EPA Moves to Effectively Ban all New Coal Power Plants

Great Debates
1

Signed and submitted for the Federal Register today: http://epa.gov/carbonpollutionstandard/pdfs/20120327proposal.pdf

I’m sure folks can find high-level summaries elsewhere, but in effect the Obama Administration has banned all new coal power plants of a utility scale. Yes there are several caveats: the plant must be 25 MW or larger (the standard definition) and there is this slightly complicated exemption for plants which commit to implementing carbon capture and sequestration within 10 years of construction and meet certain performance targets. Some highlights:

  • If your coal-fired power plant is not starting construction within the next 12 months or is not already under construction, it must meet a CO2 emissions cap of 1,000 lbm/MWh. A top-of-the-line coal power plant nowadays with a coal with a low C/H ratio still won’t come within a mile of this without carbon capture. You might get to 1,600 lbm/MWh - might - with a combination of the right coal and right technology.

  • There appears from my reading of this to be no credit for renewable co-firing or biomass co-firing, unless the coal contribution is 250 MBtu or less (which in effect means almost no power plants of 25MW or larger would really meet that unless they effectively made a complete coal-biomass conversion).

  • It should be noted as well that this regulation impacts fossil-fueled plants, not just coal, and as a result some less-efficient simple-cycle gas turbine designs would not meet the criteria. My spreadsheet calculations show that even a gas turbine plant needs to have an efficiency of at least 47% to be in the clear. Very achievable nowadays, but nonetheless I still see occasional peaking units proposed which are less efficient than that.

  • This will effectively ban all new oil-fired steam-turbine and combined-cycle units that I know of.

Personally I don’t see CCS systems being competitive in this country for a very long time, so I predict that other than a couple of experimental plants, this, if it stands, will end all new coal-fired and oil-fired power plants in this country.

I guess the question for debate is, does this really matter in the near term, and if not how bad could this be in the long term? Given the massive slowdown of new coal projects and the epidemic of older plant closings (a topic I could speak for pages on), in the near-term this appears to have little to no impact. However, the big question in my mind is what happens if the gas picture reverses? In my time in the industry I have seen incredible volatility in gas prices, driven by a large number of factors: weather, pipeline capacity, accidents, gas home heating growth, rollout of gas turbines, and of course people gaming the system such as Enron. Gas is cheap now, but creeping back upward, and I think it will really only take about 25-50 more GW of coal plant closures, one really bad winter, or a couple of states restricting or banning fracking, to drive gas prices back up to $8/MBtu or higher. At $10/MBtu gas - a price we saw not very long ago - given the coal plant closures and this new regulation, there is a strong chance some folks could expect their current utility bills to double or treble in the winter, and increase by 50-100% in the summer.

At $15+/MBtu, things start to get really ugly in some regions of the US - my group predicts in a couple of states, due to a perfect storm of volatile weather, high reliance on gas, no new nuclear, and a sudden flood of coal plant closures already underway, a 2,500 square-foot single-family home might see peak monthly bills of $1,200+ in the winter and $800-$1,000 in the summer. Don’t by any means take that as a prediction of national averages, and YMM certainly V.

Some can argue net cost reductions to society in terms of improved health and mortality, and I won’t dispute that, but right now, in this economy, we have a lot of folks looking at their utility bills in panic. What happens if those bills, on a long-term basis, double or treble? I personally don’t mind paying more for energy which is cleaner, but a lot of folks don’t have that luxury. My hope is that this will spur a major increase in conservation, but my fear is that the combined effects may sandbag the economy in the mid-term. Another aspect of this is that if the total net price of electricity increases, it makes renewables and nuclear look much more competitive, and this could further help to reduce net GHG emissions and pollution of various sorts.

And one other concern has to do with resource allocation - natural gas is an incredibly flexible and valuable fuel, which can be used in the home, for electricity production, industry, business, and chemical processing with little modification. Coal is mostly suited for stationary power production. If renewables and nuclear aren’t able to rise to the challenge for some reason (political or otherwise), do we risk using up gas too quickly, or even returning to coal in the future? (And no, Fischer-Tropf isn’t going to save us either).

Several potential items for debate, I guess including will this measure stand? IMO Obama seems likely to win and stay in another 4 years, and Congress is too divided to over-ride a veto, so in 4 years time of no new construction the inertia may be too great to over-ride, and again, I’m seeing the end of new coal and oil electrical generation, if this stands in its current form.

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AIUI, “the Obama Administration” ≠ “the EPA”.

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I think the EPA regulation was always intended as a stop-gap for Congressional action. The Supreme Court all but forced similar regulations. Unfortunately, since the Tea Party revolution, it appears that no Republican can risk supporting doing anything about any air pollution, much less CO2.

If Romney wins, his administration will rescind this. And we’ll end up back in the federal courts when the Romney EPA refuses to issue replacement regulations. I’m not sure what happens at that point. Probably Congress amends the Clean Air Act to exclude CO2 as a pollutant in exchange for some changes in energy policy, like nuclear subsidies and changes to the tax laws for oil and gas.

If Obama is re-elected, then there will be the usual industry erosion of the regulation. Maybe we’ll expand the bubble rule to new coal plants built right next to old ones, or something else “innovative.” And we’ll either continue to see Congressional inaction, or probably see a similar half-ass energy policy as we’d see from a Romney administration.

Economic impact? Not much unless, as you say, something very different happens in the natural gas market than what’s expected in the near-term. But I’m inclined to think that trend is about as sure as energy trends get, at least as compared to the economic viability of coal.

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I still think at some point a cap-and-trade plan will pass, and that legislation will remove the EPAs authority to regulate CO2, but its obviously going to be a while till that happens. Personally I (and the Obama admin) think that would’ve been a better route to take now, but given cap-and-trade died the last time around, I prefer the EPA using regulations to curb emissions at all, which seems to be the alternative.

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Yes it is. The EPA is part of the Executive Branch, headed by Obama’s chosen Administrator, Lisa Jackson. She implements policies and directives which meet with Obama’s approval. This is the same with every single Administration since the EPA was formed regardless of which party is in power. I’m pretty sure I saw hundreds of times people on here refer to the “Bush Administration” when referring to Bush’s EPA. So let’s drop this odd hijack right now.

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Only sort of. They didn’t mandate at what level the EPA regulated CO2 in Massachusetts v. Environmental Protection Agency. The EPA had the option of requiring a CO2 emissions level which mandated ultra-supercritical boilers or some other efficiency metric. Of course the states might not like that and sue…

I could buy this scenario, but I don’t see Romney winning so I haven’t thought about it much.

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We could have cap-and-trade which only encompassed existing generation too, and keep the strict limits on new generation. It’s possible, anyhow.

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True, of course. But I think that any rule capable of surviving further litigation was gonna be similarly harsh on new coal plants. EPA has definitely moved away from mandating particular technology, since it’s not a very market-oriented solution, and any reasonable limit was going to be much harsher on coal than the lower-CO2 alternatives.

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I agree with your first and last points, but not so much with the middle - they’ve implicitly mandated fossil generation technology, in that one either picks a high-efficiency combined cycle unit, or else a coal plant with CCS. Since there is no commercial-scale coal plant with CCS, and at the current state of things there may not be for quite some time, it essentially leaves one option.

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But an implicit mandate by virtue of an exacting emissions standard given current technology is quite different from the old way of doing things in which particular technologies were directly mandated.

The critical difference is that, in this case, there is every incentive to invent something new and better (or at least new, as effective, and cheaper).

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OK, I see what you’re saying.

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I’m just going to focus on this part:

According to the Consumer Expenditure Survey, the share of household income spent on electricity ranged from 2.1 to 2.3% in 2007-2010. If that doubled over the course of one year and stayed there (big if) that could represent a substantial shock to the economy. Spread over 7 years, not so much.

Also, I might wonder though what the basis of comparison is. Any short run disruption in the supply of gas would affect the economy whether or not new coal plants are built. Though it would presumably be more intense under newer policies.

Or maybe not. The reporter/blogger Matt Yglassias says:

Una: Does that sound right? Or no? I understand that there was a great rush to build coal fired plants, under the thinking that CO2 emissions wouldn’t be penalized and the EPA would end up regulating the greenhouse gases the same way they do particulates, etc: via command/control regs. Looks like that gamble paid off.

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Previous thread: Coal is dead. Long live … what?, in particular this post.

Coal’s relative demise was already written, this just drags the body through the street some. Very little can compete with power from natural gas at the current price point of natural gas (for now the worry is to have room to store it). Previously extant regs were also a significant part of a “perfect storm” against coal.

The “scary uncertainty” indeed is not knowing how long natural gas can stay cheap. Supply will get squeezed at some point …

So the question is how volatile that supply and demand are. And how sophisticated the various players are at using futures to hedge against that short term volatility (versus wanting to speculate themselves).

If it is using up supplies comes gradually enough that prices rise over years, and the ball is kicked down the road a few decades, then other sources can be brought on line along the way*, from new nuke to renewables (that an extant natural gas back up would compliment well). If prices treble in one season?

*Can of course does not equal will.

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The rollout process itself is slow, but many corporate planning processes which I have seen have been looking hard at a “swap” situation, like Duke Energy has done with Cliffside - shut down Units 1-4 (which were old, inefficient units) in order to build Unit 6 (Unit 5 being not terribly old and decently running). Another thing is the whole infrastructure issue - if the EPC market drops all possibility of performing new work in the US, then there will be over time an effect of losing expertise and manufacturing capability. Yes SE Asia is still hot on coal, as are parts of Africa and even NW and NE South America, but the Chinese are brutal competitors in those areas, offering power plants in some markets which are akin to what EDF did with gas turbines in the 1990’s - selling loss-leader power plants to get their foot in the door. There’s a chance that if in 10 years we need a few coal plants built to give baseload power, due to renewable problems, no new nuclear, and gas at $15/MBtu, then they’ll be built by Chinese companies re-branded as “subsidiaries” of American companies. Whether that’s a big deal or not is in the eye of the beholder, I guess.

Short-term the effects of this particular measure will be small, but then I also was not expecting gas to be highly volatile in the short-term either. I’m worried about the mid-term and long-term impacts. I think a strategy of “trade lots of old small plants for large but clean plants” would have been a better and more stable way to go. Near St. Louis there was a plan to replace several older units with a couple of large ultra-supercritical units with much lower CO2 emissions, which will now be scrapped. Sure the new gas to replace them will have less CO2, but the old coal units will likely keep operating and pumping out much more CO2 as well, in addition to SO2, NOx, mercury, HAPs,…the list is rather lengthy now.

One convoluting factor here is that the pace and scope of coal plant retirements has surprised me, and even surprised people I know who have always been somewhat pessimistic on the issue. GenOn’s announcement of so many plants being closed in PA and OH was very unexpected (we thought some would close, sure, but not as many) and some serious rumblings I’m hearing from other utilities has me worried. Homer City’s problems are a surprise to many, and there is a real risk that the Constellation-Exelon merger may result in a large amount of recently upgraded coal generation being wasted - throwing something like $700M of new emissions controls on the scrap heap. There are a few cases where I can’t name names at risk of being fired, but where my company has suddenly, within the last 30 days, been approached by some major utilities with requests for “let’s have you do a study on decommissioning X GW of coal plants”, with the sum total being maybe…damn, another 15% of the US fleet?

So again, I agree with the blogger guy to the extent that near-term the effects of this single rule look small, but long-term, combined with other factors, there will be a huge amount of pressure put on gas and a huge shift in the energy balance of the US. Without an uptick in nuclear and renewables seemingly in the pipeline. I would love to see the coal generation replaced by those two, not so much by gas.

One thing of note in the EPA rule as far as I can tell is biomass co-firing seems to finally be dead for new plants. I saw - analyzed - consulted on - several new coal plant designs which were planned on being 50% biomass / 50% coal. By my reading of this rule, there is no exemption for biomass unless the coal heat input is 250 MBtu or less, which makes that essentially a non-starter except for a very, very small unit (most likely, an industrial generator). I guess the EPA decided that the uncertainty over the true carbon neutrality of biomass (something one can witness in innumerable biodiesel and ethanol threads on the SDMB) was so great that the EPA decided it didn’t want to grab onto that tar baby, so to speak, and just threw biomass out the window. And with so much of the Canadian wood pellet market destined for Europe soon anyhow…it probably was a moot point in many states.

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Great thread! I’ve been thinking a lot about this recently, in part because it has some impact on my job.

I’m first to admit I don’t fully understand all the forces at play here. It looks like we’ve seen a huge decoupling of NG and oil prices due to the recent oversupply from shale formations. I think we’re going to still see significant decoupling just because the NG and oil are now mostly coming from different sources. However, anything that can use a flexible hydrocarbon source will create some coupling of prices. I don’t know how significant that is. Probably not so much an issue for power generation and home heating. Dow and the like can relatively easily (compared to a power plant) swap some of their processes to and from NG, but EIA tells me that only 20% of our energy consumption is “industrial”, and that “Includes industrial combined-heat-and-power (CHP) and industrial electricity-only plants.” There’s been a push for NG-powered vehicles, which seems to be most feasible for trucks (CNG or LNG) right now, but I know there are funding opportunities for improving storage so that passenger vehicles can run on CNG. However, I don’t think using NG in vehicles will further couple NG and oil prices unless we see substantial gas-to-liquids processes put in place. We can currently make methanol (via syngas) that’s cheaper than gasoline, and converting a car to run on methanol (or some mixture of it, gasoline, and/or ethanol – “tri-flex-fuel”) is pretty cheap. That I think has huge potential to tie NG prices back to oil prices.

I also wonder about about the NG transmission infrastructure. If we double our use, can we get it from the ground to the consumer? If TransCanada ever puts in their $40B pipeline from Alaska’s North Slope to Alberta, can we move it from there?

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And there is of course a much more vibrant trans-oceanic trade in petroleum than there is in CNG or LNG.

I confess that NG price dynamics as impacted/impacting transportation is not something I research much.

[QUOTEI also wonder about about the NG transmission infrastructure. If we double our use, can we get it from the ground to the consumer?[/QUOTE]

A huge problem for many power plants, especially as getting a new major gas pipeline run costs millions per mile and can face significant NIMBYism.

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This policy might be brilliant. I hope it gets the job done insofar as reducing CO2 emissions is concerned.

But I’d prefer it if companies had to pay a charge for CO2, and then were left to their own devices. Put a $100/ton tax on the stuff and let Una decide whether a coal/biomass plant makes sense. Moreover, let her run the spreadsheets every year as technologies and various prices evolve over time.

The charge could be via a tax or an auctioned permit. Makes little difference. It could even help close our chronic budget deficits. It would discourage bad things like pollution rather than beneficial things like labor, savings and investment. It would not be too late for Congress to pass such a law next year, over-riding these EPA mandates. But the odds of that lie somewhere between slim and none. Bah.

Meanwhile, Scientific American reports that “The world is close to reaching tipping points that will make it irreversibly hotter.” I guess we’ve twiddled our fingers for long enough.

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Could we sum up and make a broad statement that this action will result in increased electrical prices for the consumer?

19

Assuming for some reason we needed to go back to coal, but wanted it to be as green as possible (or least non green), would it be more beneficial to build new plants or retrofit older ones?

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I also saw that everyone who owns a (now unused) LNG port is really pushing to start exporting LNG, which I’m under the impression they’re not allowed to do now. There’s limited capacity for that, but it would certainly boost prices if there’s a disconnect between domestic and world NG prices.

Also slightly unrelated, but I found out that there is a plant in the Midwest that is steam reforming coal and turning the syngas into methane, which they pump East. http://www.dakotagas.com/ Dakota Gasification Company - Wikipedia Apparently they capture 50% of their leftover CO2 (the waste stream is much purer than, say, coal flue gas, so this is easy), which they pipe and sell to oil fields in Saskatchewan. I have to wonder whether they’re still viable given current prices.