as well as allowed the targeting of higher quality prospects, thus improving the overall well productivity and finding rate. Although many of these technologies have been around since the 1970s, further improvements and refinements have been necessary to allow them to penetrate the industry and become more widely used. Some emerging technologies, such as micro drilling technologies, smart drill pipe technology, tight sands sweet spot detection, and neural net interpretation technology, as well as continued advances in reservoir analysis and stimulation techniques, are expected to improve the development of crude oil and natural gas resources for some time to come.
Although oil and gas research and development programs have contributed to the advancement and deployment of innovative technologies, it is difficult to quantify the impact. One reason is that not all technological advancements that have had significant impact on oil and gas exploration and development, such as improved computer technology, were funded through oil and gas research and development. However, continued investment in oil and natural gas research and development programs will help in the discovery, development, and deployment of future technological breakthroughs as well as the advancement and penetration of current oil and gas technologies.
Transportation Fuels . S. 1766 to focus research on reducing the cost of producing transportation fuels from coal and natural gas, and through indirect liquefaction of coal and biomass.
Liquid fuels have long been produced from coal; however the cost of producing useful liquid fuels from coal (the sum of feedstocks, conversion, and refining) has typically been much higher than the costs of petroleum products derived from the refinement of crude oil. For the last thirty years, the world oil price has remained low enough to deter large-scale production of coal liquids, primarily because of the tremendous quantities of low-cost crude oil reserves available in those Organization of Petroleum Exporting Countries (OPEC) member States of the Persian Gulf. Producers in these countries currently have a reserve-to-production ratio in excess of 85 years with average production costs of approximately $1.50 per barrel.53 In 1999, OPEC’s Persian Gulf producers accounted for 27 percent of total world oil production and an estimated 30 percent of the world’s production capacity. As a result of relatively low world oil prices, large-scale production of liquid fuels from coal primarily has been limited to situations where countries have been isolated politically from the rest of the world, and, therefore, lacked access to world oil markets.
Non-fuel production of coal-derived liquids generated as a byproduct of coke-making (e.g., solvents, wood preservatives, and coal-tar dyes) dates back to the 1840s with operations in both Germany and the United Kingdom, while large-scale production of coal liquids for transportation fuels is more recent, dating back to the beginning of World War II (WWII) with the operation of large-scale coal-to-liquids plants primarily in Germany but also in the United Kingdom.54 By the end of WWII, Germany 's nine indirect and 18 direct liquefaction plants were producing approximately 4 million tonnes of liquids per year, satisfying 90 percent of Germany' s total petroleum consumption. Following WWII, the political isolation of South Africa from the 1950s through the mid1980s led to the development of a sizeable coal-to-liquids industry there. At its peak, the combined output of South Africa = s three coal-to-liquids facilities reached approximately 10 million tonnes of liquid transportation fuels per year, supplying as much as 60 percent of the country = s annual requirements.
In the United States, a dramatic rise in the world oil price following the Arab oil embargoes in the mid-to late-1970s prompted a considerable amount of research in the area of coal-to-liquids production technologies; however, none of the processes was deployed commercially. The sudden collapse of world oil prices in the mid-1980's led to the abandonment of most of the pilot and process development scale coal-to-liquid facilities built in the United States during the 1970s and early 1980s. Additionally, the U.S. Synthetic Fuels Corporation (SFC), a quasi-public corporation established by the U.S. Government in 1980 to help fund development of both liquid and gaseous synthetic fuels technologies, was terminated in 1985. Some of the most promising coal-to-liquids research undertaken in the United States from the late 1970s to the present include: the Solvent Refined Coal process (Gulf Oil), the Exxon Donor Solvent process, and the H-Coal process (Hydrocarbons Technologies Incorporated).
In general, coal liquefaction technology can be divided into two generic types: direct and indirect. Direct liquefaction is the reaction of coal with hydrogen (usually in the presence of some liquid solvent) to produce a synthetic crude oil, or syncrude. No intermediate gasification step is needed. Direct liquefaction, however, is a very difficult process to carry out, involving temperatures over 400°C, pressures of over one hundred atmospheres and an appropriate catalyst. The syncrude can be refined to produce gasoline, as well as diesel fuel and fuel oils.
Indirect liquefaction involves the gasification of coal to produce a mixture of carbon monoxide and hydrogen, called synthesis gas. The synthesis gas can then be converted into liquid hydrocarbons using one of several conversion technologies such as the Fischer-Tropsch liquefaction process or the Mobil Methanol-to-Gasoline (MTG) process. At present, the only commercial-scale coal liquefaction process in operation in the world is Sasol 's indirect-Fischer-Tropsch-based process used to produce coal-based liquid transportation fuels in South Africa.
Coal-to-liquids technologies are not currently represented in NEMS; however, in response to a recent request from the U.S. Department of Energy 's (DOE's) Office of Fossil Energy, work is underway to add this modeling capability. Recent reports completed for the Office of Fossil Energy by Mitretek Systems indicate that coal liquefaction should become viable if the world oil price rises to and remains above $25 per barrel.55 The reports focus on the development of a coal-to-liquids coproduction plant (producing both coal liquids and electricity) where a slurry-phase Fischer-Tropsch indirect liquefaction reactor is placed between the coal gasification section and the combined cycle block of an Integrated Gasification Combined Cycle (IGCC) facility.
Recent DOE studies place the estimated cost of producing coal liquids at approximately $30 per barrel. Coal liquids, if they could be produced economically, would have a slight cost advantage relative to crude oil, in that the cost of upgrading coal liquids using conventional petroleum refining technologies is less than the cost associated with the refinement of crude oil. In the AEO2002, the world price of oil is projected to rise from $22.48 per barrel in 2000 (2000 dollars) to $24.68 per barrel in 2020 in the Reference Case.
Major hurdles facing the start-up of a U.S. coal-to-liquids industry are the high capital costs associated with the construction of a commercial-sized plant, and the fact that no such plants have yet been built in the United States. DOE estimates the capital costs of a coal-to-liquids facility with generating capacity of 1,000 megawatts and daily liquids production capacity of 33,200 barrels at approximately $2.2 billion. Thus, a U.S. coal-to-liquids industry capable of producing one million barrels of coal-derived liquids per day (equivalent to 17 percent of U.S. crude oil production and 11 percent of net crude oil imports in 2000) would require the construction of 30 such plants at a total capital cost of $66 billion. Total annual coal requirements for these 30 plants, taken as a whole, would approach 180 million tons for bituminous-grade coal, with additional quantities required for the conversion of lower ranked subbituminous coal or lignite. The potential impacts resulting from the additional supply of transportation fuels to the U.S. market would be some decrease in the U.S. dependence on foreign oil but would probably have little impact on gasoline or diesel fuel prices, absent a massive U.S. coal-to-liquids program. With world oil production currently in excess of 75 million barrels per day, an additional one million barrels of supply would have a small impact on the world oil price, and, subsequently, the price of gasoline at U.S. service stations.