EPA's New Power Plant Rule - How Does It Affect Coal-Fired Power Generation?

Today EPA proposed its Carbon Pollution Standard for New Power Plants. The proposal sets a performance standard that new plants will need to meet. Existing coal-fired generation accounts for the largest chunk of carbon dioxide pollution emitted by stationary sources in the US, which is roughly on a par with the carbon dioxide pollution emitted by the entire transportation sector. For more context and background on the rule, see recent posts by Frances Beinecke and David Doniger.

What does the new standard for the kinds of power plants that can be constructed in the future? In particular, where does it leave new coal plants? The answer is that the proposed new source standard is technology neutral. It does not specify directly or indirectly what technologies generators can choose to invest in, nor does it ban the use of coal in new power plants. It does effectively necessitate the use of modern technology if coal plants are to meet the standard though.

Investing in a new coal-fired power plant these days is not an attractive option in general, for reasons quite apart from the NSPS. Back in 2007, 150 or so new coal plants were proposed around the nation. Today, the vast majority of these proposals has been cancelled or been put on indefinite hold due to a multitude of factors (see here). The high capital cost of coal-fired power plants in a weak economy, combined with investor concerns about exposure to carbon emissions legislation make these plants unattractive, and this has been widely documented in proceedings and statements by many utility officials. Furthermore, the recent drop in natural gas prices has allowed combined cycle natural gas plants to beat some coal plants on price at the margin (see EIA Monthly Electricity Update, Dec2011), while coal's share of electricity generation has dropped from nearly 50% in 2007 to 45% in 2010, according to the EIA, even falling below 40% during the unusually warm months of Nov/Dec2011.

The proposed new  emissions rate that facilities need to achieve is 1,000 pounds of carbon dioxide emitted per megawatt-hour of electricity produced (on a gross basis). This is a standard that new combined cycle natural gas plants are able to meet easily, since their emission rates are in the region of 800lb CO2/MWh or below. Simple cycle natural gas peakers (gas turbines) would likely not meet the standard, since their emission rate is in the region of 1300lb CO2/MWh, but this type of plant is explicitly excluded from the rule. As for coal, the standard means that a new plant would have to capture and sequester a moderate amount of its CO2 emissions: a new supercritical pulverized coal plant would emit in the region of 1600-1800lb CO2/MWh (see here), which means that even when the parasitic load for capture, transport and sequestration is factored in, the required percentage of capture is well below the technical potential of over 90%.

If someone is hell-bent on building a new coal plant despite the economic and financing challenges, the new source standard will allow that if the plant captures and sequesters a portion of its CO2 emissions. This is not just an option on paper – it’s an option that developers have in practice, if future economics justify it. Capture and sequestration is a technological reality today at the scale needed for new coal plants. In addition to numerous non-power projects that are capturing and/or sequestering CO2 successfully around the world (for a list see databases and maps by the Global CCS Institute and ZERO), coal plants with capture and sequestration are under construction or nearing financial close in the US. These include the Kemper County IGCC plant in Mississippi by Mississippi Power (a subsidiary of Southern Company) and the Texas Clean Energy Project by Summit power Group. The former, although it has been entangled in litigation in relation to the PUC proceedings that authorized cost pass-through, clearly shows that such a plant is technically feasible today. The latter, having obtained all its permits, is planning to begin construction soon when the financing arrangements are in place.

From a regulatory standpoint, all the pieces are in place to permit a capture and sequestration project today. Siting the capture and transportation infrastructure is fundamentally the same as standard power plant and pipeline siting. For the sequestration part, EPA promulgated a new injection well class (Class VI) under the Underground Injection Control Program in December, 2010, specifically tailored for the geologic sequestration of CO2. The Class VI rule is final, and obtaining permits is now a clearly defined process.

The proposed standard therefore simply aims to move any new coal plant proposals away from the technology paradigm of our grandfathers and up to date with today’s achievable pollution standards in a feasible and realistic way.