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.
By William Strauss | August 12, 2014

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.

Author: William Strauss
President, FutureMetrics
[email protected]