The U.S. Environmental Protection Agency, while granting a few breaks to coal in a new CO2 proposal, might only let a few mostly integrated gasification combined cycle (IGCC) plants get built under this standard over the next few years.
EPA, in two notices to be published in the Jan. 8 Federal Register, is both withdrawing its controversial April 2012 proposed CO2 standard for new power plants and replacing it with a new one that grants a few concessions based on massive power industry criticism of the original idea. For one thing, this new proposal separates the standards for coal and natural gas plants. Industry said the original combined standard for all fossil plants went against long-established policy.
Also, the new proposal notes that carbon capture and storage (CCS) is a viable option, while the industry has said that commercial deployment of CCS is still at least 10 years away and that the April 2012 proposal would effectively bar all new coal plant construction in the meantime.
EPA, in justifying its revamped proposal, said there are a handful of proposed coal projects that would meet the new standard among the few coal plant projects that have survived in the face of this and other new EPA emissions rules.
An assessment of the technical feasibility and availability of CCS indicates that nearly all of the coal-fired power plants that are currently under development are designed to use some type of CCS, said the Jan. 8 proposal. In most cases, the projects will sell or use the captured CO2 to generate additional revenue. Each of the projects has obtained some governmental financial assistance, EPA added. One is actually in Canada. They are:
- Southern Co.’s (NYSE: SO) Kemper County Energy Facility, a 582 MW IGCC power plant that is currently under construction in Kemper County, Miss. The plant will include a CCS system designed to capture approximately 65% of the produced CO2.
- SaskPower’s Boundary Dam CCS Project, in Estevan, Saskatchewan, Canada, is a commercial-scale CCS project that will fully integrate the rebuilt 110 MW coal-fired Unit 3 with available CCS technology to capture 90% of its CO2 emissions.
- Texas Clean Energy Project (TCEP), an IGCC plant near Odessa, Texas, that is under development by the Summit Power Group. TCEP is a 400-MW IGCC plant that expects to capture approximately 90% of the produced CO2.
- Hydrogen Energy California LLC (HECA) is proposing to build a plant similar to TCEP in western Kern County, Calif. The HECA plant is an IGCC plant fueled by coal and petroleum coke that will produce 300 MW of power and will capture CO2 for use in enhanced oil recovery (EOR) operations. They expect to capture approximately 90% of the produced CO2.
These examples suggest that project developers who are incorporating CCS generally considered two variants: either a partial CCS system or a full CCS system (i.e., usually 90% capture or greater). Therefore, the EPA said it considered both options.
EPA says that CCS has been ‘adequately demonstrated’
In assessing whether the cost of a certain option is reasonable, the EPA said it first considered the appropriate frame of reference. Power companies often choose the lowest cost form of generation when determining what type of new generation to build. Based on both the U.S. Energy Information Administration (EIA) modeling and utility integrated resource plans (IRPs), there appears to be a general acceptance that the lowest cost form of new power generation is natural gas combined cycle (NGCC). EPA doesn’t fully acknowledge at this point in the Jan. 8 notice that a primary reason for this preference for gas is the agency’s own regulations, like the Mercury and Air Toxics Standards (MATS) and long-delayed (and possibly very expensive) new coal ash disposal rules, plus the looming threat of this very CO2-control mandate.
“Many states find value in coal investments and have policies and incentives to encourage coal energy generation,” EPA wrote. “Utility IRPs (as well as comments on the April 2012 proposal) suggest that many companies also find value in other factors, such as fuel diversity, and are often willing to pay a premium for it. Utility IRPs suggest that a range of technologies can meet the preference for fuel diversity from a dispatchable form of generation that can provide intermediate or base-load power, including coal without CCS, coal with CCS and nuclear. Biomass-fired power generation and geothermal power generation are other technologies that are dispatchable and that could potentially meet this objective. These technologies all cost significantly more than natural gas-fired generation, which ranges from a levelized cost of electricity (LCOE) of $59/MWh to $86/MWh, depending upon assumptions about natural gas prices.”
The agency added: “In assessing whether the cost of coal with CCS would have an unreasonable impact on the cost of power generation, the EPA believes it is appropriate to compare coal with CCS to this range of non-natural gas-fired electricity generation options. Based on data from the EIA and the DOE National Energy and Technology Laboratory (NETL), the EPA believes that the levelized cost of technologies other than coal with CCS and NGCC range from $80/MWh to $130/MWh. These include nuclear, from $103/MWh to $114/MWh; biomass, from $97/MWh to $130/MWh; and geothermal, from $80/MWh to $99/MWh. The EPA believes the cost of ‘full capture’ CCS without EOR is outside the range of costs that companies are considering for comparable generation and therefore should not be considered [best system of emission reduction] BSER for CO2 emissions for coal-fired power plants. The EPA projects the LCOE of generation technologies with full capture CCS to be in the range of $136/MWh to $147/MWh (without EOR benefits). Because these ‘full capture’ CCS costs without EOR are significantly above the price range of potential alternative generation options, the EPA believes that full capture CCS does not meet the cost criterion of BSER.”
Finally, EPA said it considered whether implementation of “partial capture” CCS should be proposed to be BSER for new fossil fuel-fired utility boilers and IGCC units. Partial capture CCS has been implemented successfully in a number of facilities over many years.
- The Great Plains Synfuels Facility in North Dakota is a coal gasification facility that has captured at least 50% of its produced CO2 for use in EOR operations since 2000.
- Projects such as that at American Electric Power’s (NYSE: AEP) conventional Mountaineer coal plant in West Virginia have successfully demonstrated the performance of partial capture CCS on a significant portion of the exhaust stream, EPA noted.
- The Kemper County IGCC will use partial CCS to capture about 65% of the produced CO2 for use in nearby EOR operations. The facility is now more than 75% complete and is expecting to begin operation in 2014.
The EPA analysis shows that the costs of partial CCS are comparable to costs of other non-NGCC generation. The EPA projects LCOE generation ranging from $92/MWh to $110/MWh, depending upon assumptions about technology choices and the amount, if any, of revenue from sale of CO2 for EOR. This range compares to levelized costs in a range of $80/MWh to $130/MWh for various forms of other non-natural gas-fired electricity generation. “When considered against the range of costs that would be incurred by projects deploying non-natural gas-fired electricity generation, the implementation costs of partial CCS are reasonable,” EPA argued.
CCS technology has been adequately demonstrated, and its implementation costs are reasonable, the agency said. Therefore, the EPA is basing the standards for new fossil fuel-fired utility boilers and IGCC units on partial CCS technology operating to a level of 1,100 lb CO2/MWh.
Industry groups say new CCS proposal still unrealistic and anti-coal
Notable is that EPA doesn’t address a common industry argument that while CCS technology exists, the costs of that technology in terms of commercial viability still need to be reduced. Also, the industry argues that no Wall Street banker is ever going to agree in the near term to finance a commercial CCS project, at least without additional government financial support, considering the current unproven and costly state of these technologies.
The American Coalition for Clean Coal Electricity (ACCCE) said in a Jan. 7 statement that this new version of the rule is just as coal-averse as the old one.
“EPA’s New Source Performance Standards are yet another example of bad energy policy from the Obama White House. The rule’s unachievable requirements will take reliable, affordable coal-fueled electricity out of our future energy equation, and will force America to forego leadership on carbon capture and storage (CCS) technology, an industry that promises an estimated $1 trillion in economic benefits, while countries like China gladly assume supremacy,” said Laura Sheehan, Senior Vice President of Communications for ACCCE. “Even experts on EPA’s own payroll have voiced serious concerns about the viability of CCS, and hopefully EPA’s delay in posting the rule to the Federal Register indicates that the agency is hard at work making much-needed revisions to NSPS.”
Sheehan added about the viability (or lack of it) of CCS: “By requiring CCS, EPA is placing a de facto ban on the construction of new coal-fueled power plants, handing over leadership of the development of CCS, and an estimated $1 trillion in economic benefits, to countries like China. Even EPA’s own Science Advisory Board has convened a dedicated working group to explore the viability of CCS and to determine whether the agency properly reviewed the issue before releasing the rule.”
National Mining Association (NMA) President and CEO Hal Quinn said in a Jan. 7 statement: “This EPA regulation is a big step backwards for supplying America affordable and reliable power from the cleanest coal-based power systems commercially available. The proposal effectively bans coal from America’s power portfolio by conditioning new power generation on the use of unproven technologies. … Rather than recklessly pursuing another rush-before-ready approach, the more responsible course for the administration is to base standards on the best-in-class technology available today. This would ensure the reliability of electricity supply by allowing power companies to replace older, less efficient coal plants with newer, more efficient ones with lower emissions.”