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Is Clean Coal Too Expensive?

Policies that subsidize the demonstration of large-scale technologies make economists queasy. Severin explored this topic in a recent blog.

In retrospect it’s easy to point to failures, including the United States Synthetic Liquids Fuels Program that died in the 1980s and Solyndra’s bankruptcy in 2011. But there are a few clear winners too. Take the government-supported technologies that enabled the US shale oil and gas boom.

Of course in retrospect, it’s easy to identify the failures and the successes. It’s much harder to do it in real time. Still, policymakers presented with many options and limited resources need to make decisions.

One important set of technologies that deserves a critical review right now is the use of coal to produce electricity but keep the carbon dioxide from entering the atmosphere and contributing to climate change.

The Tavan Tolgoi coal mine in Mongolia. Mongolia exports most of its coal to China.
The Tavan Tolgoi coal mine in Mongolia. Mongolia exports most of its coal to China. SOURCE:

Many of the world’s fastest growing economies are relying on coal to lift their populations out of poverty. In 2013, 70 percent of global coal consumption occurred in rapidly growing Asian countries. Remaining coal reserves are enormous too. According to BP’s latest statistical survey, world coal reserves in 2013 were sufficient to meet 113 years of global production.

If clean coal technologies do not become cost effective, developing countries will continue burning coal in an uncontrolled way to meet societal needs.

In the US, clean coal technologies have received hundreds of millions of dollars in subsidies since the mid-2000s, but the federal government is starting to yank its support.

In February, the US Department of Energy pulled the plug on the high profile FutureGen 2.0 project in Illinois. The project’s blue chip sponsors, including major coal producers like Peabody Energy and BHP Billiton, as well as foreign utilities E.ON of Germany and China Huaneng Group of China, needed continued government subsidies to build this first-of-its-kind project. The project had already gone through more than $200 million in federal money, and the DOE decided that was enough. Now FutureGen 2.0 has joined the dozens of other cancelled carbon capture and storage (CCS) projects.

While news from the Prairie State (Illinois) is grim, there has been some progress in the Hoosier State (Indiana), Magnolia State (Mississippi), and the Land of Living Skies (Saskatchewan!). Three plants have been completed or are approaching completion:

  • Duke Energy’s 595 megawatt Edwardsport Integrated Gasification Combined Cycle (IGCC) plant in Indiana. The world’s first large scale IGCC plant. The carbon capture and storage component of the project was dropped part way through construction, although the plant could be upgraded with carbon capture and storage in the future.
    Online date: June 2013. Forecast cost: $1.985 billion. Actual cost: $3.55 billion. Cost per unit of capacity: $6,000 per kilowatt.
  • The Southern Company’s 582 megawatt Kemper plant in Mississippi. The world’s first large scale IGCC plant with CCS. The carbon dioxide will be injected underground in a nearby oil field. Online date: first half of 2016. Initial forecast cost: $2.4 billion. Revised forecast: $6.2 billion. Cost per unit of capacity: over $10,000 per kilowatt.
  • SaskPower’s 110 megawatt Boundary Dam Project in Saskatchewan. The world’s first post-combustion coal-fired CCS project. The plant takes the flue gas from a pre-existing coal power plant and strips out the carbon dioxide. The carbon dioxide will be injected in a nearby oil field. Online date: late 2014. Actual cost: C$1.467 billion. Cost per unit of capacity: over US$12,000 per kilowatt (at today’s exchange rate).

The three plants received either direct government subsidies, or have been authorized by the government to recover costs from their captive customers—a sort of off-the-government’s books subsidy.

To put the plants’ costs in perspective, the graph below compares the capital cost per kilowatt of these plants with the capital costs of other technologies as estimated by the US Energy Information Administration:

Data from US Energy Information Administration (

The capital cost does not tell the whole story of how power generation technologies compare. Plants also vary in terms of fuel cost, percentage of time they operate, operations and maintenance costs, expected life and pollution they generate. Capital costs are, however, one of the most important components of the comparison between technologies.

The graph shows that these three plants were more expensive than the estimates for similar plants of the same technology, and were much more expensive than many alternatives.

However, it is also important to note that substantial knowledge and experience have been produced as a result of those government investments. Valuing that knowledge and experience is difficult.

Now it is time to ask—should the government subsidize additional coal projects like these? Should these first-of-their-kind projects be the last-of-their-kind?

Does this guy deserve more subsidies? Maybe so. SOURCE:
Does this guy deserve more subsidies? Maybe.
SOURCE: Punch, Vol. 105, August 19, 1893 at

To make this decision, policymakers should be exploring a number of things: Why did the projects cost so much? What caused the budget over-runs? How can costs be reduced and output increased for future plants? Is there a plausible path to make the technology cost competitive? How can clean coal avoid the increasing cost trends experienced by nuclear energy, highlighted by Lucas in a prior blog?

Policymakers need to carefully consider subsidizing second, and even third, versions of each promising clean coal plant. That may be a hard case to make in the US given expectations of large natural gas supplies and low natural gas prices, but European and Asian countries may be able to justify further government investments in coal.

The opportunity is too big to ignore coal.



Andrew G Campbell View All

Andrew Campbell is the Executive Director of the Energy Institute at Haas. Andy has worked in the energy industry for his entire professional career. Prior to coming to the University of California, Andy worked for energy efficiency and demand response company, Tendril, and grid management technology provider, Sentient Energy. He helped both companies navigate the complex energy regulatory environment and tailor their sales and marketing approaches to meet the utility industry’s needs. Previously, he was Senior Energy Advisor to Commissioner Rachelle Chong and Commissioner Nancy Ryan at the California Public Utilities Commission (CPUC). While at the CPUC Andy was the lead advisor in areas including demand response, rate design, grid modernization, and electric vehicles. Andy led successful efforts to develop and adopt policies on Smart Grid investment and data access, regulatory authority over electric vehicle charging, demand response, dynamic pricing for utilities and natural gas quality standards for liquefied natural gas. Andy has also worked in Citigroup’s Global Energy Group and as a reservoir engineer with ExxonMobil. Andy earned a Master in Public Policy from the Kennedy School of Government at Harvard University and bachelors degrees in chemical engineering and economics from Rice University.

19 thoughts on “Is Clean Coal Too Expensive? Leave a comment

  1. Coal is basically the only provider of low MC electricity of course not accounting for the cost of emissions. Many developing countries particularly China and India have no option but to rely on coal as their main source of energy. Countries with no gas resources of their own may also have to rely on coal despite the significant increase in LNG trade. Developed countries, in turn, have no option but to continue relying on coal as a major source of energy for basically the same reason.
    Progress and the application of clean coal technologies have been disappointing. IG and IGCC have proved an order of magnitude more expensive than simple generation technologies as well as more efficient generation technologies as the article notes. Most disappointing though is the IG or IGCC heat rate which at 9000 and 11,000 Btu/kWh respectively exceeds or approaches the heat rate of simple cycle and CC plants. Carbon capture also seems to present serious issues including the possibility of geologic stored gas resurfacing to adequate use for the CO2 captured. The major challenge to development of clean coal, however, is posed by the availability of particularly natural gas the economics, treaties, and controls on emissions.
    All this, however, does lead me to call for continued support for research in clean coal and for the right incentives and support policies. Clean coal is an emerging technology. Costs are most likely to drop rather than increase. New technical frameworks are likely to be designed that employ clean coal technologies that can in turn prove them more economical. A process such as IGCC can feasibly be integrated in oil and gas production and processing to provide the required utilities. Given the highly energy intensive nature of IGCC, it can be integrated to take advantage of rejected heat produced in gas processing to perform the required gasification, produce the power and steam required and produce the CO2 that might be required in tertiary oil recovery.
    The development of policies targeting clean coal need to be guided by the externality posed in the analysis, costing, and threat of emissions. Accordingly, the question is of 1) the business models that need to be developed, 2) the impact the models would have on utilities particularly conventional generation, and 3) how regulation will evolve to support clean coal and ensure that cost benefit analysis is observed in both the medium and long run.

  2. Thanks Andrew for your thoughtful column.

    The problem with further government subsidization of clean coal is that there are so many public priorities–from education and health care to funding basic scientific research, other clean energy technologies, transportation improvements, etc.–and talent, resources, and money are not unlimited.

    This means that governments must make choices and when it comes to energy and climate change as we stand at a crossroads and must choose a path. Since the 1970s we have continued to hedge our bets by supporting all of the above energy policies and clean coal has clearly not progressed as much as wind, solar, energy efficiency, plus what is now possible with smart development and public transit to take a lower energy path and still have a productive economy. This means its time to end wasteful spending on a dead end technology and instead invest in what is proving to be a more productive pathway into the energy future. That means calling it quits on public subsidies for clean coal projects, as if the black rock could ever be clean to begin with.

  3. Continued widespread use of coal without CCS by the United States and developing Asian nations will make achievement of 80% GHG reduction goals very difficult, if not impossible. Life-cycle accounting of GHG emissions from ALL fossil fuel pathways, energy source to end uses, is an essential first step in any analysis of project feasibility. Sustainable business models based on achieving life-cycle carbon reduction goals must be the primary requirement for securing project financing for any fossil energy project. With respect to coal, an integrated systems approach that combines unit processes to maximize the production / manufacture of value-added co-products from coal, i.e. electricity, merchant CO2, high purity hydrogen, high quality solid substitutes for cement / concrete / asphalt and / or other co-products, could provide sufficient life-cycle carbon reductions in many regions of the world to justify continued use of coal. The catch is that government policy and allocations of external costs MUST stimulate use of innovative material handling and chemical / energy unit processes that are more cost-effective than continued use of simple combustion technologies combined with traditional ash and flue gas CO2 recovery systems. Mine-mouth gasification of coal combined with syngas and solids processing to generate high value chemicals, solid materials and fuels, would reduce transportation / distribution costs and also support other activities needed to generate revenues that can be used to reclaim mined lands to productive uses.

    • Thank you for the comment. I gather from your comment that there are a quite a few technical issues surrounding the commercialization of clean coal that merit additional research, development and demonstration.

  4. We have been looking for support to test and BSER Certify our Carbon Capture Utilization System technology. The DOE has money but we were informed it is set aside for CCS projects, the expensive one.
    Combusted exhaust is a product that needed to be given a purpose instead of being vented into the atmosphere.
    There is a lot of Heat Energy in this exhaust that needs to be Recovered and utilized.
    Our CCU technology transforms the CO2 on site into useful – saleable products.
    With the heat energy removed / recovered, Water is “created”. Collect this distilled water as it is becoming a precious commodity.
    Our goal is to Improve America’s Economy by creating many jobs and our Environment by removing this combusted exhaust from entering our atmosphere.
    Jack – ESP’s do consume a lot of electricity. We have an ash removal technology that will consume just a fraction of that electricity to do the same job of removing the ash particulate.
    Applying this technology will mean more electricity going into the grid = Profit to the utility.

  5. The question “, , , should the government subsidize additional coal projects like these?” is not precisely the right question. This question implies that solving the GHG emissions challenge will make coal fired generation a clean fuel source. To be sure coal fired generation is the technology with the highest GHG emission rate. But were CCS perfected and no longer was there a worry about the GHG emissions from burning coal, coal generation would still inflict significant environmental damages. The GHG emissions from burning coal are only a part of the portfolio of damages.

    In order to make an informed policy decision, the true life-cycle impact of burning coal must be fully measured and incorporated. Further, if generation options are limited, then coal must also be compared to the true life-cycle impact of the alternatives. Coal is a base-load resource, thus the best point of comparison is likely nuclear. Still, many analysts compare coal to gas. So, does coal mining, processing and transporting impose a greater or lessor risk than hydraulic fracturing, building pipelines and burning gas? Again, accept the heroic assumption that GHG emissions are no longer in play. Under such a circumstance, coal remains an incredibly damaging fuel. Without an honest, robust analysis of life-cycle impacts any policy decision will be poorly informed.

    • I was reading along at all these posts and hoping to see a post that addressed the reality of using coal by burning it for energy generation has one glaring reality… as you so eloquently and very simply ,COAL IS “an INCREDIBLY DAMAGING fuel” . It seems as if there is no consideration of the other aspects of using coal that are inclusive or exclusive of coal combustion. Just mining processing and transporting coal will create non GHG emission of particulate matter (PM), specifically PM 2.5 or PM 10 that is not only emitted from combustion but also non combustion from coal processing until it actually arrives at the combustion process. PM is a significant emissions issue that affects the quality of air. I live in NW Indiana where we have a significant steel industry and PM is of great concern. Finally, I sincerely appreciated reading your post and the simple reality you have brought to light, CCS (with or without government subsidies) may be a consideration for the use of coal BUT ultimately COAL is a VERY DAMAGING FUEL.

  6. In the 2050 time frame, IPCC sees bioenergy with carbon capture and storage as one of the most important sources of energy because of its potential for negative emissions; all 2°C scenarios and half of 3°C scenarios depends on BECCS. (Unfortunately, the amount of bioenergy needed will be north of humongous.) In addition, CCS could work with large point sources of CO2 other than power, such as steel mills. And then in a decade or three we will face the question of what to do with all the fossil fuel plants that Germany, China, and the US are building/recently built (2.2 GW lignite in Germany, ugh). Will CCS added on be cheaper than replacing the plant?

    I don’t know the answers to these questions, but would like to see them addressed as part of cost analysis.

    Your EIA estimated overnight capital cost graph makes SaskPower look more expensive/kWh than solar, not sure that is the case.

    • Based on the relative importance of CCS in Working Group 3, perhaps it makes sense for California to subsidize it ahead of some of the other non-nuclear methods we subsidize/mandate.

    • Good point that demonstration of CCS in the coal context could have applications for other fuel sources like bioenergy.

  7. The same line of reasoning extends to end-use efficiency, distributed solar, utility-scale solar, and onshore and offshore wind – that there are opportunities to further reduce their LCOE (a better metric than kW capital cost), given that each of these options of providing more than half of total energy service needs. A big difference, however. Is that EE/S/W don’t require government long- long-term indemnity subsidies against CO2 leakage, plus have virtually no fuel and water inputs and associated price volatilities. These all need to be monetized values included in the LCOE of the delivered energy services from each option and then Priority ranked. I doubt that coal+CCS could make the market clearing price, falling in the laggard ranks with nuclear power.

  8. The few articles I’ve read on the operating and maintenance-related costs for CO2 capture suggest it might consume as much as 35% of the plant’s electrical output. Even if you could build a coal plant with CCS for something approaching the price of a pulverized coal plant without CCS, the operating costs of sequestration are enormous.

    Another problem with CCS you did not discuss is the potential for CO2 leaks from an underground store that is not adequately monitored or controllable. Whereas toxins introduced into a water supply by fracking has longer-term health effects, CO2 that leaks from an underground store into a populated area would cause almost instant mass casualties.

    Finally, coal plants are dirty and there’s no getting around it. I’ve been in a number of them and the only ones that were acceptably clean were the stoker-fired machines in Virginia that are owned and operated by Cogentrix.

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