InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

How To Collect Your Share of My Million Dollar Giveaway

How To Collect Your Share of My Million Dollar GiveawayWe recently kicked off the most outrageous initiative in the history of investment research. It’s called the Income Millionaire Project. And the goal is simple: create 1,000 income millionaires. That’s a $1 billion goal! No one has ever tried it before, but that doesn’t bother me. I’m so sure you can use this program to make a million bucks… I’ll pay you $1,000 to start your journey. Go here for details.

 

The Dirty Secret of Clean Coal

By Robert Rapier on June 7, 2016

Last week I discussed Donald Trump’s contention that we were going to have “clean coal and we’re going to have plenty of it.” Readers have surely heard of clean coal. But just what is it? And does it have a chance at economic viability? If it does, there are two implications for investors. One is that the coal industry could see a resurgence, and the second of course is that there may be worthwhile investment opportunities in cleaning up coal.

So today let’s learn a bit more about clean coal.

What is clean coal?

So what is meant by the phrase “clean coal”? To produce power from coal, the coal is crushed, mixed with air and then burned in a boiler. The boiler produces steam, which is used to drive a turbine. The turbine is connected to a generator, where magnets spin within wire coils to produce electricity.

There are many ways to spin a turbine. It can be done with water, as at the Hoover Dam (which I visited last month). It can be done with wind, as in a wind turbine. Or it can be done with fossil fuels. When fossil fuels are burned to produce power, carbon dioxide is released into the atmosphere.

160607TELhoover

Photo I took of the hydroelectric turbines inside the 2 gigawatt (GW) Hoover Dam. Those generators are each capable of producing 130 megawatts (MW) of power, which is enough to power more than 100,000 homes.

According to the Energy Information Administration, 2.2 pounds of carbon dioxide are produced when one kilowatt hour (kWh) of electricity is generated from coal. Natural gas, on the other hand, releases 1.2 pounds of carbon dioxide per kWh. The reason is that these fossil fuels derive energy from both the carbon and the hydrogen within them, but natural gas contains much more hydrogen than coal does. Hydrogen ends up as water when it is burned. Carbon ends up as carbon dioxide.

The emissions from a coal-fired power plant travel out the stack and into the atmosphere. While there are various emissions associated with mining for and then burning coal (likewise with natural gas), the term “clean coal” is used by the industry in reference to the carbon dioxide emissions. If the carbon dioxide emissions could be captured and stored (“carbon capture and storage,” or “CCS”), that’s what is meant by clean coal. It’s coal, but without the carbon dioxide emissions entering the atmosphere.

But is it feasible?

The Carbon Money Pit

If you happen to be a person who doubts that humans are making a measurable contribution to climate change, please bear with me. The reality is that most of the world’s governments do acknowledge that the carbon dioxide that we are adding to the environment is indeed contributing to climate change, and that it is imperative that we limit those emissions.

As I remind people sometimes, it is my job to figure out what is likely to happen, and respond accordingly. I believe the world has accepted that carbon dioxide is contributing to climate change, and that therefore countries are likely to continue to try to limit carbon dioxide emissions. Whether some segment of the population doubts that humans are causing climate change won’t have a large bearing on that.

So, given that premise, how are we likely to combat rising carbon emissions? Emissions from coal happen to be the lowest hanging fruit. Unlike emissions from oil — which largely come from over a billion cars around the world — carbon dioxide emissions from coal are concentrated at the power plants. To curb those emissions we either have to burn less coal or else capture and store the resulting carbon dioxide byproduct.

Since the coal industry and utilities that use coal want to survive, they have pushed the clean coal narrative for many years. After all, if there is some hope that this dream is achieved, perhaps the EPA could cut them some slack while they work out the kinks.

It’s not so hard to imagine how it would be done. In fact, it’s already been demonstrated many times at a pilot scale. The exhaust from the power plant stack is captured, compressed, and stored underground — either in a cavern or an old oil or gas field. It might look something like this:

160607TELcarboncapture

Source: World Coal Association

The key challenge has always been one of economics. The capital cost of the equipment for capturing and compressing those emissions is very high, and the power these processes consume inflicts a prohibitive drain on the plant. Just to compress the emissions can require 10% of the plant’s power output, and then the carbon must still be transported to an appropriate site and pumped into the ground. All of these factors drive up the costs to the point where coal with carbon capture is prohibitively expensive relative to alternatives.

The prohibitive costs are amply demonstrated by the FutureGen project in Illinois. This project was a partnership between the United States Department of Energy (DOE) and an alliance of coal mining and electric utility companies. The project was to be located at the 275 MW Meredosia Power Station.

FutureGen won $1.1 billion in federal money in 2009, and the project cost was estimated to be $1.65 billion. The DOE spent $202 million on the project, but missed project deadlines and unresolved technology challenges ultimately caused the feds to pull the plug on the project in 2015.

While a number of other pilot projects are underway around the world, they all suffer from the same basic problem. The costs of competing power sources are close enough to coal that when you try to capture the carbon dioxide emissions coal becomes uncompetitive.

Thus, in reality there aren’t any commercially viable clean coal technologies. It’s very likely there won’t be any. So for countries that have committed to reducing carbon emissions, the pressure to phase out coal will continue to be intense. Thus, I view a renaissance of the coal industry as highly unlikely. This is a key reason we continue to largely avoid coal companies in our portfolios at The Energy Strategist. I also wouldn’t advise investing in clean coal technologies. You’d be overwhelmingly likely to lose that money.

But what about the carbon dioxide that has already accumulated in the atmosphere since the beginning of the Industrial Revolution? Might there be a way of scrubbing that from the atmosphere? I will address that possibility in a future column.  

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

 


You might also enjoy…

 

R.I.P Bull Market—Here’s How To Protect Your Wealth

I hope you’ve enjoyed the phenomenal bull market of the past eight years…

Because it’s about to come to a screeching halt.

The Federal Reserve’s nearly decade-long spending spree has finally come to an end.

With no other options left at their disposal, the Fed has no other choice than to raise interest rates to keep inflation in check.

And that leaves you with two options…

Do nothing and suffer the agony of watching the profits you’ve accumulated over the years evaporate right before your eyes…

Or reposition your portfolio and invest in companies which prosper as inflation rises and interest rates soar.

I think the choice is clear. And I’ll show you the best new positions you can take if you click here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.