World governments recognize strategic value of fossil fuels

Power, May/Jun 2001 by Hylko, James M, Javetski, John

During the Electric Power 2001 Conference, the World Energy Council sponsored a session on "Strategic Value of Fossil Fuels for the Future of Electric Power." Regional perspectives from Africa, Europe, and Asia, and supplemental data obtained from the US Dept of Energy's (DOE) Energy Information Administration, centered around one common theme: World energy consumption is projected to increase by as much as 60% through 2020.

Much of the growth is expected in developing regions, particularly Asia and Central and South America, where energy consumption is expected to more than double. Already, for example, China ranks as the second largest energy consumer in the world, behind the US. But its growing economy is projected to drive energy-demand growth through 2015 at an annual rate of about 5%, compared to just 1% during this period in the US and other western countries.

To fuel this demand, developing countries are looking to fossil fuels, predominately coal. Consider that approximately 75% of China's current electricity production comes from coal. World coal consumption is expected to increase at a rate of 2% annually, with China and India totaling almost half of world consumption by 2010. According to the International Energy Agency, new capacity additions for power generation, including the rehabilitation of existing plants, will amount to 1200 GW over the next 15 years, and 50% of the additions will be coal-fired.

Coal concerns

In addition to fueling powerplants, the projected growth of coal will almost certainly fuel disputes--for example, with environmental activists. Their concerns include health effects from particulate emissions, land disturbances, solid-waste disposal problems, regional effects of SO2 and NOx emissions, and global effects of CO2 and methane emissions.

Although the Kyoto Protocol would require large cuts in carbon emissions from western nations, it would not result in worldwide stabilization of emissions, according to speakers at Electric Power 2001. In fact, carbon emissions from developing countries would continue to increase under the Kyoto Protocol, as a result of their economic expansion, growing demand for energy, heavy reliance on coal, and low plant efficiencies. Many developing countries use 15- 30% more fuel to produce a given amount of electricity than western countries do.

Conference participants concluded that clean coal technologies must be implemented to reduce costs in the coal-to-electricity chain and to improve environmental features.

Greece and Turkey

Central Asia, with its vast hydrocarbon reserves, particularly in the Caspian Sea area, is rapidly becoming an important mid- to long- term supplier of oil and gas to Europe and the Western Hemisphere. These reserves provide a valuable strategic alternative to either Russian or Middle Eastern supplies by diversifying the current supply base, and securing uninterrupted and economically attractive supplies for Western economies. However, bringing these reserves to market will depend on the definition and firm establishment of geopolitically stable, technically feasible, and economically viable supply routes. Greece and Turkey offer significant advantages here; they are expected to become key links in the emerging oil- and gas- supply schemes.

Turkey's strategic location makes it a natural "energy bridge" between major oil producing areas in the Middle East and Caspian Sea regions on the one hand, and consumer markets in Europe on the other. Turkey's port of Ceyhan is an important outlet both for current Iraqi oil exports and for potential future Caspian Sea exports. Most observers say that the area poses the lowest political risk of all competing land routes, because, apart from Turkey, it transits European Union (EU) territory only--Greece and Italy. Pipeline and electricity interconnection projects may ultimately tie in the EU, Asia, and Africa.

In order to encourage foreign capital participation in Turkey's power sector, the Parliament enacted a new law on Feb 20. The law contains such reforms as an autonomous regulatory authority governed by a separate board; a new licensing framework for market participants; an obligation to provide nondiscriminatory third-party access to the transmission and distribution networks; and liberalizing electricity trade through organized power exchanges. Privatization will be achieved through sale of assets, and with the transition to be implemented over a two-year program.

Synfuels in the US

Another session at the Electric Power 2001 Conference was conducted by the Energy & Mineral Law Foundation. A central theme here was the production and use of synthetic fuels (snyfuels)--clean- burning fuels produced from coal.

The US Congress will soon debate a bill that proposes to change the placed-in-service deadline for tax credits awarded to synfuel production facilities. The bill would extend the deadline from 1998 to 2011. If the bill becomes law, it will surely trigger a second round of construction of synfuel machines and turn the economics of today's synfuel tax-credit "industry" upside down