As recently as a few years ago, I would often tell my students, “It’s not a matter of whether coal will be used, but how it will be used.” After all, coal is abundant throughout the world – in developing as well as developed nations – and it can be used to generate electricity at comparatively low cost. Today, coal-fired power plants generate about 40% of the world’s electricity. For coal-rich developing nations such as China and India, where the power plants provide an indispensable source of low-cost electricity, coal can contribute as much as 90% of total power generation.
But, coal-fired power plants also make the largest contribution to global carbon dioxide (CO2) emissions and are therefore the largest contributor to global warming. So if we’re going to put a dent in the emissions that cause global warming, coal-fired power plants provide a large target of opportunity. But, can we have it both ways? Can we continue to build and operate the power plants while reducing their emissions? The short answer is “yes.” We can do it by implementing technologies involving carbon capture andsequestration (CCS).
CCS has two key components: (i) separating the CO2 from a gas stream (capture) and (ii) transporting it to an underground geological formation for permanent storage (sequestration). For coal-fired power plants, CCS is an essential tool for reducing carbon emissions.
Today, I frame my thoughts on coal differently. Instead of saying “it’s not a matter of whether coal will be used,” I now pose two questions. Is CCS in fact a viable option? And, if not, should coal be used without CCS?
Last year (Incropera, 2015), I answered the first question, at least to my satisfaction. Absent a major breakthrough in technology − one that significantly reduces costs – CCS does not provide a viable option for reducing emissions. Nevertheless, existing coal-fired power plants are being retrofitted for CCS and new plants are being built with CCS.
Was I mistaken, or have conditions changed? Does CCS now look more promising? To answer this question, let’s consider the status of four large projects beginning with the world’s first commercial scale power plant in Saskatchewan, Canada.
Subsidized by a $240 million grant from the Canadian government, the SaskPower project retrofitted an existing coal-fired plant by using a chemical absorption process to capture 90% of the CO2 from the products of combustion. The CO2 is routed to a mature oil field where its injection enhances production by the field. As a transaction, enhanced oil recovery (EOR) involves the sale of captured CO2 by the power plant operator to the oil producer. If market conditions are favorable, the sale allows the operator to reduce the net cost of CCS and the producer to profit from the sale of additional oil made possible by EOR.
But SaskPower is not without issues. At $1.3 billion for a plant with a net generating capacity of 110 MWe, the cost of nearly $12,000 per kWe exceeds that of constructing a carbon-free nuclear power plant and far exceeds costs associated with carbon-free wind and solar energy. And that’s just to retrofit an existing plant. Even if the cost of future retrofits were reduced by 20% to 30%, as claimed by the developers, and generous government grants were continued, economically, the projects would remain non-competitive.
The other problem is that, since start-up in October 2014, SaskPower has experienced frequent disruptionsattributable to the capture technology. In addition to requiring costly repairs, the disruptions have reduced the amount of captured CO2 and have triggered steep penalties for failing to meet contractual EOR requirements.
Like SaskPower, the Petra Nova project in Houston, Texas involves retrofit of an existing coal-fired power plant, use of a chemical absorption process to capture the CO2, and use of the CO2 for EOR. At a projected cost of $1 billion, with $167 million provided by the US Department of Energy, and removal of the CO2 from a stream providing 240 MWe of generating capacity, the cost of about $4,000 per kWe appears to be a good deal less than that of the SaskPower project and perhaps an indication of economic viability. But, there are some caveats.
The project is scheduled for completion at the end of 2016, and full costs will not be known until it is fully operational and meeting design specifications. The costs may well exceed initial estimates, perhaps by a large amount. Also, because 240 MWe is the plant’s gross generating capacity, it does not account for the power needed to operate the CCS process. A 75 MWe gas-fired turbine was constructed to meet this need, adding additional costs to the project and potentially reducing the generating capacity by as much as 75 MWe (from a gross of 240 MWe to a net of 165 MWe). The gas-fired turbine also produces CO2 emissions, the net effect of which would be to reduce by as much as a factor of 2 the amount by which the retrofit is projected to reduce CO2emissions.
But, there’s another caveat that threatens Petra Nova and, for that matter, any project relying on economic benefits from EOR.
For EOR to be profitable, the market price of a barrel of oil must be large enough to justify the cost of CO2 used to produce the oil. For oil selling at $75 or more per barrel, EOR makes economic sense. For oil selling at $50 per barrel, it does not. With oil prices likely to stay low for the foreseeable future, EOR does not contribute to the economic viability of CCS.
Scheduled to become the world’s largest CCS project, construction began in June 2010 on a 582 MWe (net) power plant in Kemper County, Mississippi. Touted as an example of clean coal technology, the integrated gasification and combined cycle (IGCC) plant involves a facility that gasifies the coal and removes 65% of the CO2 before the gas stream is burned and the products of combustion are used for power generation by a combined (gas and steam) cycle. Initial projections called for a total project cost of $2.4 billion, subsidized by a $270 million dollar grant from the US Department of Energy and hundreds of millions in tax credits from the Internal Revenue Service. Additional benefits were projected from use of the captured CO2 for EOR.
Fast forward to April 2016, and costs have ballooned to $6.5 billion, with completion now projected for the end of 2016. Because of the delay, developers have lost tax credits totaling $367 million for failure to meet an original deadline of May 2014 and a second deadline of April 2016. By order of the Mississippi State Supreme Court, the developers must also refund $353 million to rate payers who would be serviced by the power plant. Add to these setbacks the questionable viability of EOR, and the project appears to be an unmitigated financial disaster.
The fourth project is also flying under the banner of clean coal technology. Conceived in 2009 and termed the Texas Clean Energy Project (TCEP), it also uses IGCC technology, in this case for a power plant that would produce 400 MWe (gross) and capture 90% of the CO2 for EOR. Net production of commercial electricity would be 245 MWe, with the balance used for CCS and coproducts of commercial value, such as urea and sulfuric acid.
At an estimated cost of $2.6 billion, the project benefits greatly from government subsidies, which include a $450 million grant from the Department of Energy, $811 million in federal tax credits, and other tax advantages provided by the State of Texas. The project may break ground this year and could be completed by 2019. But, even if all design and performance objectives are reached – a really big if – the need for such large subsidies makes it more than problematic that TCEP could – or should – be a template for future projects.
Collectively, SaskPower, Petra Nova, Kemper County, and TCEP provide little confidence in the ability of existing technologies to provide an economically viable CCS option, certainly not without the large government subsidies they have enjoyed to date. The subsidies are justifiable for first-generation projects, but not for future projects. And, it is unlikely that cost savings suggested by the first-generation projects would be large enough to encourage private-sector investments in future projects.
I therefore stand by my original assessment. Without a major breakthrough in technology, CCS will not be a viable option for coal-fired power plants. Moreover, with the rapidly dropping costs of wind and solar energy, it makes more sense to move away from coal − in developing as well as developed nations – while increasing investments in carbon-free sources of electricity.
A nuanced response is needed to the question of whether, absent a technological breakthrough, new power plants should be constructed without CCS. For the wealthier, developed nations of the West, the answer is “no.” Needs can be met by expanding renewable and nuclear sources. For poorer, developing nations of South and East Asia and the Southern Hemisphere, the answer may be a “qualified yes.” With hundreds of millions of people yet to achieve an acceptable standard of living and abundant coal reserves, coal-fired power plants may provide the best, if not the only viable option for bridging the economic divide. But, even in developing nations, the gravity of the global warming problem calls for an eventual moratorium on new construction, perhaps within a decade.
Incropera, F.P. (2015). Climate Change: A Wicked Problem, Cambridge University Press, New York, p. 124-9.