July 21, 2010
Ken Silverstein
EnergyBiz Insider
Editor-in-Chief
When the World Bank approved a $3.75 billion loan to build a highly efficient coal plant in South Africa, it provoked outrage among many in the developed world who responded that those resources should go to cleaner energy forms. Supporters have said, however, that the facility is needed to bring electric power to the underserved.
In reality, coal remains the world's most dominant fuel source -- and one that is consumed by both rich and poor countries alike. That's why the pressure to clean it is building. If burning it can become increasingly clean and efficient, it will remain viable in world markets while modern plants will get funded and constructed.
South Africa's state-owned Eskom applied for and won the World Bank loan, which determined that reliability was paramount. While the United States voiced concerns over the loan, it simply abstained from voting. In the end, bank officials said that South Africa faced energy shortages and that the coal plant would be supercritical, or highly efficient, when compared to older coal-fired units.
In a formal statement, the United States said that it understood the need to bring electricity to the masses. It also said that it is aware that that private investment for clean infrastructure projects had not been forthcoming. In the future, though, this country says it would oppose such lending unless the focus was on carbon reduction.
"Despite these benefits, the United States is concerned about the project since it would produce significant greenhouse gas emissions, and uncertainty remains about future mitigation efforts," says the U.S. Treasury Department. "The project is incompatible with the World Bank's strategy to help countries pursue economic growth and poverty reduction in ways that are environmentally sustainable."
Developing countries are supporting the loan, noting that they are working to industrialize their economies in the same way that the Western world has already done. For them, coal is abundant and cost-efficient and it can help electrify their communities. Close to 2 billion people in Africa and parts of Asia currently have no access to central power and instead use wood and other agricultural products to heat their homes.
In 2009, loans from the World Bank to renewable energy and energy efficient projects made up 40 percent of the institution's $8.2 billion portfolio, says the Center for American Progress. Fossil fuel deals accounted for 24 percent of that. That represents a change from previous business practices.
Classic Fight
While the global community is moving steadily to green pastures, it is nevertheless dependent on fossil fuels and specifically coal for electricity. Not only does this country rely on it for about half of all generation, the major developing nations of China and India are also dependent on it.
The BP Statistical Review of World Energy 2010 says that coal's share of world energy markets has grown steadily since 1970. Interestingly, NASA's James Hansen says that global temperatures have risen by 0.8 degrees Celsius over the last century with most of that coming in the last 30 years, and during coal's heyday. He says that the global leaders must act now to avert what he says would be the catastrophes of global warming.
But two Stanford University professors, David Victor and Richard Morse, wrote in the Boston Review that even if firm carbon restraints are enacted domestically it would do little to dent coal's influence. They say that if coal generators paid more than twice the carbon dioxide penalty now envisioned by Congress, utilities would still find it cheaper to build coal plants than wind facilities.
Beyond the pure economics of the issue, the scholars are also noting that the nation does not have the infrastructure in place to carry -- reliably -- green electrons. They point to a February 2008 sudden drop in wind power in Texas -- an event that was the equivalent of taking two coal plants offline for 10 minutes.
"While some have blamed these troubles on the Texas grid operators and the lack of standby supplies, the reality is that this event is a harbinger of things to come anywhere engineers try to integrate large amounts of wind into power grids," write the professors.
Global climate treaties now under discussion, however, are pushing both the developed and the underdeveloped countries to invest lots more in green energy. Numerous interest groups are saying that the World Bank has the key responsibility to make loans for the purpose of expanding the green infrastructure and combating climate change.
The World Bank says that it gets it and that it is committed to making loans to construct renewable energy projects. The less-developed nations also are saying they will get on board but only after they become more prosperous and they receive substantial financial and technological support.
While proponents of curbing coal consumption recognize the need of poorer regions to grow, they are also concerned about how they would weather climate change. Global lending institutions must then decide whether to finance highly efficient fossil-fired generation facilities or whether to steer away from them altogether.
The demands placed on the World Bank and others will only strengthen. But coal's role in world energy markets is unlikely to fade for a while.
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