The National Coal Council (NCC), an industry advisory arm of the U.S. Department of Energy, on Nov. 12 released a new report that calls for creating a level playing field to deploy carbon capture and storage technologies (CCS) used for coal, natural gas and industrial sectors at commercial scale.
The white paper offers recommendations to the DOE Secretary to create “policy parity” for CCS to achieve diverse energy policy objectives and examines the state of play for clean energy development including coal. The authors, who came from all over the coal and power industries, have provided a gap analysis defining the difference between the current trajectory of CCS and what is needed to propel its progress. The white paper was requested by DOE Secretary Ernest Moniz in advance of the U.N. Conference of Parties in Paris later this month.
“Coal will continue to be a major source of electricity in the United States and globally for decades to come,” said NCC Chair Jeff Wallace, retired Vice President of Fuel Services for Southern Co. (NYSE: SO). “The world needs CCS to achieve its environmental goals, and CCS offers the greatest opportunity to capture, use and store significant volumes of carbon dioxide from fossil fuels.”
Some 87% of global energy is supplied by fossil fuels, and coal is by far the most abundant fossil fuel by reserves. Coal provides 44% of the world’s electricity. Coal will remain the dominant fuel for power in 2035, accounting for approximately one-third of electricity, according to the BP Energy Outlook 2035. Currently there are more than 2,200 coal units in construction and planned globally.
NCC Report Chair Glenn Kellow, Peabody Energy (NYSE: BTU) President and Chief Executive Officer, explained that the DOE has stewarded a successful research and development program to spur early development of CCS technologies, though greater support is needed to bring CCS to commercial scale. Peabody is the largest U.S. coal producer and a major producer in Australia, as well. The Australian operations particularly export heavily into the growing Pacific Rim market for coal for power plant consumption.
“We believe the recommendations in this report will bring much needed advances to commercialize this vital technology and will help guide decisions on global facilities that will operate for years to come,” said Kellow. “This report addresses the path to near-zero emissions, which is recognized by global leaders as essential to carbon goals.”
Principle report recommendations include:
- Financial Incentives: Financial incentives for CCS must be substantially increased and broadened to include incentives available to other clean energy sources. Incentives should be emphasized and designed recognizing, as with wind and solar in the 1990s, that CCS is an immature technology with upfront risks and high capital costs. Risk to capital must be reduced, and operating incentives are important to assure a steady long-term revenue stream and lessen direct costs to consumers.
- Regulatory Improvements: A first-of-its-kind regulatory blueprint is needed to remove barriers to construction and development of CCS projects. This blueprint would be applicable to power plants and carbon capture facilities and would apply to transportation and injection.
- Research, Development and Demonstration: DOE must be a catalyst for additional commercial-scale demonstration projects, and such projects must commence immediately. The NCC believes that the U.S. should set a goal of bringing online 5 GW to 10 GW of commercial-scale projects by 2025, and development must begin now.
- Communication and Collaboration: DOE must assure U.S. and global policymakers and other stakeholders that fossil fuels will be used in coming decades to a greater extent than today, and there is a resulting need for CCS. DOE should initiate international collaboration to support the prompt deployment of 5 GW to 10 GW of commercial-scale demonstrations in addition to U.S. projects.
In assessing policy parity for CCS, the NCC noted that U.S. renewables received 12 times the federal subsidies compared with coal in 2013 even though fossil fuels produced 79% of U.S. energy and renewables 11%.
NCC Executive Vice President and Chief Operating Officer Janet Gellici noted that the NCC has a long history of developing studies and reports supporting deployment of CCS technologies to achieve the world’s ambitious environmental goals. The NCC’s “Leveling the Playing Field” white paper is the tenth report the council has prepared for the U.S. Secretary of Energy on carbon management policy and technologies since 2000, Gellici said. The NCC Technical Report Chair and lead author was Fred Eames of Hunton & Williams, with Gellici as a contributing author.
Report says new power generation technologies a key first step ahead of CCS
The report said: “In light of the recent growth of fossil-fueled power plants in international markets, especially in non-OECD nations, achieving the goal of reducing CO2 emissions will clearly require the deployment of CO2 reduction technologies worldwide. Globally there are 510 coal power plant units under construction, with a further 1,874 planned; a total of 2,384 units. China alone is bringing online an average of 500 MW of new coal capacity per week through 2030, an average of a new coal-fired plant every 7 to 10 days. The equivalent of the entire U.S. coal fleet was built between 2005-09 – more than 500 coal plants of 600 MW. From 2010 to 2013, China added the equivalent of half the U.S. coal fleet, plus another 39 GW in 2014. China is predicted to add another U.S.-worth of coal capacity over the next decade, or the equivalent of one 600 MW plant every 10 days. By 2040, its coal-fired power fleet is expected to be 50% larger than it is today and these plants typically operate for 40 years or more.
“Today China consumes more than 4 billion tons of coal annually, compared to less than 1 billion tons in the U.S. and 600 million tons in the European Union (EU). China is not alone. BP’s Energy Outlook 2035 predicts that coal use will increase in India by 360 million tons of emissions by 2035. ASEAN countries also are expected to increase coal use significantly, far outstripping projected modest coal use reductions in the U.S. and Europe.
“These recently built fossil fuel plants, which will continue to operate over a projected lifetime of 40- 60 years, as well as more mature plants still years away from retirement, constitute overwhelming evidence that CCS must be part of the path to reducing atmospheric CO2 emissions. Here in the United States, CO2 reduction technology deployment will similarly be necessary to achieve CO2 emissions reduction policy goals. Coal provided fuel for 18.5% of total U.S. energy consumption and 43% of U.S. electric power generation in 2013. In 2014, the U.S. coal fleet totaled 300 GW of capacity (28% of U.S. total generating capacity) and 1,586 million megawatt hours (MWh) of generation (39% of U.S. total).
“A first step in advancing CCS is to provide financial incentives for investment in state-of-the-art high efficiency, low emission (HELE) coal power plants. HELE technologies, including supercritical and ultra-supercritical/integrated gasification combined cycle plants, have significant potential to reduce CO2 emissions through the deployment of more efficient coal power generation. Moving the current average global efficiency rate of coal-fueled power to supercritical levels could deliver the equivalent environmental benefit of reducing India’s CO2 emissions to zero. The average efficiency of coal plants worldwide is 33%; state-of-the-art facilities have efficiency rates of 40%. Increasing the efficiency of coal power plants by 1% reduces CO2 emissions by 2-3%. Many of these technologies are commercially available today and could cut 2 gigatonnes of CO2 emissions, equivalent to India’s annual CO2 emissions. In the future, these units also could be potential candidates for CCS retrofits.
“Policymakers justify incentives on the basis that a favored technology has not yet reached maturity. Many incentives for renewables are quite recent, being employed well after those technologies achieved maturity and became commercially available. Tax credits extended to the wind and solar industries in the U.S. were intended to promote the installation of these technologies by buying down the cost of market penetration. [Renewable energy standards] mandated markets for wind and solar, and tax incentives subsidized compliance with those mandates. By comparison, many carbon reduction technologies, including CCS, are in their early stages of development and are highly complex in nature, entailing significant technical and financial risk for developers and investors.
“The risk profile of building a 10 MW photovoltaic facility versus a 500 MW supercritical coal power plant with CCS are significantly different. CCS systems entail much higher cost, have not been demonstrated on commercial scale in the power sector, and bind power production with back-end (i.e., transportation and storage) processes that likely will be beyond the generator’s fence line and control. These and other challenges unique to CCS support the need for policy incentives, which if properly designed will result in CO2 emission reductions, even as the use of fossil fuels increases.”