The Many Benefits of Replacing Coal With Wood Pellet Fuel

Electricity generated from pellets in converted coal plants is almost
the same cost as electricity generated from natural gas, by far the
cheapest way to make new, low-carbon power.

Use of fossil fuels is driving a rapid increase in the concentrations
of CO2 in the atmosphere and oceans.  The combustion of coal, petroleum
products and natural gas, as well as land use changes are, in a matter
of a few centuries, releasing carbon that was captured over hundreds of
millions of years.  There is overwhelming consensus that if we are to
mitigate the impacts of increasing CO2 concentrations, we need to change
how we create energy.  But there is also fear that in doing so we will
inhibit economic growth and harm business. 

There is a simple and ready-to-deploy way of mitigating carbon
from power generation that is good for growth and business.  It is by
converting older coal power plants to wood pellets.  The cost of power
from the converted plants is about the same as power generated from
natural gas, and the strategy results in creating, rather than
destroying, jobs.  As a bonus, the strategy also provides a motivation
to sustain and expand our working forests.

One might think that there is no way that using wood pellets for
fuel in a power plant can compete with fossil fuels.  That would be true
if the cost of the fuel were the only input to the total cost of
generation.  If only fuel cost mattered, utility-scale wind and solar
power would be free, and nuclear power would be cheap.

There are four key components to the equation that calculates the
total cost of generation: repayment of the capital cost to build the
plant, the fixed and variable operation and maintenance (O&M) costs,
the fuel cost, and the plant’s capacity factor.  For nuclear plants,
there is a fifth component: decommissioning costs.

The capacity factor is a ratio of how much power the plant
actually generates versus what it could generate if it ran at 100
percent output every day of the year.  Capacity factor matters because
the cost of each megawatt-hour generated has to contain a portion of the
repayment of the capital cost.  Lower capacity factors, such as those
for wind and solar, put a higher capital cost repayment burden on each
megawatt-hour. 

Conversion of a pulverized coal plant to a pulverized wood pellet
plant is relatively straightforward.  Coal plants grind the coal into
dust and then pneumatically transport that dust to wall-mounted burners
in the boiler.  The coal dust combusts very rapidly; almost like a
liquid fuel.  Grinding pellets into dust and using them in essentially
the same hardware has been proven to be technically feasible.  For
example, England’s largest power plant has converted two of its six
650-MW boilers to use wood pellet fuel instead of coal.  That plant is
generating reliably and just as many megawatts are being generated from
pellet fuel as from coal.

The U.S. has 428 pulverized coal power plants larger than 50 MW,
typically aged.  For those plants to keep running, most will have to
upgrade pollution control systems to meet sulfur, mercury and NOx
emissions limits. 

The good news is that all of those older plants are fully paid
for.  That means that the initial capital cost component of the total
cost equation can be ignored.  The amortized capital cost is by far the
largest contributor to the total cost of generation.

Assuming that plants older than 35 years are fully paid for, even
with pellet fuel 2.9 times more expensive per million Btu than coal, a
converted coal plant generating power with pellets creates electricity
at a rate that is less than one-third of a cent more expensive per
kilowatt-hour than natural gas. 

Electricity generated from pellets in converted coal plants is
almost the same cost as electricity generated from natural gas, by far
the cheapest way to make new, low-carbon power. Not only does this
strategy provide new low-cost, low-carbon capacity, it also has a very
positive impact on job creation.  It takes 2,540 jobs to provision a
500-MW coal plant with coal.  To provision the same-sized power plant
with pellet fuel takes 3,480 jobs.

Long-term demand for sustainable refined pellet fuel will
motivate the preservation of existing working forests.  It will provide a
strong market signal for investment in improving forest management and
expanding the stock of trees in our forested lands.

This is a strategy for decarbonization of the power sector that
does not increase the cost of power, and actually adds jobs.  It also
incentivizes the expansion of our working forests, which will increase
the amount of carbon sequestered. 

All of the fears about economic harm that typically paralyze the
political process are missing.  Our policymakers need to know that there
is a way to be proactive on carbon without raising power rates and
creating jobs.