Published: April 21, 2014 |

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Some top technology firms are expressing concern about U.S. EPA’s proposed rules to limit power plant carbon emissions, questioning whether they will truly encourage innovation.

Pro-coal groups, including the National Mining Association and the American Coalition for Clean Coal Electricity, along with their allies in Congress, have questioned the agency’s plans to require carbon capture and sequestration for all new coal-fired power plants.

Beyond discussing whether CCS is “ready” for such a mandate, EPA critics have also said the agency’s proposal is making technology firms apprehensive about investing in advancing the technology.

“We’ve pulled way back on carbon capture [research and development],” said Kip Alexander, a power technology executive at Babcock & Wilcox Co. He cited “the way the rules are being written, the rules are being made” for the strategic decision to scale back.

The statement may appear counterintuitive. If EPA is going to require a certain technology, why wouldn’t companies be scrambling to cash in on the requirement? And why wouldn’t technology firms be ramping up their research to help them out?

Coal boosters respond that market conditions and the high cost of CCS mean that utilities will instead opt for building natural gas power plants or turn to renewables. Such a reality would hurt coal and leave the country vulnerable in times of high power demand, they argue.

Alexander said Babcock & Wilcox ramped up its focus on technology to reduce power plant greenhouse gas emissions as policymakers increased their focus on global warming, especially when regulation-minded democrats gained control of Congress and the White House.

“From say 10 years ago to four or five years ago, we were seeing signals with things like Waxman-Markey that carbon capture was going to be required for new coal, and we invested in first-generation solutions,” Alexander said in an interview.

Beyond policy, market conditions were different back then. Natural gas prices were higher and more volatile when the cap-and-trade bill authored by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) passed the House in 2009.

In 2008, for example, the price of natural gas topped $13 per million British thermal unit. It was less than half that earlier this year.

Not only did coal have a leg up in the marketplace several years ago, but the cap-and-trade legislation included tens of billions of dollars for carbon capture and sequestration efforts.

“We all scrambled, thinking there was a market coming,” Alexander said. “The economics unfolded as we did the development. We still do research and development for coal technology. But it’s a lot more geared toward the global market.”

‘NOT THE RIGHT ANSWER’

Robert Hilton, vice president of power technologies for government affairs at Alstom SA‘s power division in the United States, another top power plant technology firm, didn’t necessarily say proposed EPA rules were killing CCS research but was also not shy about criticizing the proposal.

Requiring “CCS at a point when CCS is improving is not the right answer,” Hilton, who frequently speaks on carbon capture issues, said in an interview. “As an industry, we’re not ready to go with CCS on a bunch of plants.”

EPA has touted ongoing CCS projects like Southern Co.‘s Kemper County, Miss., power plant, which is soon to open, as evidence of the technology’s current viability.

The Obama administration also often touts billions of dollars in Department of Energy spending to promote and develop CCS. Plus $8 billion in new loan guarantees is currently in the application process.

That doesn’t keep Hilton from insisting that research efforts are “absolutely languishing.” He said, “How can we say it’s anything but languishing? And there’s no financing for new [demonstration projects].”

At the same time, he said, “We’re continuing to drive technology because we do believe that governments will accept the responsibility of what’s happening to the atmosphere.”

Fred Eames, CCS Alliance attorney and partner at the firm Hunton & Williams LLP, is also among the industry advocates who thinks EPA is hurting rather than encouraging technological innovation.

“EPA said it read the comments on its prior version of the rule,” he wrote in an email. “Then it would have read comments from the people who would know best — equipment manufacturers, utilities, financiers — that a mandate is going to hurt CCS, not help it.”

Eames added, “If the Administration wants to encourage CCS, it needs to support research and incentives, but every year the President’s budget proposes deep cuts.”

PARTIAL CAPTURE

Carbon capture advocates, who stress that the technology is necessary for the world to meet climate goals, often speak at conferences about what is keeping CCS from becoming commercially available faster.

For years, the conventional wisdom — even among opponents of strong government action on climate change — was that governments failed to incentivize CCS by not enacting tougher emissions constraints or pricing.

But during a recent Global CCS Institute meeting at the Canadian Embassy in Washington, D.C., several carbon capture advocates noted that governments, including in the United States, are slowly but surely boosting regulations on carbon. In other words, the regulatory trigger is in many ways already there.

CCS advocates therefore identified other factors preventing the widespread commercial penetration of CCS include cost, competition from gas and renewables, and liability concerns, especially for long-term underground storage.

Sarah Forbes, senior associate at the World Resources Institute, who specializes in carbon capture efforts, said new Obama administration injection rules to encourage and regulate the underground storage of CO2 were a necessary part of administration efforts and are boosting the practice.

Like many CCS backers not involved in politics or lobbying, Forbes demurred from weighing in on whether EPA’s proposal to require CCS for all new coal plants would effectively kill rather than boost the technology’s U.S. footprint.

But in an interview last week, she stressed that EPA’s mandate would only require plants to trap about half of their CO2 emissions. That, in her view, has been absent from much of the back and forth.

For perspective, the energy giant Southern hopes to capture at least 65 percent of CO2 emissions at the Kemper plant. The DOE-backed FutureGen 2.0 project in Illinois looks to capture more than 90 percent of plant emissions.

Last month EPA proposed a permit for FutureGen’s plans to inject CO2 underground. And this week it proposed a similar permit for an Archer Daniels Midland Co. project in Decatur, Ill.

Forbes, who spent time working on clean coal issues at DOE, said EPA’s greenhouse gas control and CCS mandate proposal “actually gives a good bit of flexibility in terms of systems design.”

When it comes to the future, Forbes said policymakers and companies have to decide how much money to spend on the technology and the appropriate level of public-private cooperation.

“The question that I would ask in this space is what is the model for the next generation of CCS that would be installed,” she said.

‘NOT WITHOUT COST’

Pushing that next generation of CCS projects is one of the top concerns for Julio Friedmann, DOE’s clean coal chief, who says they are crucial to growing the technology’s marketplace penetration.

Lawmakers are also pushing legislation to help commercialize CCS. A new bill by Sen. Heidi Heitkamp (D-N.D.) would boost federal research spending and provide incentives to utilities.

While welcoming the legislation, National Mining Association spokesman Luke Popovich said the group’s main concern was the EPA proposal. “She’s offering to build a hospital for patients who need urgent attention now,” he said.

EPA Administrator Gina McCarthy defended her agency’s rulemaking during a PBS interview last year. “It’s not about adding cost,” she said, while conceding that the rule is “not without cost” to power generators and the coal industry.

“It is about providing certainty that there is a future for coal and a future that allows them to manage their carbon emissions effectively at a time that we know they need to be managed for public health and the environment,” she said.

At the same time, in its regulatory impact analysis for the greenhouse gas rules, EPA cited federal statistics predicting that few if any new coal power plants would be built in the coming years.

“Taken together, current and expected natural gas and coal market trends are contributing to a fundamental shift in the economic conditions for new power plant development that utilities and developers have recognized and responded to in planning,” the EPA analysis said.

The tough landscape for U.S. coal is why Matt Dooley, an Alstom executive consulting engineer, is thinking about the growing demand for the fuel beyond U.S. shores.

“I can tell you that Alstom is a global player in technology. We provide power solutions all over the world,” he said. “Coal may be declining in the U.S. but not declining in other places.”

At the same time, even though coal is thriving abroad and China has been active in CCS research, Dooley noted, “Market drivers for energy efficiency in Third World countries isn’t there.”

When it comes to efficiency, Dooley said at least some coal power plants in the United States could be installing technology to boost their performance but don’t, not wanting to trigger a new source review under the agency’s greenhouse gas tailoring rule.

Dooley sees the trend as an example of EPA inadvertently stifling technological innovation through regulations. “A lot of this technology exists now that can be implemented,” he said. “We didn’t start this yesterday. We’ve been doing this for many years.”

DELAY TACTIC?

George Peridas, a scientist with the Natural Resources Defense Council, visited SaskPower’s Boundary Dam carbon capture project in Canada this week. It reinforced his view about the righteousness of EPA’s proposed mandate.

“This is living proof that this is right here, right now,” Peridas said in an interview. “If you go to Boundary Dam, it’s staring at you, it’s real.”

Peridas called industry’s resistance to CCS an effort to delay the inevitable, a “standard tactic that industry often deploys to complain about new rules.”

Peridas said continuing the status quo of burning coal without carbon capture is no longer an option if the world wants to meet its climate goals.

EPA’s proposed standard is, therefore, a way to level the playing field because no utility would be able to seek commercial advantage by building a coal plant without CCS.

“No one can hold a crystal ball and predict what the market is going to do,” said Peridas, calling it “plausible” for gas prices to increase in a way that would make new coal plants with CCS viable.

Even though it is not an option for new plants in all regions, selling captures of CO2 for enhanced oil recovery can also boost the economic benefits of CCS. Both Boundary Dam and Kemper plan to sell their carbon emissions for drilling nearby.

Then there are smaller companies like Eco Power Solutions Inc. that have been researching new, more affordable ways of capturing emissions in order to benefit from increased regulations.

BEYOND COAL

Even though EPA’s proposed CCS standard for new power plants does not include natural gas projects, which generally release less CO2 emissions, Peridas said CCS research would have to continue for those plants too.

“Even a large-scale switch from coal to gas won’t do it,” Peridas said about meeting global climate goals. “We have to do CCS on gas as well.”

The Obama administration has been stepping up its efforts to promote DOE’s CCS research for natural gas plants. Those efforts have faced resistance from pro-coal lawmakers who say coal research is the priority, especially with the possible new rules.

Don’t count on the private sector to drive the innovation.

“It remains to be seen,” Alexander said. “It won’t happen on its own through private R&D.”

—By Manuel Quiñones, E&E Publishing