Assessment of Advanced Coal-Based Electricity Generation Technology Options for India: Potential Learning from U.S. Experiences
Discussion Paper 2005-02, Belfer Center for Science and International Affairs
Author: Debyani Ghosh, Former Research Associate, Energy Technology Innovation Policy Research Group, 2002-2005
India has huge domestic reserves of coal and predominantly depends on coal-based electricity generation to meet a substantial portion of its electricity generation requirements. Economic and security drivers are likely to ensure coal’s dominance in India’s energy scenario and especially in the electricity sector for many more years to come. Coal-based electricity is primarily generated from conventional sub-critical pulverized coal technologies, and most of these plants operate with low conversion efficiencies of coal to electricity. The poor performance of coal-based power plants in India is attributed to diverse factors:
- problems related to the coal supply industry;
- lack of performance standards;
- insufficient incentives for performance improvements due to near-absence of market competition, and distortions in the fuel supply and electricity market;
- inadequate investments in public R&D efforts;
- poor operational and management practices;
- insufficient investments for technological advancements;
- lack of information and awareness; and inadequate public policy initiatives.
Regulations that reduce negative environmental impacts associated with coal use are inadequate. Increasing reliance on imported natural gas, due to rapid expansion of natural gas-based capacity over the past decade or so, raises serious concern about security and reliability of supply. The natural gas capacity has been driven to a large extent by inefficiencies and difficulties in coal supply. In this context, the country is increasingly facing the challenge of being able to utilize coal in an efficient manner, keeping in mind development priorities as well as the need to minimize harmful environmental impacts.
At present, there is little strategic thinking in India for advancements in the current technological stock, as well as for demonstration and deployment of advanced generation technologies in future based on coal. The country needs to embark on a path of strategic energy planning in its economic and security interests that lays a foundation for coal usage in an economically efficient and environmentally sustainable manner. There remains significant need and opportunities for advancements in coal-based electricity generation technologies in the country. As the growth in demand is likely to be substantial for setting up base load plants, possibilities of reaping scale economy advantages are significantly high. Additionally, many of the existing plants will soon be due for retirement and there is likely to be a turnover of the present technological stock. This potential for investments in substantial new capacities also presents opportunities for leapfrogging to advanced technologies. Along with the high growth rate in demand and energy supply, substantial investments in energy supply infrastructure are likely in future — therefore unlike in developed countries where the energy supply infrastructure is already locked in, there is scope for alterations in the present mix of energy supply options.
There is a lack of systematic assessment studies that evaluate different coal-based electricity generation technology options that would best be able to address economic, environmental, and energy security objectives. The absence of systematic assessment studies raise concerns surrounding the dangers of a priori picking a “technology winner”. Such studies also serve as extremely useful policy linkages by providing inputs to the policymaker on decision-making and formulating policies with respect to technology choices. This study is an attempt to fulfill these objectives. It reviews the historical and current state of knowledge with respect to research, development, demonstration, and deployment efforts (RD3) in different categories of coal-based electricity generation technologies along with ongoing efforts towards future advancements. In the United States, RD3 efforts related to coal have been long-standing and have resulted in significant advancements in coal-based electricity generation technologies. A historical review of overall coal-related programmatic efforts as well as technology-specific experiences in coal-based generation advancements in the United States could potentially be useful for India in designing public policies and programs as well as making technology choices and launching technology-specific RD3 efforts. One would need to keep in mind overall, however, contextual country-specific differences in terms of the following factors- landscape features of coal and electricity industries in both countries, historical perspectives that relate to the manner in which these sectors evolved and currently operate, roles of actors and institutions and their networks, and national priorities and development plans, just to name a few.
This paper analyzes levelized generation costs from different coal technologies for the Indian situation. It assesses their relative competitiveness with natural gas based technologies, changes in relative competitiveness among these technologies with variations in certain key factors such as natural gas and coal prices, rate of advancements in technologies, and likely imposition of global environmental constraints for controlling carbon dioxide emissions. Based on the assessment of different technological options for India and drawing on the review of coal technologies as well as potential lessons from U.S. experiences, the paper makes suggestions for technology-specific RD3 efforts that India could engage in. It also discusses crosscutting factors that assume importance across all technology categories. The analysis in the paper is likely to be useful in laying a foundation for a “technology roadmap” for the future and for prioritization of current and future energy research development, demonstration, and deployment (ERD3) efforts with respect to coal based generation technology advancements.
An assessment of India’s clean coal technology choices indicates that there is no silver bullet in terms of one technology that overcomes all the challenges. The country needs to develop a portfolio of clean coal technologies with varying degrees of RD3 efforts across these technologies depending on short, medium, and long-term targets aimed at fulfillment of macroeconomic, security, and environmental objectives. Like in the U.S. case, development of a clean coal technology roadmap for India that outlines RD3 efforts in different advanced coal technologies will help prioritize the country’s needs in moving towards a sustainable energy future dependent on coal. Analysis in the paper shows that in the Indian context, competitiveness among coal and gas technologies is extremely sensitive to natural gas price variations. Coal technologies emerge competitive with combined cycle gas turbine technologies at relatively low levels of natural gas prices of $3.5/GJ and higher. Reforms aimed at improving efficiency of the electricity sector should be pursued simultaneously with coal market development that seeks alterations in present institutions, actors, supply, and prices.
Among coal technology options, the analysis here establishes the robustness of supercritical PC technology across a wide range of scenarios, thereby warranting top priority in ERD3 efforts. Supercritical PC is a commercially mature technology — so learning from technology development and deployment experiences in the United States and other countries will be relevant for India. Future regulations on SO2 emissions from power plants are likely to push deployment of supercritical PC with FGD as the most economic and best control technology. The analysis indicates that under the Indian situation, the efficiency advantage of supercritical is substantial enough to outweigh its higher costs, even with relatively high cost estimates and low coal prices. One needs to assess India’s R&D capabilities in development of advanced materials, however, as well as its manufacturing strengths related to supercritical development. Knowledge transfer and co-operation with the United States in the area of advanced materials development, as well as operating experiences, are likely to be useful for India.
Among other coal technology options — AFBC deployment in India, as in the United States, is likely to be primarily pushed by independent power producers (IPPs), rather than Investor-Owned-Utilities (IOUs). Co-firing using different kinds of coal and biomass/wood waste, currently being demonstrated in the United States, may find some niche application areas in India, where a mix of coal and biomass can be used. Experiences from such ACFB projects in the United States may prove useful for the IPPs as well as industrial level power generators in India.
The fuel flexibility advantage of PFBC is similar to that of AFBC, and this technology also may find some niche application areas in India for fuels that are unsuitable for utilization in PC plants. PFBC is unlikely to emerge as an economic choice over supercritical PC except in niche application areas where waste fuels, which are unsuitable for use in PC, are to be utilized.
Also, medium and long-term deployment opportunities for PFBC are likely to be limited due to competition from IGCC. Therefore, the market potential of PFBC needs to be systematically assessed before embarking on any RD3 efforts. U.S. experiences show that commercial deployment opportunities for first-generation systems are limited because they do not offer significant efficiency and/or economic advantages over conventional PC technology to justify their high capital costs. Demonstrations of first-generation PFBC systems may be considered as a transition strategy for second-generation PFBC development in India that is likely to have substantial performance improvements.
The primary driver for IGCC deployment is its superior environmental benefits. Analysis for the Indian case shows that first-generation IGCC without carbon capture has potential to reduce CO2 emissions by a tenth as compared to emissions from supercritical PC and by a fifth as compared to less efficient subcritical PC technologies. It is unlikely that first-generation IGCC will emerge as an economic choice over super-critical PC unless there are significant advancements in reducing costs and/or increasing efficiency in IGCC systems. IGCC becomes competitive with supercritical PC and PFBC only under a considerably high penalty level of $200/ton of carbon and higher. But, IGCC competitiveness is significantly enhanced under a scenario that considers carbon capture and storage. Analysis results show that under such a scenario, the break-even tax level at which IGCC emerges as an economic choice over supercritical PC and PFBC is around $75 per ton of carbon. Thus, addressing climate change by including a carbon capture and storage approach is likely to significantly enhance deployment opportunities for IGCC. A thrust on IGCC development and deployment efforts from the point of view of addressing climate change concerns will, therefore, have to be pursued for its own sake, as technology assessments point to a disjoint between technology choices and competitiveness among technologies for addressing local and global environmental concerns.
For the Indian situation, the break-even natural gas price at which IGCC (first-generation) become competitive with NGCC ranges from $5–5.5/GJ. Thus, it may be useful for India to pursue IGCC development as a hedging strategy in light of future uncertainties with respect to natural gas prices. Learning experiences from first-generation IGCC plants may be useful for India, primarily in terms of operating and environmental performances. Economic estimates, derived from the U.S. projects, would have to be applied in the Indian context. U.S. experiences may provide some guidelines towards cost estimations. A crucial aspect of demonstration would be to test operation of several subsystems of an IGCC at full-commercial scale, as systems integration is one of the key aspects of IGCC development. Though operational and environmental performances of first-generation IGCC systems have been well demonstrated, exploring deployment opportunities will require addressing substantial reliability and availability concerns, and associated high-risk perception among utilities and investors. There remains a need to assess the viability of polygeneration options for India that has potential to significantly improve IGCC market potential by providing economies of scope. In India, demonstrations of advanced IGCC systems that are integrated with fuel cell operations should be undertaken only if first-generation IGCC projects have been demonstrated successfully. Finally, under a future scenario that imposes regulations on mercury emissions in India, IGCC would be preferred over other coal technology options due to its substantial cost advantages with respect to controlling mercury emissions as compared to other coal technologies.
It is necessary at the national policy planning level to have a coherent vision for the electricity and coal sectors in India that integrates objectives for both sectors. Without simultaneous pursuit of coal and electricity market reforms, a clean-coal technology vision for India is likely to fall short of attaining its objectives. Reforms in the coal industry with likely improvements in coal supply quality and reliability, along with economic attractiveness prospects of advanced coal technologies, are likely to induce greater private participation in this sector. Along with generators and coal suppliers, there needs to be increased participation of other relevant stakeholders such as foreign and domestic equipment manufacturers, banks and financial institutions, environmental agencies, regulatory organizations, research institutes, non-governmental organizations, and policymakers across different relevant government departments. An institutional mechanism for interactions among these different groups of stakeholders would enable information dissemination and learning on technology performances and costs. A primary requirement is to integrate sectoral policies relevant to clean-coal technology development and deployment efforts across different government portfolios handling energy and environment issues. The capability of public institutions in undertaking R&D activities need to be strengthened in terms of greater resource availability as well as building stronger human and infrastructure capabilities. Last, but not least, greater initiatives are needed on part of the government to generate mechanisms for international co-operation in advanced coal technology RD3 efforts involving different groups of public and private stakeholders.
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Document Length: 128 pp.