Observations on Carbon Capture at Coal-Fired Power Plants Hint: It doesn’t appear to be economic and there are significant risks for investors and ratepayers David Schlissel June 17, 2020
Introduction ▪ There are now 21 of what the industry terms “large - scale” carbon capture facilities in the world ▪ However, only 2 of these capture CO 2 from operating coal-fired power plants: ▪ Boundary Dam Unit 3 in Saskatchewan, Canada, and ▪ Petra Nova near Houston, TX, which is designed to capture the CO 2 from a 240 MW portion of the flue gas from W.A. Parish Unit 8 ▪ Seven new carbon capture projects have been proposed for existing U.S. coal plants. Observations on Carbon Capture at Coal-Fired Power 2 Plants
IEEFA’s Work Evaluating the Economic and Financial Viability of Capturing CO 2 from Coal Plants ▪ IEEFA’s carbon capture team (myself, Dennis Wamsted and Karl Cates) has investigated several proposed coal plant carbon capture retrofit projects in depth and reviewed the limited publicly available information on the remaining proposals. In addition, we have reviewed the scientific and engineering literature on carbon capture. ▪ The evidence we have seen has led us to conclude that: 1. capturing CO 2 from existing coal plants is uneconomic and the market in the U.S. for doing so, already limited, is shrinking fast. 2. retrofitting existing coal-fired power plants for carbon capture will prolong the operating lives of some units; instead of capturing CO 2 from aging and uneconomic coal plants, the same money would be better spent on developing new renewable resources and on energy efficiency and thereby not produce the CO 2 in the first place. 3. continuing to do research on capturing CO 2 from non-coal sources is important, including from gas-fired power plants, industrial sources, as well as direct air capture. Observations on Carbon Capture at Coal-Fired Power 3 Plants
Plant-Specific Issues Determine the Financial Viability of Proposed Retrofit Projects ▪ What will it cost to retrofit existing coal plants for CO 2 capture? ▪ How much CO 2 will the retrofitted plant produce? ▪ How much of the CO 2 will be captured? ▪ What will it cost to capture the CO 2 ? ▪ What will it cost to generate electricity at the plant after it is retrofitted and will that cost be competitive with renewable and gas- fired resources? ▪ What revenues, if any, can be produced from selling the captured CO 2 for enhanced oil recovery? ▪ Is it feasible to permanently store captured CO 2 in underground repositories? ▪ How much of the costs will be subsidized by federal & state govt’s? Observations on Carbon Capture at Coal-Fired Power 4 Plants
The Federal Government is Heavily Subsidizing Carbon Capture in an Effort to Save to Coal Industry ▪ The federal government is spending well over one hundred million dollars to support site specific analyses and front-end engineering design (FEED) studies for proposed carbon capture retrofits at existing coal-fired power plants. ▪ The 2018 federal tax act increased the credits for carbon capture to $35 per metric ton for captured CO 2 used in EOR and $50 per metric ton for CO 2 permanently stored at an underground repository. ▪ However, our analyses show that even these subsidies will not be enough (1) to cover the full cost of carbon capture retrofits; (2) to protect investors from the full range of risks associated with operating coal plants after they are retrofitted for carbon capture; or (3) to protect ratepayers against the risk of higher electricity prices. Observations on Carbon Capture at Coal-Fired Power 5 Plants
U.S. Market for Carbon Capture Retrofits is Very Limited as Use of Coal is Declining Rapidly Moody’s projects coal will generate just 11% of U.S. electricity by 2030 – IEEFA believes this could happen even sooner. Very unlikely new coal plants will be built in the U.S., even with carbon capture. Observations on Carbon Capture at Coal-Fired Power 6 Plants
Current Retrofit Proposals Assume Dramatic and Rapid Reductions in Capital Costs ▪ Proponents claim that capital costs of carbon capture retrofits will decline due to lessons learned from previous projects and economies of scale as project sizes increase. ▪ This has been the experience with some, but not all, new power generation technologies. ▪ For example, the cost of installing new utility-scale solar resources declining by nearly 70% between 2010 and 2018 as a result of the lessons learned and economies of scale in the manufacture and installation of 24.7 GW of new solar capacity. ▪ Similarly, the price of installing new wind capacity fell by 40% between 2009-2010 and2018 as a result of the lessons learned and economies of scale from the installation of 56 GW of new wind capacity. ▪ However, the promoters and supporters of retrofitting existing coal plants with carbon capture assume dramatic reductions in capital costs will be achieved in the very next plants to be built. ▪ In fact, some claim that reductions in capital costs already have been achieved even though no new plants actually have been built since Petra Nova. These claims are based on the results of pre-construction studies not actual cost experience. Observations on Carbon Capture at Coal-Fired Power Plants 7
Current Retrofit Proposals Assume Dramatic and Rapid Reductions in Capital Costs Claimed $/kilowatt Capital Costs $6,000 Actual Petra Nova Capital Cost - $4987 per kW in $5,000 2026 US Dollars per KW $4,000 30% Below Petra Nova Cost - $3491 per kW in 2026$ $3,354 $2,969 $3,000 $2,346 $2,096 $2,000 $1,455 $1,417 $1,000 Projected Declines in $/Kilowatt Capital Costs from Petra Nova $0 Project Tundra Project Tundra Corrected Dave Johnson Dry Fork Dry Fork Project Project Corrected Dave Johnson Dry Fork Dry Fork Highest CCS Lowest CCS San Juan CCS Unit 4 CCS Highest CCS Lowest CCS Tundra Tundra San Juan CCS Unit 4 CCS Highest CCS Lowest CCS Capital Cost Capital Cost Capital Cost Capital Cost Capital Cost Capital Cost Highest CCS Lowest CCS Capital Cost Capital Cost Capital Cost Capital Cost Estimate Estimate Estimate Estimate Estimate Estimate Capital Cost Capital Cost Estimate Estimate Estimate Estimate 0% Estimate Estimate -10% -20% -30% -33% -40% NRG Estimate -40% that building a 2nd Petra Nova -50% would be 10%- -53% 20% Less IEA Estimate that -60% Expensive -58% next generation of capture capture -70% projects (after Petra Nova) will cost 25%- -71% -72% 30% less -80% Observations on Carbon Capture at Coal-Fired Power 8 Plants
Actual Costs of Scaling Up Power Plant Projects, Especially Those Involving New Technologies, Often Greatly Exceed Estimates Scaling up technologies, especially new ones, almost always leads to unanticipated problems and additional costs, both during construction and operation. $8 $7.5 $7 $6 Billions of US Dollars $5 $4 $3.5 $3.0 $3 $2.0 $2 $1 $0 Edwardsport IGCC Actual Kemper IGCC Actual Kemper Estimated Capital Edwardsport Estimated Capital Capital Cost Cost Capital Cost Cost Observations on Carbon Capture at Coal-Fired Power 9 Plants
90% CO 2 Capture Has Not Been Demonstrated over the long term, or Proven to be Economically Feasible ▪ A 90% CO 2 capture rate is the holy grail of carbon capture. However, evidence shows neither Petra Nova or Boundary Dam has achieved this goal on a sustained basis. ▪ In fact, both Petra Nova and Boundary Dam have captured far less CO 2 than their owners projected they would. Petra Nova Boundary Dam Unit 3 4.5 1,200,000 4.20 4.0 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 3.54 3.5 Millions of Metric Tons of CO2 792,500 3.0 800,000 2.80 Metric Tons of C02 2.5 625,996 616,119 2.18 600,000 506,848 2.0 426,100 1.5 400,000 1.0 200,000 0.5 0.0 0 January 2017-December 2018 January 2017-December 2019 2015 2016 2017 2018 2019 Target CO2 Capture Actual CO2 Captured Projected CO2 Capture Actual CO2 Capture Observations on Carbon Capture from Coal-Fired Power 10 Plants
90% CO 2 Capture Has Not Been Demonstrated or Proven to be Economically Feasible ▪ It is unclear how much of the difference between the projected and the actual CO 2 capture rates at Petra Nova has been due to problems with the technology and how much was due to management decisions that capture was uneconomic. Boundary Dam clearly experienced technology problems. ▪ The builder and the owners of Petra Nova have not released any information at all on how much CO 2 it has processed and captured; what operational problems it has experienced; why it has captured less CO 2 than projected; or how much the CO 2 capture has cost. All vital information. ▪ An IEEFA analysis based on the CO 2 emissions data NRG has filed with the U.S. EPA shows that it far more likely Petra Nova has captured somewhere between 80% and 82% of the CO 2 it has processed, not 90%. Nevertheless, CCS proponents repeatedly claim, without citing any supporting evidence, that it has achieved a 90% or higher capture rate. ▪ Bottom line, there is no evidence to accept the claim/assertion of proponents that retrofit projects will be able to consistently capture 90% of the CO 2 they produce for periods of between 12 and 40 years. Observations on Carbon Capture at Coal-Fired Power 11 Plants
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