Green Coal The LowCost, LowCarbon Alternative

1
Green Coal The Low-Cost, Low-Carbon Alternative
Energy Summit 2009 Yampa Valley Partners May 14,
2009
Fredrick D. Palmer Senior Vice President
Government RelationsPeabody Energy
2
Electricity Makes the Difference Korea
Only 20 of North Koreans have access to electric
power South Korean access
approaches 100

• South Korea ranks 32nd in GDP per capita North
  Korea ranks 156th
• The Infant Mortality Rate in North Korea is 12
  times higher than South Korea
• South Korean preschool children average 3 inches
  taller and 7 pounds heavier than North Korean
  children

Source Orbiting Defense Meteorological Satellite
Program (DMSP)
3
The Incredible Growth of TVA
Electricity Generation (Billion kWh)
Electricity Consumers (millions)
Source Tennessee Valley Authority, U.S. Energy
Information Administration
3
4
Coal is the Backbone of TVA

• Provides 64 of TVA electricity
• Serves 158 municipal and cooperative power
  distributors
• Tax payments of over 450 billion
• TVAs production costs are third-lowest among the
  nations 50 largest electric utilities
• Electric reliability of 99.999 for 8 consecutive
  years

TVA has 59 coal-based power plants with 15,075
MW of capacity
Mother, I didnt know how dark our house was
until we got electric lights. child in
Shelby, Ky., when TVA electricity came to the
farm
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Green Coal The Answer to Why and How for Energy,
the Economy and the Environment
Key Themes

• The worlds current energy capacity is
  insufficient to support sustained population and
  economic growth
• Global coal reserves are ubiquitous, understated
  and sufficient to provide for centuries of
  expanded use to allow more people to live longer
  and live better
• Clean coal technology has solved other emissions
  challenges, and carbon capture and storage (CCS)
  is the key to unlocking the full value of coal
• Climate policy goals amidst economic progress
  cannot be met with coal without CCS

6
Global Population Growth Trends Require Enormous
New Energy Supply
Current U.S. population 300 million U.S.
population in 2040 400 million
World Population in Billions
7
The World is Consuming Far More
Oil Than it is Finding

Oil Discoveries Off 80 from Peak in 1961
50
50.0
Billion Barrels Per Year Discovered
Reserve Additions
45.0
40
40.0
Billion Barrels Per Year Consumed
35.0
Consumption
30
30.0
25.0
20
20.0
15.0
10
10.0
5.0
0
0.0
2007
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
Source ASPO Ireland, Newsletter, August 2007
U.S. Energy Information Administration, World
Petroleum Consumption, 2008 and Management
Information Services, Inc., 2008.
8
Wanted Six New Saudi Arabias in 21 Years
Required New Production
64 mmb/d
Existing Production
An additional 64 mmb/d of oil six
times Saudi Arabias production needs to be
brought on stream from 2007 to 2030.
8
Source International Energy Agency, 2008
9
Iran, Russia, Qatar, Algeria and Indonesia Have
Announced an LNG Cartel
Most Gas Reserves Are in the Middle East and Asia
LNG is a Global Commodity, Priced Off of Oil
Benchmarks
10
Coal Continues to be the Worlds Fastest-Growing
Fuel
Six-Year Change in Global Energy Consumption
Compound Annual Growth Rate 0.6
1.7 2.9 2.9 5.1
4
Nuclear
11
Oil
19
Hydro
2001 - 2007 Change
19
Natural Gas
35
Coal
Seaborne Coal Demand Grew 7 Annually
Source BP Statistical Review of World Energy,
June 2008.
11
Quality of Life Depends on Electricity
Electricity Use and Human Development
1.0
Sweden

• Italy

United States
Canada
Finland
0.9
Argentina
Qatar
UAE
0.8
Malaysia
Brazil
China
0.7
South Africa
Indonesia
Morocco
Human Development Index
0.6
India
Life expectancy, educational attainment and
income all correlate with per capita energy use
Bangladesh
0.5
Zimbabwe
0.4
Zambia
Mozambique
Ethiopia
0.3
0.2
0
5,000
10,000
15,000
20,000
Electricity Use (kWh per capita)
Source International Energy Agency, World Energy
Outlook 2005.
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Societies with Greater Access to Electricity
Live Longer and Better
Out of Poverty Study Energy and Social Progress
Closely Linked
DrinkCleaner Water
EatBetter
Are BetterEducated
LiveLonger
SurviveChildhood
Access toImproved Sources ()
Under FiveDeath Rate/1000
Life Expectancy(years)
Under-Nourished ()
Literacy Rate ()
Source Dr. Frank Clemente at Penn State
University 25, 70 and 90 represent randomized
samples of 25 countries in which 25 or less, 70
or 90 or more of the population has access to
electricity.
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Coals Contribution to China is Model for
Developing World
Electrification in China a Remarkable Success
Story

• Access to electricity increased 76
• GDP increased 300
• Irrigated land increased 9
• U.N. Human Development Index increased 22

Enhancing Progress

• Food production index increased 88
• Steel production increased over 300
• Concrete production increased 250

Coal accounted for 65 of the increase in energy
production from 1990 2005
Strengthening the
Backbone

• Poverty decreased 45
• Undernourished population decreased 25
• No access to improved sanitation decreased 27
• Infant mortality declined 39

Creating Hope
Source International Energy Agency, World
Energy Outlook 2008.
14
The Big Picture Our Energy Destiny
is Being Determined Globally
Demand Increase in Billion Kilowatt Hours 2006 -
2030

1,090 billion KWh
13,184 billion KWh
USA
Rest of World
14
Source International Energy Agency, 2008
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And That Future is Based on Coal
China built more coal generation in a single
year 2007 than the United Kingdom built
in its history.
Source Data Derived from Platts Proprietary
Database, 2009
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The Ever-Increasing Role of Electric Power
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More Electricity Means Less CO2 per GNP
Electricity
CO2/GNP
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Coal is the Continuing Cornerstone of the U.S.
Electricity Supply
In 2030, coal is projected to supply more than
2,300 billion kWh of electric power to American
consumers more than the total electricity use
of Japan, Germany, France and the United Kingdom
combined

Other fuel 54
Other fuel 51
Coal 49
Coal 46
2005
2030
18
Source U.S. Energy Information Administration,
2008
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Coal is Americas Greatest Energy Asset
America is Coal-Rich Home to 27 of Global Coal
Reserves
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Low-Cost Electricity from Coal
Retail Cost Per kWh Percent of Coal Generation
13.7 2
6.7 8
6.6 91
7.4 62
7.8 60

7.3 7
16.7 14
9.0 66
5.7 1
7.1 52
9.2 61
5.7 94
9.4 53
7.0 77
6.5 66
8.4 85
9.9 22
7.1 95
9.2 48
5.6 98
6.5 82
8.1 44
8.6 65
7.6 73
6.9 81
13.0 1
6.3 94
8.1 61
8.0 63
8.0 48
7.9 41
MA 16.2 25 CT 17.0 15 NH 14.6 15 RI 16.1
0 NJ 14.9 15 VT 12.3 0 MD
13.0 58 DE 12.3 70
7.8 47
9.1 37
8.3 74
average retail price per kilowatt hour for
CY 2008 percent of total generation from coal
for CY 2008
9.0 63
8.6 51
8.9 35
10.9 37
9.4 26
10.8 30
14.5 10
29.2 15
lt 9.5 gt 9.5 Hydro
Source Energy Information Administration, March
2009.
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Electrotechnologies Benefit Boththe Environment
and the Economy

• Electrotechnologies are more efficient than
  fuel-burning counterparts, e.g. laser welding
• Electrotechnologies produce less CO2 per GNP
  unit
• Reduced electricity prices will accelerate the
  use of electrotechnologies
• Thus, increasing the price of electricity to
  reduce consumption is counterproductive

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But Electric Rates Are Increasing
Source Edison Electric Institute, 2008
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Dependence on Natural Gas
Means Higher Electricity Rates
Source U.S. Energy Information Administration,
2008
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Why California Uses Less Electricity
High Rates, Fewer High-Paying Jobs
California has lost over 400,000 manufacturing
jobs since the 2000-2001 rate increase.
Source U.S. Energy Information Administration,
U.S. Department of Labor
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Coal Plant Cancellations Create Dash to Gas

• Increase length of time natural gas sets the
  price of electricity
• Significantly increase natural gas consumption
• Increase natural gas prices by more than 175
• Have minimal impact on CO2 emissions from the
  electricity sector
• Professor Jay Apt, Carnegie Mellon University

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25
25
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Coal with CCS The Low Cost, Low Carbon Option
Coal with CCS 15 - 50 Less Expensive than
Alternatives
The cost of delivered wind power to the populous
Northeast or Southeast would be 12 to 20
cents/kWh
Cents per kWh
Apt. et al., A National Renewable Portfolio
Standard? Not Practical. Carnegie Mellon
University, 2008.
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Clean Coal TechnologyA Technological Success
Story
Reduction in SO2 and NOx Over Time
4.37
1.08
0.85
0.39
0.30
0.26
0.16
0.182
0.12
0.07
0.065
0.05
0.027
Near-Zero
0.015
U.S. Average 2007
Clean Air Interstate Rule 2010
Prairie State Supercritical (Permitted) 2011-2012
Clean Air Interstate Rule 2015
U.S. Average 1970
FutureGen (Goals) TBD
Taylorville IGCC (Permitted) 2015-2016
Turk Ultra- Supercritical (Permitted) 2013-2014
NOx reductions mandated by 2009. Source EPAs
Clean Air Markets database, January 2009 Project
Permits FutureGen Final Environmental Impact
Study, DOE/EIS-0394, November 2007.
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Peabody is the Global Leader in Clean Coal
Solutions
Advancing Signature Climate Projects in U.S.,
China and Australia
BTU is the only non-Chinese equity partner
in GreenGen, Chinas centerpiece commercial
climate initiative
BTU is a long-standing supporter of the Vision 21
and FutureGen clean coal projects
BTU is a member of Australias COAL21 Fund to
advance near-zero emissions through technologies
such as oxyfuel
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The Green Coal Path to Near-Zero Emissions
New Supercritical Plants and CCS Demonstration
Essential
Advanced Supercritical Combustion Plants
Demonstrating Carbon Capture / Storage (CCS)
Commercial CTG/CTL with CCS
Commercial IGCC with CCS
Retrofitting PC Plants with CCS
2007 2010
2020 2030
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1,600 MW Prairie State Energy Campus is Under
Construction in Southern Illinois
Global Model for Building Modern Plants in the
Public Interest
Northern Illinois Municipal Power Agency 120 MW
Illinois Municipal Electric 240 MW
Prairie Partner, Inc. 130 MW
Amp-Ohio 368 MW
Indiana Municipal Power 200 MW
Missouri Joint Municipal Electric Utility
Commission 195 MW
Kentucky Municipal Power 124 MW
Southern Illinois Power Cooperative 125 MW
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Obama Administration Green Coal is A Great
Resource More Funding Proposed
Obama Proposes Five Major CCS Projects
President Barack Obama
Secretary of Energy Steven Chu
EPA Administrator Lisa Jackson
Coal is a vital resource in our country. It
provides about 50 of our electricity.
The coal resources in the United States are
immense. I am hopeful and optimistic we can use
those resources in a clean way. Its really a
question of technology. I think we will be using
that great natural resource.
Well invest in technology that will allow us to
use more coal, Americas most abundant energy
source, with the goal of creating five
first-of-a-kind coal-fired demonstration plants
with carbon capture and sequestration.
Source President Obama Aug. 4, 2008 speech in
Lansing, Mich. Secretary of Energy Chu Jan. 13,
2009 Senate Energy and Natural Resources
Committee hearing EPA Administrator Jackson
Jan. 14, 2009 Senate Committee on the Environment
and Public Works hearing.
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Behind the Numbers Fossil Fuel RD
3.4 Billion Goes a Long Way
Funds will support significant green coal
research and projects to commercialize CCS
Dollars in Billions
Geologic Surveying Research
Geologic Storage RD
Clean Coal PowerProjects
Industrial CCS RD
Administration
Energy RD
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Enhanced Oil and CBM RecoveryComes with Carbon
Management
Enhanced Oil and CBM Recovery Comes With Carbon
Management

• U.S. has identified carbon capture and storage as
  promising method to manage carbon
• Major partnerships under way around the country
• EOR could lead to an added 2-3 million barrels
  per day of oil production

Source National Coal Council The Urgency of
Sustainable Coal 2008 study.
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What Two Million Barrels a Day fromCO2 with
Enhanced Oil Recovery Would Do
Source International Energy Agency, 2008
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FutureGen Americas Path to Green Energy
Peabody is a Founding Sponsor of the FutureGen
Alliance
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Green Coal The Low-Cost, Low-Carbon Alternative
Energy Summit 2009 Yampa Valley Partners May 14,
2009
Fredrick D. Palmer Senior Vice President
Government RelationsPeabody Energy