CAN COAL BECOME A MAJOR PLAYER IN THE NIGERIAN ENERGY MIX?
Coal is one of the fossil fuel found in abundance in Nigeria. It is found in over thirteen states out of its thirty-six states. In countries like USA, China, India and South Africa coal is their primary source of electricity and it is has sustained their economy. Nigeria coal is good for power generation. It has low sulphur and content which makes it very attractive for export. Despite these qualities this sector has been left unexploited especially after oil was discovered in commercial quantity in Nigeria, and the country became over-dependent on it as its primary source of energy. The aim of this paper is to show that although the coal in Nigeria is being underutilized it has the potential of becoming a major player in the energy mix of the country.
LIST OF ABBREVIATIONS
CCGT Combined cycle gas turbine
CCS Carbon Capture and Sequestration
CCT Clean Coal Technology
CDM Clean Development Mechanism
CO2 Carbon Dioxide
DisCos Distribution Companies
GDP Gross Domestic Product
GenCos Generating Companies
GHG Green House Gas
GW Giga Watts
IGCC Integrated Gasification Combined Cycle
IPP Independent Power Producers
MW Mega Watts
NOx Nitrogen Oxide
NYMEX New York Mercantile Exchange
ODS Ozone Depleting Substances
PHCN Power Holding Company of Nigeria
TransysCo Transmissions Company
Nigeria is the most populated country in Sub- Saharan Africa and the eight most populated countries in the world accounting for 2.19% of the worlds' estimated population. It is the 12th largest producer of petroleum products and the 8th largest exporter of petroleum products. Nigeria also has the 10th largest proven reserve in the world. Its largest trading partner is the Unites states and accounts for 11% of their oil imports.
Nigeria has a wide range of mineral deposits like natural gas, crude oil, coal, and bauxite, gold, tin, tantalite, limestone, lead and zinc but the mining sector is still very underdeveloped.
The Nigerian energy sector consist of crude oil, natural gas, coal, and renewable energy , but the crude oil accounts for over 95% of Nigeria's primary energy supply while the other source of primary energy make up 5%. The sectors being served by this energy include the transport sector, electricity, industrial and the residential. Petroleum accounts for 40% of the nations GDP and 80% of government earning showing that Nigeria is heavily dependent on oil products. This accounts mainly for the neglect of other sectors that have great potential to support and develop the Nigerian Economy.
This research work will be focused on Coal. The aim is to show that coal has a potential of being a major player in the Nigerian demand mix. The question asked is why coal which can be found in abundance not being exploited to the maximum by Nigeria? Countries like China which are powered by coal, what steps have they taken to harness the potential of this fossil fuel? How can Nigeria utilize the abundance of coal in the country thereby making coal a major player in the energy sector? Also, since coal is used to power electricity, what incentives have or should be put in place so that a market can be created for coal locally and internationally.
The first chapter will give a general overview of coal, stating its uses and problems attached to the use of coal. It will also mention how it is being used in other countries like China, India and the United States and the advantages to the economy of these nations.
The second chapter will give a brief overview of coal mining in Nigeria and shed light on the market for coal with concentration on Electricity in Nigeria
The third chapter will give the cost benefit analysis of investing in the coal industry of the energy sector. It will compare coal powered electricity with other forms of energy used to power electricity. It will give an insight into various types of CCT that can be used to control how coal affects the environment. After which I conclude.
Coal is a black or brownish-black combustible carbon based sedimentary rock. Its origin dates back to prehistoric earth- the carboniferous period which was over 360 million years ago. It is formed when vegetation which has been deposited over a long period of time begin to decay and loose oxygen thereby forming peat. The temperature and pressure continues to increase leading to the formation of coal. This process where the physical and chemical property of peat is changed to coal is known as coalification. The quality of the coal deposit is mainly determined by the following:-
§ the different types of vegetation that constitute the coal
§ how deep the decayed plant deposit was buried
§ the temperature and pressure experienced at that depth
§ The length of time the coal has taken to form.
Coal is a non renewable source of energy and contains carbon, hydrogen, nitrogen, sulphur and oxygen. It is a fossil fuel and accounts for over 23% of the worlds' energy needs and generates over 39% of the world's electricity. It is a cheap source of fuel due to the fact that it is found in abundance and it is not expensive to convert it to energy.
TYPES OF COAL
Coal is classified based on the level of carbon it contains and the amount of energy it can produce. Coal that contains a high amount of carbon is referred to as high rank coal. They have a low hydrogen and oxygen content and have a high heat value. Low rank coal has low carbon content but contains a high amount of hydrogen and oxygen. The various types of coal include:-
This is formed when peat is first transformed to coal. It is the lowest rank of coal and often called brown coal. Lignite has about 25% - 35% carbon content and is very moist and soft since it has not undergone the extreme heat and pressure experienced by the other types of coal. It is mainly used to generate electric power.
§ Sub-bituminous coal
This has about 35% - 45% in carbon content and is organically more mature than lignite. It is used for steam electric power generation and also a source of light aromatic hydrocarbon for chemical industries.
§ Bituminous Coal
It is called hard coal. It has a high carbon content of about 45% - 86% and a high heating value so it is used largely in the generation of electricity and in steel and iron industries.
It is very hard and glossy and used mainly for residential and commercial heating. It has a very high concentration of carbon. Its carbon content is about 86% to 97%.
This contains the highest amount of carbon but it is not used as fuel due to the fact that it is hard to burn. It is used in making pencils.
Coal is used in various sectors and in various ways. It is used in heating and also used to generate electricity. It is used to make coke; this is used to smelt iron for making steel. By -products of coal- ethylene and methanol are used in plastics, fertilizer, synthetic fibre and medicine. Furthermore it provides foreign exchange because it is a trade-able good so it is exported.
In India, coal is used to power the electric sector, the iron and steel industry and the cement industry. In the United States, 50% of the electricity generated is from coal. Also, they export it to other countries so it is a source of major income to their economy. In China, coal is the major source of energy. They use it for electricity generation and to power their very large steel industry.
COAL MINING IN NIGERIA
The Nigerian Coal Corporation is the arm of the government with the sole responsibility of handling the coal industry in Nigeria. It was formed in 1950, thirty four years after coal exploration started in the country. Coal was the major source of energy in Nigeria before the discovery of crude oil. It was used in the Nkalagu cement company as a major source of raw material; it was also used to power electricity and to run the railways. In the late 1950s this industry experienced a sharp decline in production and this was blamed on two main reasons. Firstly, due to the three years civil war that ended in 1970, coal production in the country was at a standstill. Most of the mines were shutdown and abandoned during this period and all efforts to revive them after the war proved abortive. Secondly, due to the discovery of crude oil in commercial quantity, the government steered the economy and focused on the oil sector thus causing the country to become majorly dependent on this one sector and ignoring and crowding out other industries, showing that there were no laid down policies on energy use in place.
Sub-bituminous coal and lignite are the types of coal found in large quantity in the country. Nigerian coal has low sulphur and ash content. It also has low thermoplastic properties, making it very attractive for export to other nations. The country is estimated to have a proven coal reserve of over 639 million metric tons and inferred reserve of over 2 billion metric tons. The government is trying to encourage the utilization of coal in order to reduce the country's over dependence on oil and also stop deforestation which also emits GHG.
It can be used in form of briquettes to supply solid smokeless fuel that can be used instead of wood. It can be mixed with imported coal for coke production which can be directed to the Ajaokuta Steel Plant for steel production. Also, coke char which is a non polluting energy source can be used in the cement industries, in laundries, bakeries, and ceramic plants and brick factories. Furthermore, it has been determined that coal is the best fuel to use in the resuscitation of the abandoned Oji River Power Station.
Coal mining in Nigeria has long been abandoned and neglected. Development of this industry will bring great development to the economy of the country. It is one sector that has great potentials and the government have decided to exploit this coal in other to improve the electric power generating capacity of the nation. They intend to attract foreign companies to develop this sector and a study of the Electric Power Sector Reform Act of 2005 shows various incentives have been put in place to make this investment attractive. The minister of Power Dr. Rilwan Babalola pointed out that due to unreliability and potential problems affecting the supply of natural gas from the Niger Delta which has been used in the past in the oil- fired and gas fired hydro electric power plants, that coal is the best alternative.
Electricity: A Market for Coal
Electricity is the most efficient method of transferring energy to the final consumer. Nigeria is a country that has other potential source of energy like hydro, nuclear, biomass, solar and wind; but the cost of these ventures and other economic variables acts as a limiting factor in this respect. The agricultural method practiced in Nigeria is mainly subsistence farming. It is the major source of food to this vast population. Large plantations needed for the development of biomass energy is limited by this fact. Also, nuclear energy production is limited by the lack of technological development and the fact that the international community is very cautious with that sector. Furthermore, natural gas requires heavy investment in infrastructure before it can be fully utilised by the end users. The unpredictable nature of renewable energy, and the lack of adequate and efficient storage systems affect and limit solar and wind energy as a reliable source of energy. Also, hydro energy is highly unreliable since it is very seasonal in nature.
The major use of energy is to power electricity. Nigeria has experienced and is still experiencing severe power outage. This has increased the cost of production and caused many businesses to close down. Machines are constantly damaged and many businesses have resorted to the acquisition of standby generators which has further increased their operating cost thus slowing down the growth of the economy. It is argued that Nigerians cannot afford the available electricity since domestically refined oil which is being used to power the thermal stations is expensive. Coal is considered the best alternative to this. It is found in large proven quantity so it is easily available. Due to its high heat content, it is easily transformed to electricity. The cost of production is quite attractive, and infrastructures are in place for transportation and distribution thus making it relatively cheaper than other options. Besides in the world today coal is used to generate electricity to power businesses. Coal powered plants are used to produce steam that turns turbines to generate electricity. In fact, coal is the energy source that drives great economies like that of the United States, China, Japan, South Africa and Australia.
BENEFIT COST ANALYSIS OF COAL POWERED ELECTRICITY
In the Nigeria energy sector, electricity is powered by hydro electric power and gas turbines. In all the years it has been used there has been a constant decline of the power generating capacity of the power stations. Despite all efforts by the government to boost power supply, constant interruptions in the oil supply due to problems in the Niger delta and severe dry seasons have been a source of limitation.
In 2005, Behre Dolbear and Company, a mining firm in the USA was commissioned to carry out a feasibility study on the country's coal deposits. In the feasibility study carried out in Nigeria, they projected that the electricity demand in Nigeria will rise to about 15GW in 2025 from the present 3.5GW, with coal providing over 6GW. These projections will definitely increase with coal playing a major role in the electricity sector.
Presently, power demand is about 20,000MW and the country generates only 3,000MW. This has caused the Nigerian government to source for an alternative source of power and coal is easily the best option since it is readily available, easy to use and emits a lot of heat especially the sub-bituminous type found in Nigeria. The government is encouraging the use of this major energy source to boost the country's power generating capacity and attract foreign investors. It has put several incentives in place to encourage foreign investments. They include
§ A 3-5 year tax holiday,
§ Royalty payment is deferred,
§ 100% ownership of mining company and generating plant
§ Extension of infrastructure to the mining site
§ Export processing zones and free trade zones
§ Capitalisation of initial expenses on survey and exploration is possible
§ Presence of a domestic market for industrial commodities
§ The country has a Stock Exchange
§ Presence of a national electric power grid.
The government is restructuring the power sector to encourage investments. According to the Electric Power Sector Reforms Act of 2005, they have decided to form seven Generating companies (GenCos), one transmission company (TransysCo) and eleven distribution companies (DisCos) to encourage private sector investment in the sector, reduce the extent of Power Holding Company of Nigeria's (PHCN) monopoly on the sector and encourage the entry of Independent Power Producers (IPPs) into the sector.
Hydro electric power is used for over 28% of the country's power generation. It is a cheap source of power because the raw material is free, but the development of dams for this purpose is limited by the irregularities and uncertainties surrounding the water flow. Over exertion of the major regional river by other countries along its path affects the efficiency of the dam. The presence of a dam reduces land that is available for agricultural development. Also, the cost of displacing and relocating communities is high. It takes a long time to construct a dam and the initial cost is quite high.
Other forms of renewable energy like wind, geothermal and solar are readily available, but they are limited by the lack of technological know-how.
The benefits that will accrue from the use of coal to power the energy sector in Nigeria abounds. Apart from the fact that coal has a place in the international market, it is traded on in the NYMEX, it can be exported to other nations that use it mainly to power their economy. The quality of Nigerian coal makes it highly sought after. It is low in sulphur and ash content making it very competitive with international steam coal. It emits plenty of heat. It is sub bituminous in nature so it is the best type of coal for power generation. Also, it is found in large supply so investment is long term in nature and due to the incentives in place by the government investors both foreign and local are duly encouraged and assured of security in their investments.
Other benefits that are expected for both the economy and the investors include
* Coal is not an expensive source of energy. It is found in abundant supply. This reduces exploration costs since a significant amount of the reserves is proven. These also translate to a low cost of energy which is readily affordable by the population.
* Coal is a fuel that is quite versatile in its use. Due to this quality it has a market in every sector. In the residential, use of coal briquettes can be encouraged instead of fuel wood which promotes deforestation and pollution. In the industry it is a source of raw material for the production of chemicals. It is used in the cement industry as a source of heating and the source of raw material called gypsum.
* Electricity from coal is reliable. It does not depend on the weather like renewable energy and it can't be affected by disruptions in the Niger delta regions of the country.
* It is low maintenance energy in that transportation cost is not expensive. The basic infrastructure for transportation is already in place. Also, it can be safely stored and used when it is needed.
* Coal use will reduce the nation's dependence on oil as its mainstay as it is also able to earn foreign exchange.
* It will create employment, investment opportunities not only in the new sector being developed but due to constant and reliable power supply, a lot of businesses will spring up and the operation cost experienced by existing businesses will reduce considerably. This makes more products available to the consumers and a definite growth in the economy.
* GDP values are affected positively. Taxes increase national income.
The cost of coal powered plants depends on the location, the type of technology being used and the regulations being enforced in that country. The major cost attached to the use of coal for generating electricity is the environmental effect associated with energy source. The burning of coal produces emissions that make up the ODS and GHG. These emissions include Sulphur dioxide (SO2) and Nitrogen Oxide (NOx) cause acid rain, Carbon dioxide( CO2) which is the primary GHG and mercury which when mixed with water transforms into methyl mercury a toxic chemical found in fish, animals and people that eat fish. The use of coal in power generation affects the water, land, air, animals and humans and this may occur either during the extraction, transportation, preparation, combustion or during the disposal of the by-products. To reduce this effect, the expense is borne by both the business organization who pays at the beginning and the consumer who pays at the end.
Several technologies are being developed in order to improve the efficient burning of coal and reduce the negative effects it has on the environment. They include:-
* Integrated Gasification Combined Cycle (IGCC) - This is used to convert coal to gas. When coal reacts with steam and oxygen in a gasifier, the sulphur and impurities are removed and then the syngas is fed into the Combined Cycle Gas Turbine (CCGT) to generate electricity.
* Flue Gas Desulphurization Machines are used to remove sulphur from the smoke emissions due to coal combustion. It uses a mixture of limestone and water which reacts with sulphur to form gypsum an important raw material in the cement industry.
* Coal washing- coal is grinded to small pieces and passed through a process called gravity separation which separates the impurities. It is then pulverised and used for combustion.
* Carbon Capture and Sequestration involves the capture of CO2 from a concentrated stream. The CO2 is converted to liquid and injected into the ground where it is permanently stored. Although it is heavily monitored to avoid it seeping back into the atmosphere or contaminating the water supplies.
Clean coal technology (CCT) is been promoted so that the large supply of coal deposit can be exploited without affecting global warming. Coal is an economic source of energy and it has a stable supply. Large amounts of CO2 are emitted but coal can be made clean and efficient. To achieve this there should be a transfer of technology from the developed to the developing countries. This was the plan according to the Kyoto Protocol proposal of CDM to allow developed countries sponsor and carry out projects that reduce GHG emissions in the developing countries. This was to encourage the developed countries invest in countries like Nigeria and the incentives was that they would gain credits that they could use to reduce their emission levels. The main aim of the CDM was to encourage the use of coal in a more environment-friendly manner and ensure the rapid transfer of CCT to developing countries.
Nigeria's coal is mainly sub-bituminous in nature and is deposited in over thirteen states of the federation. It is high in quality and useful in industries like steel, cement, brick and tyre. It is also useful in the residential sector for domestic cooking fuel. Coal is a major player in the world's energy mix. It makes up over 23% of the energy consumed in the world and it is used to generate over 40% of the world's electricity. It is found in abundant supply in Nigeria and the benefits are yet unexploited. The strength of a fuel in a country's energy mix is dependent on how important that fuel is in the nation. Coal is one fossil fuel that could be the answer to Nigeria's bid to boost the Electric Sector of the nation. It is cheap and available and the technology to exploit it to the fullest is available. Coal will play a major role in the energy mix of the future, and the challenges of GHG emissions are being addressed. The CCTs are been improved upon and will be used to critically reduce the CO2 emissions from coal combustion. The Kyoto protocol tried to promote the transfer and deployment of CCT to developing countries with their DSM proposal. The transfer of technology also involves the development of personnel and the development of innovative technical know-how that will enable coal play its role in Nigeria's energy mix and also foster a partnership with other developed countries.
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