Clean Coal: THE Green Alternative Energy
4th Annual Clean-Tech Investor Conference Feb. 7, 2008
Gregory H. Boyce Chairman and Chief Executive Officer Peabody Energy
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Like Many, You May Be Asking Yourself…
How Do We…
● Meet our environmental goals?
● Improve our energy security?
● Achieve strong economic growth? ● Help people live longer and better? ● Provide a sustainable future?
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…Or You May Be Thinking More Directly
Why Coal?
How Coal?
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Why Coal? Because…
● Global Energy Demand is Soaring ● The Best Economies Use the Most Coal ● China and India Change the Equation ● Other Energy Forms Have Inherent Limitations ● We Can’t Shrink Our Way to Prosperity ● Coal = Electricity = Health and Wealth ● Coal: Only Large-Scale Sustainable Fuel
Key Words for Venture Capital: Growth and Scale
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How Coal? New Uses and Zero Emissions
● New Economics = New Uses for Coal & CO2
● A Long Record of Clean Technologies
● The Enabling Technology: Carbon Storage
● New Entrants and Emerging Technologies
For the First Time in Decades… Entrepreneur Access
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WHY COAL?
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A Rising Tide as the World Awakens to Modern Energy
Electricity Usage per Capita
15,000
USA
Passenger Vehicles per Capita
600
Italy
12,000
Kilowatt-hours per Capita
Australia
Passenger Vehicles per 1,000 People
Australia
450
South Korea
UK USA
9,000
South Korea
300
Malaysia Russia Mexico
6,000
Russia
UK Italy
150
3,000
Malaysia Mexico China India
0 0
India 0
China 10,000 20,000 GDP per Capita (in US$) 30,000 40,000
10,000
20,000 GDP per Capita (in US$)
30,000
40,000
0
Per-Capita Electricity Use Just 1/10th (China) and 1/30th (India) the U.S. Level
Source: United Nations’ Human Development Report 2005, World Energy Outlook & ConocoPhillips.
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Demand Driver: The Rise of the Automobile
812 Million Vehicles in 2002, Growing to 2.1 Billion
400 350
China United States
Total Vehicles (Millions)
300 250 200 150
India
100 50 0 2002
Brazil
Mexico
2030
Source: Dargay and Gately 2006.
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Electrification is Essential to Help People Live Longer and Better
Electricity Use Per Capita and the U.N. Human Development Index
1.0
•Italy Sweden
0.9 Human Development Index 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0
Argentina
United States
UAE
Finland
Canada
Qatar
Brazil
Malaysia
China
Indonesia Morocco South Africa
India
Bangladesh Zimbabwe
Zambia Mozambique Ethiopia
5 000
10 000 Electricity Use
15 000
20 000
Source: International Energy Agency, World Energy Outlook 2005.
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Coal Use, Electricity, GDP and Life Expectancy All Grow in Tandem
U.S. Economic and Energy Growth
275
GDP +164%
250
225
Indexed to 1974 (100)
200
Electricity Use +117%
175
150
125
Per Capita Income +86%
100
Coal Use +78%
75
50
1974
1980
1985
1990
1995
2000
2004
72
73.7
Life Expectancy 74.7 75.4
75.8
77
77.8
Source: Energy Information Administration Annual Energy Review 2006; National Center for Health Statistics, National Vital Statistics Report, December 28, 2007.
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A Rising Tide as the World Awakens to Modern Energy
World Coal Consumption by Region
11 10 9 1980 - 2004 Growth: 48% 8 7 6 5 4 3 2 1 0 2004 2010 2015 2020
2004 - 2030 Growth: 72%
Total Coal Use
Billion Short Tons
Emerging Economies
Mature Market Economies
Transitional Economies
2025
2030
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Source: EIA International Energy Outlook 2007
The United States: Another Developing Nation Turns to Coal as Alternatives Lag
U.S. Electric Power Generation by Fuel Type
3,500
3,000
Coal
2,500
Million KiloWatt Hours
2,000
1,500
1,000
Natural Gas
Nuclear
Renewables Petroleum
500
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Source: Energy Information Administration, Annual Energy Outlook 2007.
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U.S. Energy Options are Limited by Supply and Availability
All Energy Forms Needed for Diversity of Supply OIL Persistent high prices; reserves declining; risky sources NUCLEAR Valuable but constrained by cost, safety and waste disposal concerns ETHANOL Clean but energy inefficient, strains food supplies, cellulosic years away NATURAL GAS Above $6 / mcf; declining reserves, sources from volatile regions
ENERGY EFFICIENCY RENEWABLES Greater use of green No growth in supply, technologies, energy management low availability and public and conservation resistance
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U.S. Coal Production Grows While U.S. Natural Gas at Peak
Fossil Fuel Production, 1975 – 2005
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Coal
23
Quadrillion Btu
21
Natural Gas
19
17
Oil
15
13 1975
1978
1981
1984 Coal
1987
1990
1993
1996
1999
2002
2005
Natural Gas
Crude Oil & NGPLs
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Breaking Point: U.S. Natural Gas Supplies are Low and Declining
Imports Will Not Close the Gap
AEO 2003 Demand Projection: 35 TCF by 2025
27 25
26.1 20.5 22.0 18.2 21.1 21.0
Trillion Cubic Feet
23 21 19 17
U.S. Natural Gas Demand
U.S. Natural Gas Supply
15 1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
Consumption
Production
Source: Energy Information Administration, Annual Energy Review 2003, 1970-2000; Annual Energy Outlook 2007 Reference Case, 2005-2030.
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Natural Gas Supplies Not Meeting Increasing Demand
Natural Gas for Electricity to Strain Supplies
14 12 10
Tcf / Year
At Current Growth Rate, Gas for Electricity Generation Would Raise U.S. Natural Gas Demand by 6 TCF/Year
7.8 6.7 5.7
12.7 10.8 9.2
8 6 4 2 0
2002
2007
2012
2017
2022
2027
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Coal Comprises 60% of Global Energy Resources
… And 85% of U.S. Fuel Resources
50 45
Percent of Electricity Generation
… And 50% of U.S. Electricity
50%
Oil Gas 5% 10%
40 35 30 25 20 15 10 5 0
Gas
Nuclear Hydro Other Coal Oil 7% 2% 2% 20% 19%
Coal 85%
Ultimately recoverable demonstrated reserves on Btu basis. Source: USGS, National Assessment of United States Oil and Gas Resources, U.S. Coal Reserves; Energy Information Administration Monthly Energy Review, March 2007 Table 7.2b, 2006 data.
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The Compelling Case for Coal
Resources Needed to Replace Electricity from Coal SOLAR 3,000x more solar generation than currently in use WIND
730,000 1-MW wind turbines over 140 million acres
NUCLEAR 400 new nuclear plants NATURAL GAS
17 tcf = nearly double current U.S. production
HYDRO 700 facilities the size of Hoover Dam EFFICIENCY
5% reduction in use = 135% more NG generation than exists
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HOW COAL?
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Technology is Driving Greater Coal Use and Economic Growth With Lower Emissions
250%
Electricity from Coal Has Tripled Since 1970 While Emissions Have Been Significantly Improved
GDP 203%
200%
182%
Index = 1970
150%
Electricity from Coal
100%
50%
Energy Consumption
47% Population 47%
0% 1970 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-50%
Total Emissions
-42%
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Btu Conversion Technologies Expand Markets for Clean Coal
DUKE POWER AEP EPIC
CONOCOPHILLIPS DOW CHEMICAL RENTECH
U.S. AIR FORCE
FUTUREGEN
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Abundant U.S. Coal Can Be Turned Into Natural Gas and Transportation Fuels
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Clean Coal Technologies Provide the Path for Affordable & Adequate Energy Supplies
● Coal-to-Liquids – CTL with CCS can produce better fuels at the same rate of CO2 emissions as imported oil. Adding biomass increases cost but improves CTL’s carbon footprint.
● Coal-to-Gas – Coal can be gasified to create NG for power plants and the CO2 can be captured and stored. SNG from coal with CCS has much better footprint than LNG.
● Coal-to-Electricity – New “supercritical” clean coal plants emit 15% less CO2. FutureGen and GreenGen would have near-zero emissions.
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The Enabling Technology: Carbon Storage
Source: U.S. Department of Energy, Office of Fossil Energy, National Energy Technology Laboratory, Carbon Sequestration Atlas of the United States and Canada.
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U.S. Has Ample Room for Carbon Storage
CO2 Storage Capacity Based on Years of Current Emissions
China Southeast Asia India Latin America Africa Eastern Europe Western Europe Middle East Former Soviet Union USA Australia Canada 0 500 1,000 1,500 2,000 2,500 3,000 3,500
U.S. Geology: More Than 1,500 Years Space for Carbon Storage
Years of Storage Capacity
Source: Pacific Northwest National Laboratory.
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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, China’s centerpiece commercial climate initiative BTU is a longstanding supporter of the Vision 21 and FutureGen clean coal projects
BTU is a member of Australia’s Coal21 Fund to advance near-zero emissions through technologies such as oxyfuel
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China Also Seeking Technology Solutions to Climate Challenge
● BTU is only non-Chinese equity partner in GreenGen carbon initiative led by China Huaneng Group ● Multi-phase commercial project: 650 MW IGCC plant with carbon capture for EOR and polygeneration ● Construction starting this year; first 250 MW phase on line in 2009
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Latest Example of Clean Energy Investments: GreatPoint Energy
● BTU has investment in GreatPoint Energy that markets proprietary bluegasTM technology ● Process converts coal into clean natural gas with carbon storage ● Technology being advanced to commercial scale; Massachusetts pilot demo under way
GreatPoint Bluegas Demonstration Facility
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Why Coal?
How Coal?
Green Coal
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The Role of Venture Capital in Clean Coal and Related Technologies
● Emerging Technologies for Carbon Storage… Such as CO2-Consuming Algae ● Development of New Products Using Coal… Such as Coal-to-Gas and Coal-to-Liquids ● Disruptive Electric Supply Chain Technologies… Such as Transmission Breakthroughs and Electric Car Batteries ● New technologies to improve energy efficiency
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Clean Coal: THE Green Alternative Energy
4th Annual Clean-Tech Investor Conference Feb. 7, 2008
Gregory H. Boyce Chairman and Chief Executive Officer Peabody Energy
31