The Economics of Coal and Nuclear Energy

Newcomb, Richard ; Rieber, Michael ; Vogely, William A.
Organization: Society for Mining, Metallurgy & Exploration
Pages: 65
Publication Date: Jan 1, 1985
INTRODUCTION The solid fossil and nuclear fuels, but especially uranium, are given prominent, indeed leading, roles by energy experts in most long range estimates of world energy futures. Optimistic forecasts are inspired partly by the disproportionately large solid fuels resource base compared to present rates of consumption or to oil and gas resources, and partly by the vision of inexpensive high technology applications. Such a view overlooks the fact that while resource- use disparities and new technologies give allure to the promise of the solid fuels, they do not guarantee cheap solutions to the basic problems of solid fuel uses: viz., their relatively difficult conditions for efficient ignition and control, including the management of environmentally acceptable residuals disposal. Contrary to the varied versions of this optimistic hypothesis, this paper shows that a great many persistent economic and technical problems interfere with such a simple inference. These act as constraints which qualify or dispute much of the national energy policy based on existing modeling of solid fuel requirements and optimistic engineering evaluations. The assumptions and techniques of such exercises are sometimes at fault. As often as not, however, the distortions created in open market fuel com- petition due to misdirected national energy policies themselves are to blame for misdirected efforts. A number of interesting implications result. Among them are the distinct possibility that the low technology applications will dominate, so that more direct coal and less synfuel or nuclear use will occur; that, accordingly, exhaustion rates for uranium will be low, that the most extensive growth of solid fuel through 2000 will be in conventional pulverized coal cumbustors, and that the traded share of the world coal bum will be much larger than predicted. These trends will place much more pressure on oil and gas prices than forecast by most experts. On the way to these findings the paper demonstrates that solid fuel resource adequacy in situ, balanced against the projections of demands as capacity requirements, mean little as conventionally measured by years to exhaustion or potential supply schedules. Indeed, all stock concepts of demand requirements or of fuel re- sources must be tied to the paths of the unit costs and the deliverable prices of all substitute fuels and systems over time. This requires a dynamic analysis of supply and demand, integrated with geological and engineering constraints, to provide insights into the multiple modes of market and product substitution. Market forces rather than technical promise will determine the allocation of the solid fuels. Moreover, the equilibrium paths of individual fuel prices and market shares are not easily simulated by general or network models, and decision makers will continue to rely on the partial, local comparison of alternatives in their choices of fuel systems at any time. 'The economics of the solid fuels differs from that of other energy sources in important ways relating to their form in use, conversion efficiency, (dis)economies and externalities. Petroleum and gas are in a more convenient form for
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