Carbon capture and sequestration, i.e. clean coal: reality, many say. If so, when? An American Electric Power executive got a bit of questioning today in Houston about that.
AEP is burning coal at a 20-MW pilot facility in West Virginia, and capturing the carbon dioxide with a chilled ammonia process, then burying it on site. The next step, said Nick Akins, executive vice president of generation, is to bump up the generation capacity to 235 MW in 2011 or 2012. CCS will probably be widely deployed after 2020, he told the McCloskey coal conference associated with Cambridge Energy Research Associates' enormous annual conference.
But he got questions about that 2020 date.
Our colleague Jeff Ryser reports the audience noted that two years ago at the CERA event, CCS was spoken of as a technology that might be expected by 2015. US and European experts now talk about no earlier than 2020 and maybe not before 2025. If ever.
Of course, that's what federal assistance is for, and the economic stimulus bill at last look still had money for advanced coal, including $2 billion for a CCS project that seems to meet the description of the FutureGen project planned for Mattoon, Illinois.
At any rate, and unsurprisingly, AEP's Akins said in Houston that coal was the company's "main issue." AEP is taking a lead role in determining the future of CCS, he said, so it can be "out front on the technology" and "have a seat at the table."
As for the coal industry itself, at least one banker described a bright outlook, for this year at least, despite all the troubles. James Griffin, managing director at the private bank Rothschild, said US coal companies should "generate a considerable amount of cash" this year, and thus be able to "strengthen their balance sheet" as a result of coal sales made in 2008 at "nice prices." Those prices, Griffin noted, have subsequently "crashed."
The coal industry has a lot to overcome, he conceded -- global warming concerns, the rise of renewable energy sources, weak demand and low prices, a "low public image" – but still, "the inconvenient truth is that there are plentiful coal reserves" in the US and elsewhere, and, in the long term, he said he was "very optimistic" about the industry.
The banker said that while all mining stocks are down, coal stocks are oversold, and it might be time to buy. He said that last May, coal stocks were trading at 24 times EBITA, or earnings before interest, taxes and amortization, while now they are trading at five times EBITA. Griffin reasoned that that buyers of coal stocks should be prepared to hold them for at least a couple of years, the duration of the time he says he thinks it might take for the US economy to come back to strength.
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