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Alternatives
to Oil and NaturalGas
RICHARD
L. GORDON
Now, as in thepast,manyare advocatingthe rapiddeto oil and gas. Theirviews are questionable
velopmentof alternatives
for two reasons.First,theygrosslyunderestimate
the difficulties
of
new
coal
and
nuclear
for
which
developing
techniques.Only
power,
utilizationtechniquesare well established,can make a significant
contribution
in thisdecade.Second,theyexaggeratetheeconomicneed
foralternatives.
nuclearpower,coal,and newerapproachFurthermore,
es may not all be viable. Even if thepriceof gas and oil continuesto
rise,thesesourcesmaybe considerably
superiorto coal,nuclearpower,
and thenewersources.
This articlestressestheeconomicforceslikelyto influencethe developmentof variousenergysources.It beginswith a reviewof the
forcesthatlimitrapidchangein marketpatterns.Since theviews presentedhere dependcriticallyon assumptionsabout conventionaloil
and gas supplies,therelevantargumentsare outlined.Thenthespecial
case of coal-basedenergyalternativesis examinedas an illustration
of the difficulties
in securingcompetitivealternativesto oil and gas.
The breederreactoris discussedbrieflyprior to presentingoverall
conclusions.
Complexeconomiessimplydo not make rapid changesin fundamentalprocessessuchas theirenergy-consumption
systems.DevelopThis articledraws heavily on researchsupportedby the National Science Foundation and Resourcesfor the Future,Inc., but the views expressedhere are solely
the author's.
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i 75
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76 i
RICHARD L. GORDON
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77
atleastforthe1970s,wasplacedonstack-gas
stress,
scrubbing,
mary
ofthesulfur
oxides
theexwhich
thedischarge
prevented
bycleaning
haust gases. This engineeringtaskhas takenmuchlongerthanearly
hadpredicted.
of theapproach
Despitetheseproblems,
proponents
thatthesystems
areveryclosetocommercial
somestillinsist
developina substantial
ofthecoal-burning
ment
andcouldbeinstalled
portion
powerplantsin theUnitedStatesby 1980. The electricalpowerindus-
abouttheprospects.
ismuchmoreskeptical
however,
try,
deashed
solidora liquidfuel.Sulfur
couldberemoved
during
process-
coal. Alreadyvarioussmall-scale
ing of bothgas- and solvent-refined
both
are
under
for
various
It is
plants
processes
phasesofdevelopment.
conceivablethata viable technologycould be developedwithina decade.
Similarly,electricultilitieshave begun to use a combinedcyclein
whicha gas turbine(a stationaryadaptationof a jet engine) is connectedto a conventionalboilerthatuses the waste heat fromthe gas
turbineto powera steamturbine.While technicalprogressin conventionalplantsis difficult,
the prospectsforimprovements
in the combinedcycleare quite good. The main drawbacklies in presentlimitationson lightfueloils and gas, whichare used in gas turbines.Attemptsarebeingmadeto developeitheran economicalprocessforproducinggas ora turbinethatcan use heavierfueloils.
Nuclearpoweris presentlyunderconsiderableattackforits environmentalimpacts.Some of the criticismseemsill-founded;the concerns about routinereleases of radioactivityare based on dubious
statistics.
controlscan be developed.However,it
Besides,moreeffective
has not been satisfactorily
establishedthat large accidentalreleases
can be prevented.Thereare stillissues of ensuringpower-plantsafety
and of storingnuclearwastes for the millenniaduringwhich such
materialwillbe hazardous.
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78
RICHARD L. GORDON
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79
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80
1 RICHARDL. GORDON
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A muchstricter
federal
changehasbeenimposed
administratively.
minehealth
andsafety
lawwaspassedin1969inresponse
toa particcoal-mine
severe
disaster.
worker
eviHowever,
unrest,
ularly
general
andwildcat
dentin official
strikes
andgreatly
increased
transfers
tothechange.
Theriseinwages,of
jobs,hasalsocontributed
among
was
the
result
of
worker
An influx
ofincourse, entirely
pressures.
workers
hascreated
additional
difficulties.
experienced
inlaborcostspertonhavebeensupplemented
Theseincreases
by
costsofmaterials
andconstruction.
Thesecostincreases
will
rising
continue
atleastto1980.So longas coalmining
remains
an
probably
unattractive
itswageratesarelikely
torisemorerapidly
occupation,
thanthosein otheroccupations.
To restore
oldlevelsofoutput
per
worker
willbedifficult.
Evenifinflation
vanishes
eastern
tomorrow,
coalforelectric
utilities
willprobably
a million
costforty
tofifty
cents
BTUsby1980.Thereafter
Someenpricerisesmaybemoremodest.
thusiasts
believe
thatadequate
research
willensure
thedevelopment
of
newtechnologies
of
coal
costs
Howcapable lowering mining by1980.
thisbelief
isbasedonlittle
morethanfaith.
Thesources
ofthese
ever,
newmethods
arevaguely
ingeneral
sketched
toautomated
references
mining.
In contrast,
western
coalcostsas littleas fifteen
centsa million
BTUsandmayonlyrisetotwenty-five
centsby1980.Suchcostincreases
wouldlargely
reflect
extra
ofa morerapidexpansion
expenses
andtheneedtouseslightly
lessattractive
resources.
Thefuture
ofwestern
coalwillbeaffected
costs,
bytransportation
thetypeof consumers,
technological
developments,
publicpolicies,
andmany
other
factors.
Because
there
aresomanyfactors,
itisimpossibletodetermine
thegeneral
effects
ofthedevelopment
ofwestern
coalreserves.
Butan examination
ofeffects
in a fewspecific
areas
maybeofsomevalue.
Thefirst
iselectric-utility
fuelinChicago,
which
a crucial
represents
market
forwestern
coal.It willbe assumed
thatstack-gas
scrubbers
willbe available
forcoal-fired
thatstripmining
in theWest
plants,
andnuclear
willnotbebanned,
thatwestern
coalwillstillmeet
power
without
andthatoil-imnport
pollution
regulations
specialprocessing,
continue
to
fees
rather
than
policies
impose
import
quotas.Itwillfurtherbe presumedthat,whateverthedelays,by 1980 uncontrolled
burncoal will be prohibited.It is prohibitedalreadyin
ing of high-sulfur
thecityof Chicagobut couldbe burnedin a plantlocatedsomewhere
downstate.
The initialfuel-priceassumptionsare that westerncoal will cost
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82
RICHARD L. GORDON
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i 83
offorty-five
tofifty-eight
cents.
Commonwealth
Edison
believes
range
thatthismethod
further
understates
thecostsbyassuming
ophigher
eratingrates than can be sustained.It suggestsa range of fiftyto
cents.
theearlylifeofa newplant,
themostprobDuring
sixty-three
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L.GORDON
84 RICHARD
of competing
witheighty-cent
oil, coal wouldcompetewithsixtythree-cent
oil Coal priceswouldhave to be belowfifty-two
centsa
million
BTUstobecompetitive.4
Givenboththeconsiderable
uncertainties
aboutactualcostdevelopandthepossibility
ments
thatonereaction
tosuchdevelopments
would
be a changein policies,
thesecalculations
shouldbe takenonlyas indicators
offuture
No onefamiliar
withtheissueswould
developments.
that
actual
will
to theestimates
argue
prices closelycorrespond
presentedhere.
It canbe argued,
thatitis veryimportant
todeveloppolihowever,
ciesto resistrisingoil prices.Thedoubtsthatoil cancompete
against
either
coalornuclear
ifoil werepriced
powerwouldvanishovernight
closerto itstruecosts.In thecaseofcoal andoil,theintroduction
of
additional
environmental
considerations
favorsoil.Itsenvirongreatly
mental
arebothmilder
andeasiertocontrol
thanthoseofcoal
impacts
It
is
not
clear
whether
the
environmental
ofoil are
mining.
problems
worse
than
those
of
nuclearpower,mainlybecausenucleardantruly
gershavenotbeendetermined.
it appearslikelythatoil is goingto provesuperior
Moreover,
at
leasttoeastern
coalas thefuelin conventional
fossil-fired
Beplants.
causetheCommonwealth
Edisonestimates
ofscrubbing
costsareprobthanthoseof theUnitedStatesgovernment,
oil
ablymorerealistic
costscouldriseconsiderably
andstillbe competitive.
Western
on
coal,
theotherhand,mayindeedpenetrate
markets
eastofChicagoso long
as transportation
costscanbekeptdownandstripmining
is notseverelylimited.
Nuclearpoweris likelyto becomethemainsourceof electricity
ifcoalpricesriseas predicted
hereandoilpricesdo notfall
generation
In thenearterm,
oil orwestern
coal and thennuclearpower
sharply.
willdisplaceeastern
coalsas thebasicpower-plant
fuels.A comeback
is possibleonlyifthecombined
and
coal
cycle
gasification
provesuccessful
andmining-cost
risesarelimited.
Publicpolicywillbe ableto playonlya limited
rolein preventing
theshiftawayfromeastern
coal.It is conceivable
thatcoalmightnot
be competitive
withnuclearpowerevenif sulfur-oxide
control
rules
werecompletely
eliminated.
is
it
clear
that
However, quite
temporary
suspensionof therulesmightslow down thedeclinein theconsumptionof easterncoal by theelectricalpowerindustry.
The wisdomof the
'F. L. Robson at el., Technologicaland EconomicFeasibilityof Advanced Power
Cycles and Methods of ProducingNonpollutingFuels for UtilityPower Stations,
Va.: National TechnicalInformationService,1970).
PB 198 392 (Springfield,
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85
suspensionclearlycan be disputed,buttheissuesarefarfromclear-cut.
The regulationof sulfuremissionsappears to be designedto solve
problemsin heavilypollutedregionsand may be excessivein many
partsof thecountry.Thus in thecoal industrymoreturmoilthannecessarymaybe createdbypollutionregulations.
Even less is knownabout gasificationand liquefactionthan about
electricalpower.All thatis reallyknownis thatwhenusingstrippable
westerncoal,high-BTUcoal gas is likelyto costat least$1.25 a million
BTUs. Althoughsuch gas is moredifficult
to manufacture
than that
is
in
this
essential
used by powerplants,
upgrading
providinga satisfornaturalgas. Oil fromsimilarcoals mightcost as
factorysubstitute
littleas $6 or as muchas $8.
One criticalproblemis thatadequatesuppliesof cheaplystrippable
industries.The
coals may not be available formassivecoal-synthesis
knowncheaplystrippablecoals onlymeeta modestportionof America's oil and gas needs.Since further
explorationmay not unearththe
oil
additionalreservesneeded,the economicalproductionof synthetic
and gas fromcoal is subjectto exactlythesame uncertainties
of other
sources.
is
The
situation
the
energy
aggravatedby
growingresistanceto stripminingin theWest.The vast amountof miningrequired
forproducingall oil and gas suppliesfromcoal may not be tolerated.
The questionremainsof whetherwesterncoal will be the cheapest
sourceof oil and gas. Forexample,oil shale and tarsand mightprove
as a sourceof oil. Consumersmightshiftto oil ratherthan
preferable
use high-costgas.
Is theBreederan Inherently
Alternative?
Inferior
An economicargumentagainstthe presentAtomicEnergyCommission (AEC) case forthebreederhas deservedlyattractedconsiderable
attention.The breederappearsto be inferiorto conventionalnuclear
reactors.
of the breederimplythatit has
Briefly,the special characteristics
lower fuel costs than a conventionalreactor.However,these lower
fuelcostswill be obtainedby investingin an expensivedevelopment
programthatwilllead to commercial
plantswithhighercoststhanorof thebreederemdinarynuclearplants.The officialAEC justification
the
ploys several dubious assumptions.5It not only underestimates
' U. S. Atomic EnergyCommission,Updated 1970 Cost BenefitAnalysis of the
U. S. Breeder Reactor Program, Wash. 1184 (Washington, D.C., Government
PrintingOffice,1972).
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86
RICHARD L. GORDON
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