By Steve Blankinship, Associate Editor
In light of spiraling costs coming from every direction coupled with a sagging economy, the thought of making electricity even more expensive than it already is may not be a pleasant one. Perhaps no single issue is driving concern about the price of electricity in the United States more than the prospect of making coal plants capture and sequester carbon dioxide (CO2). Coal is the biggest provider of electricity in the United States and the least expensive except for hydro. Carbon capture and sequestration (CCS) would likely raise the cost of producing power from coal plants at least 50 percent.
No one thinks requiring coal plants to capture carbon dioxide and isolate it underground will be cheap or easy. The capture part, albeit tricky and pricey, is certainly doable. The capital cost of capture, via any of several methods, may be the easiest part. But the dramatic parasitic load that capture will inflict on a coal plant would likely reduce net power output by 30 to 40 percent, assuming today’s technology. Keep in mind, all of this is just for the capture, not the sequester part.
Even at that, coal might stay in the money compared to the capital of new nuclear power plants (now pushing $7,000 to $8,000/kW) and natural gas, whose capital costs have nearly doubled in the past five years and whose cost to operate over the long haul will likely spiral due to (inevitably) much higher natural gas prices.
And while the cost of conventional coal plants has doubled in the past five years, the cost of wind turbines has nearly tripled. Meanwhile, carbon capture technology vendors are hopeful they will be able to reduce parasitic load for both new coal plants and for carbon capture systems that can be retrofitted.
Still, it’s the permanent storage part—sequestration—that will be both pricy and dicey. The technical, legal, safety, logistical, environmental and economic issues are daunting. In fact, CO2 sequestration technology remains generally regarded as unproven, at least on the scale required to handle all the CO2 produced by every power plant. An official with the National Resource Defense Council estimated the cost of a national pipeline system to transport CO2 at $50 billion.
In the end, the biggest issue could turn out to be the ability to recover sequestration costs—or least some of them—from someone other than the electric customer. In other words, a coal plant that captures and sequesters will need a market for the CO2 it captures. That means it will need one or more customers willing to pay to have the CO2 pumped specifically into its oil deposits to extract more oil. At present there simply is no other significant commercial market for the immense quantities of CO2 that would have to be disposed of. Without a commercial market for CO2, power plant operators will have to absorb the cost of compressing, transporting and storing the gas as part of the power production cost and add it to the price of every unit of power produced by the plant.
Sanity Check
As principal for Arlington, Va.-based Energy Ventures Analysis (EVA), which specializes in energy and environmental market analysis and forecasting, Tom Hewson’s job is to crunch and analyze numbers and try to make sense of them. EVA forecasts are one of the many “sanity” checks used by the U.S. Department of Energy to compare its Annual Energy Outlook results to those of leading industrial forecasting firms.
During a recent briefing, Hewson presented the case that even the burdens that a national CCS policy would impose on coal plants might not cripple new coal plant economics sufficiently to eliminate coal as a viable energy option. Even if carbon capture and sequestration were to become the law of the land and even if we believe the current goals for CCS, it means the price eventually can be reduced to less than $20 per ton of captured CO2. “And at that cost, coal will remain the low-cost option for baseload power for most of the U.S.,” he said.
He based that assessment on assumptions of the value of CO2 through 2014 made by the Regional Greenhouse Gas Initiative, an effort by Northeastern and Mid-Atlantic states to reduce carbon dioxide emissions. The assessment currently projects a value for CO2 by that time to be in the range of $6 a ton. At that level, he said, coal would remain the lowest-cost baseload alternative for most of the country. Furthermore, while carbon regulations will affect all fossil fuel plants significantly, the long-term carbon penalty should eventually be capped by carbon capture and sequestration costs.
In short, if the United States can meet DOE and private sector cost goals for CCS, Hewson said he thinks coal would remain the low-cost baseloaded alternative, even with carbon regulation.
He offered a caution, however: the “if” is very big one.