Coal power generation in the U.S. stands at a crossroads. Abundant low-cost natural gas, federal environmental requirements and uncertainty over future regulation of greenhouse gas (GHG) emissions are driving the closure of older, less-efficient coal units and cancellation of planned investments in new coal generation capacity.
The fate of coal generation hinges on successful commercial deployment of carbon capture and storage (CCS) technologies. Fortunately, CCS has progressed much further than commonly acknowledged by the coal and power industry.
While CCS in electric power generation has not yet been demonstrated at commercial scale, it is proven and commercially available today using carbon dioxide (CO2) captured from other industrial processes. There are eight integrated, large-scale CCS projects in operation, with dozens more in development.
Optimism about CCS in the power sector may seem surprising, since challenges are widely reported:
- Uncertainty over federal GHG policy deters private investment;
- Low demand and prices for electricity and competition from natural gas makes CCS power projects more costly;
- Current federal incentives are insufficient;
- Some environmental groups oppose CCS power projects, not just conventional coal plants; and
- Recent cancellation of large-scale CCS power projects fuels critics’ false narrative that CCS is unproven.
Fortunately, deployment of CCS in power generation is underway. Integrated gasification-combined cycle (IGCC) power projects by Southern Company’s Mississippi Power (under-construction) and Summit Power (near-construction) will capture 65 and 90 percent of their CO2 emissions, respectively.
Companies are also successfully demonstrating post-combustion CO2 capture at existing coal-fired power plants and driving down costs.
Moreover, the coal and power industry is starting to recognize what the oil industry has understood for years—we already do CCS at scale through CO2-EOR.
CO2-EOR is decades-old, commercially proven technology. The oil industry transports by pipeline and injects 65 million tons of CO2 annually to produce 6 percent of America’s domestic oil. Much more oil could be produced, if more CO2 were available.
Policy-makers increasingly support CO2-EOR as an important energy security, economic and environmental strategy. CO2-EOR creates a revenue-generating CCS business model for power companies through sales of CO2 to the oil industry. It can also fund federal CCS tax credits to the power industry through increased federal revenues from new incremental oil production.
The work of the National Enhanced Oil Recovery Initiative (NEORI), a broad coalition convened by the Great Plains Institute and the Center for Climate and Energy Solutions, shows how CO2-EOR can help cover the cost of CCS deployment in the power sector. NEORI’s analysis demonstrates that modest tax incentives to capture man-made CO2 from lower-cost industrial sources can generate a large stream of new federal tax revenue obtained from increased oil production through EOR. This revenue stream, in turn, can help finance deployment of more costly CO2 capture technology at coal and gas-fired power plants.
Based on NEORI’s work, Senators Kent Conrad (D-ND), Mike Enzi (R-WY) and Jay Rockefeller (D-WV) recently introduced bipartisan legislation to modify the existing 45Q tax credit to help get initial projects across the finish line.
Over the longer-term, NEORI recommends a larger federal CO2-EOR tax credit that would pay for itself within 8 to 10 years. Over 40 years, the tax credit would yield an additional 9 billion barrels of domestic oil, store 4 billion tons of CO2 from power plants and other industrial sources, and generate an estimated $105 billion in net federal revenue — while enabling construction of every serious commercial-scale CCS power project proposed in the U.S. today.
Important progress has been made in proving the technical viability of CO2 capture in power generation, and CO2-EOR offers a business model and revenue stream for federal incentives to accomplish the next stage of widespread commercial deployment of CCS power projects.
It’s time for the coal and power industry as a whole to join other industry, labor and environmental stakeholders in advocating for aggressive commercialization of CCS and for CO2-EOR as the pathway for achieving it.
*This originally appeared in the November 2012 issue of Power Engineering*