Mark Stephen was manager of the Production Fuels Department of Badger Energy Limited (BEL), a small utility in southeastern Ohio. BEL had three steam electric power plants—located in Athens, Zanesville, and Strobenville—whose primary energy source was coal. Each month, coal for those plants was purchased from a heterogeneous collection of vendors in Ohio, Pennsylvania, and West Virginia, ranging in size from small father-and-son operations to large mining companies. Stephen was responsible for the monthly coal-procurement process, including how much to purchase from each vendor and which specific plant (or plants) each vendor should supply.
In October 2016, Stephen’s immediate task was to determine November’s coal-procurement schedule. BEL had recently retained the services of a consulting firm to analyze aspects of its operations, including the coal-procurement process. Stephen hoped to use the opportunity of the consultant’s analysis to rethink the entire procurement process. He also hoped the report would shed some light on two related issues that had been a source of controversy within the department.
Coal
Compared with oil, natural gas, and nuclear energy, coal was a relatively cheap source of fuel during the 2010s. Coal is a combustible rock formed by the underground compression of partially decomposed plant matter over millions of years. There are four major types of coal, classified according to energy content: lignite (lowest energy content), sub-bituminous, bituminous (most widely used as a fuel source), and anthracite (highest energy content). Coal’s energy content (or thermal value) is measured in British thermal units (Btus). (One Btu is the amount of heat needed to raise a pound of water one degree Fahrenheit.) Pure bituminous coal typically contains on the order of 15,000 Btu per pound (Btu/lb).
There are three major determinants of the quality of coal. One is total moisture content. There are two distinct types of moisture associated with coal. Free moisture lies on the surface of the coal. Its presence, which depends primarily on conditions in the mine and in transit, is an important parameter in the design of coal-handling and -preparation equipment. Inherent moisture is trapped within the pores of the coal itself and is present even when the surface of the coal appears dry. Both types of moisture reduce energy content.
A second determinant of coal quality is ash content. Ash is the incombustible residue that remains after the coal is burned. Like moisture, a high ash content increases shipping, handling, and preparation costs while reducing thermal value. Additional equipment and expense is required periodically to remove ash from a coal-fired furnace. Failure to do so adequately has a long-term impact on the life of a furnace.