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Report: EPA may weaken its carbon rules for new power plants

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The EPA's proposed carbon rules for new power plants would effectively prohibit new coal-fired power plants in the United States for the foreseeable future.

As written in the draft proposal, the rules — the New Source Performance Standards (NSPS) for carbon dioxide — would require that all new coal-fired power plants meet a standard of 1,100 pounds of CO2 per megawatt-hour of power produced, which is on the high end of what an average natural gas plant produces.

The average US coal plant currently emits around 1,800 lbs/MWh. So to hit the standard in the new rule, a new coal plant would have to bury at least some of its CO2 emissions using carbon capture and sequestration (CCS), which is extremely expensive. The practical effect of such a standard, in the absence of a fairly high carbon tax or a low carbon cap, would be to price new coal completely out of the market.

But now it seems EPA may drop CCS from NSPS! OMG.

Last week, Inside EPA ran a story, based on an "informed source," claiming that EPA is likely to drop the requirement for carbon sequestration from the final version of the new rule.

Now, until there's more to this story than a single unnamed source, it's probably not worth spending too much energy on, but here's a quick review of what CCS does and doesn't mean to the carbon rule.

CCS may be a dubious BSER

To serve as the basis for an emission standard, a Best System of Emission Reduction (BSER) needs to be "adequately demonstrated." It's difficult to make that case with CCS.

In Mississippi, the effort to build the first commercial coal-CCS power plant in the US has become an omnidirectional shit show. The cost of the Kemper Project has ballooned from roughly $2.4 billion to, at last accounting, $6.2 billion. One of the utilities partnering with the project has pulled out. Southern Co., the plant's owner, faces falling stock prices, a likely credit downgrade, and the unenviable task of asking regulators to let it jack up rates in Mississippi by 41 percent — $37 a month for a typical household.

And this is to say nothing of the grim death of FutureGen. (Remember that?)

The fact that all attempts to produce a working coal-CCS project in the US have failed (or are mid-failure) does not speak well of the viability of CCS. According to these rumors, EPA has started getting nervous about defending the technology in court and may remove CCS from its list of available control technologies (BSER).

The CO2 rule for new plants is mainly a backstop

The fact is no one particularly wants to build new coal plants in the US anyway. There are too many existing barriers. Natural gas and renewable energy undercut them; other EPA air regulations (e.g., on particulates and mercury) make them expensive; and a plateau in electricity consumption has reduced demand for them. So it could be argued that EPA's carbon rule for new power plants is redundant — another brick in a wall that's already too high to scale.

In particular, whether CCS is included in the rule seems unlikely to make the difference between coal plants getting built or not built. If coal plants can't get over current barriers, the question of exactly how high to build further barriers may seem academic.

The reason greens are so keen on the rule is that it will serve as a permanent backstop to these existing barriers. Even if the market changes in unexpected ways — say, natural gas prices skyrocket, or there's a surge in demand — the carbon rule will prevent utilities from returning to new coal.

Naturally, greens would prefer the highest, strongest possible backstop, which is what CCS would represent.

The most important thing about the rule is that it doesn't delay the next rule

While EPA's carbon rules for new power plants are mostly a backstop, its carbon rules for existing plants (the Clean Power Plan) might actually have some bite. However, the latter rule cannot go into effect until the former does.

That means it's extremely important for NSPS to survive legal challenges and be implemented as soon as possible, so that the Clean Power Plan can be implemented while Obama is still president.

Worst case scenario: CCS stays in, it loses in court, and EPA is forced to start all over again on NSPS. That would delay the Clean Power Plan for years, possibly putting it in the hands of, say, President Rubio, who is unlikely to treat it with tender care.

EPA faces a choice here between environmental risk and legal risk. It may decide that the environmental benefits of including CCS are modest compared with the legal danger it poses to the rule.

If CCS goes, the standard will have to get weaker

If EPA dropped CCS from its list of "adequately demonstrated" systems of emission reduction, it would inevitably have to weaken the carbon standard for new coal plants, since CCS is the only way to meet the current standard of 1,100 pounds of CO2 per megawatt-hour.

But there is a fallback position. EPA could relax the standard to between 1,300 and 1,450 lbs/MWh, which is the average emission level of an integrated gasification combined-cycle (IGCC) coal plant. (The aforementioned Kemper plant is an IGCC plant with CCS added.)

An IGCC plant takes coal (or natural gas) and creates a purified syngas out of it, which it then burns to make power. Not only are IGCC plants more efficient than standard coal plants, but they also have environmental advantages: pollutants, including sulfur dioxide and in some cases carbon dioxide, are removed from the liquid fuel pre-combustion, which is a much more efficient process than removing them from post-combustion flue gas. So while CCS would add to the cost of an IGCC coal plant, it would add less than it would add to the cost of a traditional pulverized coal plant. For this reason, IGCC is often referred to as "CCS-ready." (A friend used to joke that it was like calling his driveway "Lamborghini-ready.")

IGCC coal plants aren't exactly popular — there are only two operational in the US, and like every IGCC plant in the world, they are heavily subsidized by the government. And they aren't cheap — their capital costs are much higher than a comparable natural gas combined-cycle plant. But at least IGCC is adequately demonstrated.

(Side note: a top-of-the-line conventional coal plant, i.e., an ultra-super-critical pulverized coal plant, emits around 1,600 to 1,700 lbs/MWh. But it could conceivably meet the IGCC emission standard by "co-firing" coal with natural gas or biomass. That would make it as expensive as IGCC, though, so kind of pointless.)

Much ado about possibly nothing

Again, this is all based on a single, unnamed source, so don't get too excited. (I know what all these acronyms do to you. Settle.) Enviros involved in the rulemaking process say they haven't heard anything about it and doubt that it's true.

So we'll wait and see. The final rule is due out in August, and there's sure to be plenty more to say about it then.

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